How Do Freight Rates Affect Service Failures?

Does it seem like your freight shipments are failing more lately? You’re not alone — and you’re not imagining things. 

The ongoing freight recession has left the transportation industry grappling with significant imbalances, making it tougher than ever to secure reliable service. 

As a shipper, you may feel that freight rates should have no impact on the success of your shipments. After all, the carrier agreed to haul your shipment at that rate. Isn’t that a commitment to deliver the agreed-upon service, regardless of what the rate is? 

Unfortunately, it’s not that simple — a fact many shippers are finding out the hard way as the Great Freight Recession quickly approaches its third year. 

Anderson Trucking Service (ATS) has weathered many storms in the transportation industry over our decades of serving shippers. 

We’ve helped countless customers successfully navigate the ever-changing freight market, and our experience allows us to provide expert insights into the relationship between freight rates and service reliability. 

In this article, we'll recap the Great Freight Recession’s impact on the industry as a whole, explore the driving factors behind service failures, explain how freight rates influence these factors, and provide strategies to help you position your shipment’s success.

You’ll walk away with a deeper understanding of the current market dynamics at play and with practical tips to enhance the reliability of your shipments. 

Whether you're considering adjusting your rates or exploring alternative strategies, this article will equip you to make informed decisions and improve your shipping outcomes.

• How has the freight recession impacted the transportation industry?
• What causes service failures in the trucking industry?
• How are freight rates and service failures related? 
• What can shippers do to make their freight more successful?

How Has the Freight Recession Impacted the Transportation Industry?

Early in 2022, Craig Fuller, CEO of FreightWaves, wrote that a freight recession was imminent. 

He was right: Later that year, supply and demand swung woefully out of balance. Carriers were left with more trucks than freight to haul, which sent rates plummeting. 

While some, like Fuller, read the tea leaves and braced for a market downturn accordingly, few could have anticipated that the industry would still be grappling with the resulting freight recession more than two years later. 

As FreightWaves reported in April 2024, this historic freight recession has now surpassed the COVID-era bull market in duration. 

In a practical sense, this means that the industry has operated largely in recessionary territory since the pandemic — so it’s no wonder that those who have withstood the downturn thus far are exhausted, both financially and energetically. 

With costs rising dramatically over the past two years, transportation providers of all sizes are struggling to turn a profit. 

Over the course of the pandemic bull run, carriers were able to generate operational surpluses, with many building up their fleets to meet strong demand.

Now, freight volumes are less robust than they were during the pandemic, but providers still have an oversupply of trucks to fill. 

Rate negotiations have turned into a game of chicken, with both carriers and shippers holding out to see who will flinch first. 

And therein lies the problem we’ve observed in the transportation industry as of late: Shippers are happy with the rates they’re securing — but they’re also experiencing service failures more frequently.

What’s going on? 

What Causes Service Failures in the Trucking Industry?

First, it’s important to understand why service failures happen in the first place. 

In our experience, consistent load failures — meaning repeated service failures by a transportation provider hauling loads for a specific shipper — most often happen because of one or more of these factors: 

1. Geography
2. Driver capacity
3. Truck breakdowns 

From the standpoint of a freight broker, the geography of a load (i.e. the origin and destination points) dictates capacity, both in terms of available trucks and drivers. Depending on the markets at play, the rate offered, and basic timing of a load, capacity may be scant. 

In the case of asset carriers, driver capacity can be a problem even if truck capacity is not. Asset-based companies have a set pool of drivers to work with. Those drivers are often given multiple options for their freight, allowing them to choose the lane that works best for them regarding their home time and pay expectations. 

If all drivers are loaded and moving — or if drivers refuse loads due to geography, duration, or rate — there is little an asset carrier can do to get the load in question covered (short of forced dispatch). 

Related: Having Multiple Carriers in an Area: Pros, Cons, and How to Choose

Finally, truck breakdowns happen, as do mid-service failures related to delays, accidents, and any number of other variables that simply can’t be planned for or prevented.

This means that no matter how proactive the transportation provider, there’s always a chance that a shipment fails due to breakdown or urgent repairs. 

Of course, there are other reasons for one-off service failures, like inclement weather, traffic congestion, communication issues, and plain old human error. 

But in an unbalanced market like this, freight rates loom large as a cause of both incidental and consistent service failures. 

In fact, freight rates influence all three of the factors we listed above. How? Let’s talk about it.

How Are Freight Rates and Service Failures Related?

Freight rates aren’t determined in a bubble; they’re informed by the state of the freight market and the overall economy.

Since the Great Freight Recession began in 2022, the market has forced rates lower and lower. While shippers are pleased to pay less for their shipments, the shine tends to wear off when that shipment fails. 

But why is it failing in the first place? 

Think of freight rates as corresponding to a radius of drivers. The lower the rate, the smaller the radius in which a transportation provider can efficiently search for a driver.

