Rumor has it that more shippers are interested in dedicated transportation service than ever before.
According to the Journal of Commerce, U.S. carriers are increasing their investment in dedicated service offerings to meet growing demand for control and visibility from shippers, particularly in the wake of the disruptive COVID-19 pandemic.
Dedicated transportation can offer many potential operational benefits for shippers, such as improved reliability, operational control, and cost predictability. However, as interest in dedicated transportation has grown, so have the myths and misinformation surrounding its use.
Anderson Trucking Service (ATS) has decades of experience as a dedicated freight carrier, and in that time, we’ve heard many of the same misconceptions from prospective dedicated transportation customers unfamiliar with the service model.
We pride ourselves on being a trusted voice in transportation, and we’re always happy to share our firsthand knowledge and expertise to help inform others about the realities of the industry and its services.
In this article, we’ll discuss four of the most common myths about dedicated shipping and provide expert insights on each misconception.
You’ll walk away with a balanced understanding of what dedicated shipping is (and isn’t) and how dedicated transportation services may impact a shipper’s operations, budget, and supply chain.
- What is dedicated shipping, anyway?
- Myth #1: Dedicated shipping means managing a private fleet
- Myth #2: Dedicated transportation is always more expensive than OTR
- Myth #3: Signing a dedicated contract means losing control over your supply chain
- Myth #4: If the market changes, you might be stuck paying an above-market rate
What is Dedicated Shipping, Anyway?
Before we debunk some of the most common misconceptions, it’s important to have a solid understanding of the basics of dedicated transportation services.
Dedicated shipping is a logistics service model in which a specific portion of a freight carrier’s fleet, drivers, and resources are exclusively assigned to a single company's freight needs.
Throughout this article, we’re going to talk a lot about what dedicated shipping isn’t — so first, let’s talk about what it actually is, and the potential advantages it can offer shippers.
Dedicated Shipping Is . . .
- A Shared Commitment. A carrier agrees to “dedicate” a certain portion of its fleet and drivers to the shipper’s freight. In turn, the shipper agrees to ship a “dedicated” volume of freight each period.
- Consistent. Predictable freight volumes and regular lanes are the foundation of dedicated service.
- Reliable. Capacity is all but guaranteed in a dedicated shipping agreement, so shippers no longer need to worry about finding a truck.
- Long-Term. The average dedicated freight contract is one to three years in length.
- Fixed-Cost. Rates stay stable for the duration of the contract, barring any dramatic changes in the freight market or volumes.
- Efficient. Dedicated shipping agreements support streamlined scheduling for carriers and shippers, in addition to fewer empty miles, delays, and accessorial fees.
- Service-Driven. Carriers are motivated to win and maintain dedicated freight, as it keeps trucks moving and drivers productive. As such, dedicated service must be high-quality and relationship-focused to be successful.
Ultimately, dedicated shipping is a transportation solution that can offer stability to both sides of the agreement, as truck capacity, freight volumes, costs, and scheduling are all predictable.
Now that we’ve identified the defining features of dedicated transportation, it’s time to roll up our sleeves and get to myth-busting.
Myth #1: Dedicated Shipping Means Managing a Private Fleet
Dedicated shipping and private fleets are often confused, but they are two different transportation service models.
Both dedicated transportation services and private fleets offer shippers guaranteed capacity, supply chain efficiencies, and a higher degree of control. The primary difference between dedicated shipping and a private fleet is who owns and operates the fleet itself.
A private fleet is exactly what it sounds like — a fleet owned in-house by a company for its exclusive use transporting its own goods.
The company owns the trucks, employs the drivers, and is responsible for managing the fleet’s operations, scheduling, budget, truck fueling and maintenance, etc. Some shippers may choose to rent or lease trucks and hire temporary drivers, but in either case, the responsibility of fleet management rests squarely on the shipper.
In dedicated shipping, a shipper is guaranteed exclusive access to a set number of trucks and drivers from a third-party carrier’s fleet for an agreed-upon period.
During that time, the carrier’s trucks effectively act as the shipper’s private fleet despite not being owned and operated by the shipper itself.
Dedicated transportation affords shippers most (if not all) of the benefits of a private fleet, without the managerial burden and upfront costs. But that’s not to say dedicated transportation is always a better choice than a private fleet. It all comes down to resources and priorities.
Private fleets make sense for shippers that prioritize control and visibility. Investing in a private fleet allows shippers complete control over their consistent freight shipments and end-to-end visibility.
Without owning the equipment and hiring the drivers themselves, shippers who choose dedicated services inherently have slightly less control and visibility than those with a private fleet — but significantly more than, say, the average over-the-road (OTR) shipper.
As such, dedicated transportation tends to be a good fit for shippers prioritizing goals of greater efficiency, cost-savings, and/or reliability, but don’t have the in-house resources to manage a private fleet.
Myth #2: Dedicated Transportation is Always More Expensive than Over-the-Road (OTR) Transportation
Dedicated transportation has long had a reputation for being a premium service with a price tag to match — but is that reputation deserved? Not necessarily.
While dedicated transportation can have higher upfront costs than traditional OTR transportation in some scenarios, the overall value depends on the specific needs of the shipper and the nature of their supply chain.
A detailed cost-benefit analysis comparing both options is crucial to making the right choice for your business.
Here’s a brief breakdown of the variables that may impact what your dedicated transportation solution costs:
When Dedicated Transportation Might Cost More
- Lower Freight Volume. Shippers with sporadic shipping needs might find dedicated transportation less economical, as they’ll be paying for capacity they won’t fully use.
- Longer or Variable Lanes. If lanes are inconsistent or require significant backhauls, the cost of empty miles can increase the total expense.
