A Successful Truckload Model - And A Growing Contractor Program - Here’s Why

Implications: Truckload leader Schneider National has freight - and has been successfully growing their Independent Contractor segment for over a decade, while their competitors have not seen the same success. The primary reasons are they have freight (miles), continue to adjust their program, made it more transparent (and fair) and help with the major issues. While I agree with my colleague Mr. Schultz on the focus on fuel in selling their programs, this has been such since the ‘90’s. There is more that is making their program one of the best - and they will continue to successfully grow!

Analysis: Schneider National now has around 4,000 independent contractors. It is a mix of about half financed by their Schneider Finance division and the rest by 3rd parties. Other major fleets like Swift have almost the same number of contractors, although mostly financed by their Interstate financing division. JB Hunt and Werner Enterprises have struggled to get over 1,000 contractors. Asset-light contractor-focused fleets such as Landstar and Greatwide Logistics contractor numbers are double (plus or minus) Schneider’s, but flat. Then there are the “rent-a-ride” programs that deserve no comment.

What follows are some reasons why Schneider’s numbers are growing. First of all, they have a growing freight base - even in a slowed truckload freight marketplace. One area of interesting growth has been long-haul expedited team truckload runs that had been dropped by other carriers - or added by shippers wanting to tighten up some long-haul traffic lanes. This is being addressed in part by Independent Contractors, but there has been more growth in other segments for them, too.

Otherwise in general, freight is being pulled back into the major fleets due to reduced capacity and the ability of shippers to pare the number of different carriers. While some trucking companies have recently “discovered” the logistics / brokering segment as an area of growth, Schneider Logistics’ freight was recently added as a contractor alternative to their mileage-based program. This is similar to Landstar’s model, but it is freight booked through Schneider - not agents. In other words, you work directly with Schneider for dispatch. The initial revenue numbers for contractors are impressive. The administrative cost to Schneider in keeping the freight on “Schneider” contractor trucks versus 3rd party brokered-to carriers is notable less, too. Then there are other contractor freight options including bulk (tanker), dedicated and Intermodal (a separate freight growth area).

Regardless of the contract-type, their fuel program hasn’t changed much since it was started. It is basically based off of the EIA diesel price when the load was hauled less an included price of $1.18 per gallon divided by 6 miles per gallon. Get better than 6 MPG and one gets a lower effective fuel price - even allowing some to make a little on surcharge as in the referenced article. Take advantage of terminal fuel (guaranteed to match lowest diesel price in State), truck stop discounts (up to $0.05 per gallon) and their fuel optimizer program (routing vs. price) - and there are more savings.

There are then all the other assistance programs with truck financing, anti-idling equipment, maintenance, tires, health insurance and business help. They don’t charge trailer or Qualcomm satellite fees and most freight is drop and hook. Their operating centers are much better places to hang out than in truck stops - with food, showers, TV, Internet, etc. too!

Of course, key to profitability is utilization (miles). Schneider contractors' average almost 3,000 per week compared to an industry average of 2,300 - netting a contractor an additional $15,000 per year. All of this can be seen in their turnover, which is running one-half the rate of the majority of the truckload industry.

Picking up dropped traffic lanes and putting their broker freight on their own trucks makes a lot of sense (and dollars). Tying in their growing Intermodal segment does, too. Having capacity available for future growth is smart. Doing it mostly with Independent Contractors is, too. Pulling an orange “pumpkin wagon” does not have the negative connotation that it did in the past, either!