The higher the rate, the wider the radius, the more options a provider has within their network to find the best driver for that specific freight . . . you get the idea. 

When shippers secure a rate that scrapes the bottom of what the market can bear, drivers won’t be willing to come in from 100 miles away or more to cover that load. 

That leaves carriers scrambling to find coverage in a tight network, which can result in a less-than-perfect fit and, ultimately, service failures.

But if transportation providers can widen their search — with a better rate — it will be easier to find a reliable driver who can commit to hauling the load.

In this example, the relationship between freight rates and geography (and how they both relate to service failures) is clear. Better rates give carriers the literal longitude necessary to find a driver, even if they have to come from further afield. 

But what about the other two major contributors to shipment failure? 

Well, the issue of driver capacity for asset-based carriers can be alleviated (at least in part) by better rates. The more money a carrier can offer a driver in comparison to their other options, the more likely they are to accept that load — it’s as simple as that. 

“Sure,” you might be saying to yourself, “I can see how freight rates factor into service failure drivers like geography and capacity, but truck breakdowns? That’s a stretch.” But is it?

In a market that has increased costs for truck parts and upkeep while dropping rates, is it any surprise that trucks are breaking down? 

After all, the better rates a driver receives, the more financial resources they have to invest back into their truck through regular maintenance, repairs, replacement parts, etc.

A well-maintained truck is a safe truck — and a truck that’s less likely to break down and cause unwelcome service failures. 

Furthermore, paying a comparably higher rate for a quality transportation provider can afford shippers benefits they won’t get from a cheaper competitor, like better customer service and support, more advanced tracking technologies, and cleaner trucks and trailers. 

What Can Shippers Do to Make Their Freight More Successful?

Alright, shippers, listen up: You might not like the answer to this question. But we’re here to tell you the truth, even if it isn’t what you want to hear.

In general, paying a higher freight rate will translate to better service. 

There are exceptions to every rule, so it’s not a 100 percent guarantee, but paying a bit more to ship your freight tends to result in fewer failures. 

Remember, you’re buying a radius. Whether it’s looking further from the origin or working to find the driver an immediate reload after drop-off, a better rate can help you find a truck faster and with less likelihood of failure. 

Yes, another carrier might agree to haul the same shipment at a lower rate, but the less invested you are, the less invested they are. With so little financial gain riding on your shipment’s success, they may not think twice about a failure. 

On the other hand, if you can give your carrier a premium rate, they’ll be motivated to put your load on their best driver in the hopes that great service will motivate you to continue working with them. 

But times are tough across the industry right now, and not every shipper has the financial bandwidth to pay more. Thankfully, there are some things shippers can do to make their freight more likely to succeed that don’t involve a rate increase. 

If your rates are going to be low, try to be more aggressive with your lead times. Give your provider seven days instead of two or three so they can proactively work your load into a driver’s week.

Shipping on the same lanes three to five shipments per day? Sounds like your operations could be a great fit for some dedicated lanes.

Drivers on dedicated lanes want the predictability of the same route and the same freight day in and day out. 

Even if the rate is a bit lower than what they’d normally book, it could be a worthwhile trade-off for that driver to secure some scheduling consistency.

If you have the freight volume to support a dedicated driver, talk to your transportation provider about your options. 

Finally, flexibility is a shipper’s best friend, especially in an unbalanced market. Lead times, appointment windows, loading hours — if you can be flexible in as many of these areas as possible, the more likely you will be to find a truck within your timeframe. 

Make sure your transportation provider is aware of what is feasible for your operations in terms of flexibility. 

Whether it’s a change in staffing patterns, a yard space workaround like drop trailers, or non-standard appointment times, anything you can do to give your provider options will be welcome and position your freight to succeed. 

Find a Truck Faster, No Matter the Market

All across the transportation industry, trucking professionals are desperate for relief from the Great Freight Recession’s bottomed-out rates and high costs. 

This has led to a market in which shippers hold all the power to pick and choose their provider and their rates. 

But many shippers have subsequently found themselves on the receiving end of a nasty surprise: Their shipments are failing more often. 

Unfortunately for their transportation budgets, the record-low freight rates they love are at least partially to blame. Solving the problem may require paying a bit more for better service, as higher rates open up a wider pool of best-fit drivers, upping the likelihood of success.  

If paying more is out of the question, shippers can adapt to the market conditions by pivoting to a more proactive approach. 

Providing longer lead times, offering consistent lanes, and flexing with transportation providers to find creative solutions are all viable strategies for more successful shipments. 

Interested in other ways to make your freight more attractive to carriers and drivers? Download our free guide on how to Find A Truck Faster. 

It provides 12 easy, actionable tips for making your freight more appealing to the right kind of carriers.

By following these clear next steps, you can position your business to secure capacity each and every time you ship.