- Major Specialized Equipment Needs. If a shipper’s freight requires highly specialized equipment not currently represented within a dedicated carrier’s fleet, the carrier may offer to source the equipment for the job — but the shipper will likely pay more for their time, effort, and investment.
When Dedicated Transportation Might Cost Less
- High Volume on Set Lanes. Shippers moving lots of freight along predictable routes often save money through route optimization and economies of scale.
- Consistent Service Quality. Avoiding delays, product damage, or other inefficiencies associated with inconsistent OTR service can result in cost savings.
- Market Volatility. Dedicated transportation provides protection against fluctuating spot-market rates during capacity crunches.
The bottom line? While dedicated transportation may appear more expensive at first glance, its long-term value and cost-effectiveness depend on the shipper’s freight patterns, service requirements, and operational priorities.
Balancing these priorities (and being open with your carrier about your goals, whether they’re related to lowering costs or increasing efficiency) is key to a successful dedicated contract.
Myth #3: Signing a Dedicated Contract Means Losing Your Control Over Your Supply Chain
Oof, this is a big one. It’s understandable for shippers to feel anxious about handing over their logistics to a third party, but it’s simply untrue that dedicated contracts force shippers to sacrifice control of their transportation supply chain.
Let’s start with the issue of control. Despite the persistent misconceptions, dedicated transportation services can actually enhance shipper control in several ways.
Shippers and their dedicated carriers must work closely together to tailor services to the shippers’ specific needs. As such, the shippers maintain significant input over how their transportation solution is executed, from the routes and schedules to the equipment types to performance metrics and reporting.
Speaking of reporting, dedicated carriers typically offer advanced tracking and reporting tools, providing shippers with real-time visibility into their shipments. This level of insight can improve supply chain management and responsiveness.
Finally, by committing to a dedicated contract, shippers secure guaranteed capacity, drivers, and equipment. This reduces the uncertainty associated with spot-market fluctuations or general carrier availability — i.e. greater control over reliability and costs in the long term.
So, if dedicated transportation can offer shippers this increased level of control, why is this myth so persistent?
Well, since the carrier assumes operational responsibilities, shippers might feel less involved in the more granular aspects of transportation.
However, this perceived "loss" of control is often a calculated trade-off for operational efficiency and reliability.
In a typical dedicated transportation agreement, the carrier manages day-to-day operations like dispatching drivers, maintaining equipment, and complying with regulations, but the shipper retains strategic control.
Shippers can modify routing, delivery windows, or capacity requirements as business needs evolve. They can also set service level agreements (SLAs) that dictate performance expectations to ensure their dedicated carrier maintains a certain level of service quality.
Perhaps the best way to calm concerns about lack of control is for shippers to be proactive in their contract negotiations with their dedicated partner.
To ensure continued control, shippers can:
- Define Clear Expectations. Establish detailed performance metrics in the contract.
- Practice Strong Communication. Communicate clearly and often. Schedule regular reviews and strategy sessions with the carrier.
- Negotiate Flexibility. Include clauses for scaling capacity or revising routes if needed.
- Leverage Technology. Use visibility tools and dashboards provided by the carrier.
- Prioritize Partnership. Approach the relationship with the dedicated carrier as a partnership with shared goals but separate roles: the shipper defines strategic priorities while the carrier focuses on execution.
Myth #4: If the Market Changes, You Might Be Stuck Paying an Above-Market Rate
In times as unpredictable as these, it makes sense that cost stability is a primary driver of the rising interest in dedicated services.
But what if the market suddenly shifts during your dedicated transportation contact? Will you be “trapped” at the rate you locked in at the outset, which may now be higher than the market rate?
Don’t panic. Signing a dedicated transportation contract doesn’t necessarily mean you’re trapped in above-market rates during major freight market changes — but your level of flexibility will depend on the terms of your contract.
So, yes: if your contract is based on fixed rates, you may indeed pay above-market rates should spot market prices drop significantly.
However, this also protects you from price spikes if the market tightens. Locked-in pricing affords shippers the luxury of predictable costs, uninterrupted service levels, and guaranteed capacity regardless of fluctuations in the spot market.
Some contracts include provisions for renegotiating rates if there are extreme changes in market conditions. These clauses, often referred to as force majeure or market adjustment clauses, can provide relief in extraordinary circumstances, such as the drastic market change during the COVID-19 pandemic.
Shippers can also add flexibility to their contracts by including periodic rate reviews or renegotiation clauses and establishing a clear process for adjusting rates during market disruptions.
A good dedicated transportation partner will be open to these terms, as they decrease the likelihood of a termination mid-contract and prevent tension in the shipper-carrier relationship.
By negotiating flexible terms and maintaining open communication with your carrier, you can mitigate the risk of being locked into above-market rates.
Debunk the Myths, Discover the Value
Dedicated shipping has certainly garnered its fair share of myths about costs and control, but the reality of this service model is much more nuanced and flexible than its detractors claim.
For many shippers, dedicated transportation delivers the heightened reliability, efficiency, and cost predictability necessary to optimize their business operations.
While return on investment depends largely on the terms of these dedicated transportation contacts and the goals of the shippers, dedicated transportation can be a win-win scenario for all parties involved when executed strategically.
Whether you're seeking to enhance supply chain control, reduce costs, or secure stable capacity, dedicated transportation can offer a flexible, scalable solution.
The key to success lies in open communication, clear expectations, and a partnership-oriented approach with your carrier. By understanding the nuances of dedicated shipping and addressing misconceptions head-on, you can make informed decisions that align with your operational goals.
Learn more about dedicated shipping services in our article What Does Dedicated Transportation Cost? It breaks down the fixed-cost pricing model and offers a cost comparison between dedicated services and OTR trucking.
You’ll walk away with a comprehensive understanding of how dedicated transportation pricing works and how it can deliver value for shippers.
