A common rule of thumb is two carriers per route. It is a fair rule, and it gives you no way to check it. If one carrier fails, can the other pick up the work? And in the failures you have actually had, would a second carrier have helped at all?
Those are two separate questions. The right number comes from answering both with the figures from your own route.
What an extra carrier is supposed to buy
Three things, and each needs a different number:
- Cover for the day one carrier cannot supply trucks.
- Cover for your busiest days, when one carrier's fleet is not enough.
- Price pressure on the carrier you already have.
The third is a tender matter, covered in a freight tender that still works in month six, along with the primary, backup and spot layers. This article is about the first two, because they decide how many carriers a route needs.
Step 1: how much of a failed carrier's work the others can take
A carrier does not keep spare trucks waiting for you. It has a fleet already shared out between its customers. When one of your carriers fails, the others can take extra work only up to the margin they have left.
An MIT study of American truckload data reports what carriers say about that margin. They can usually find trucks when a week's loads are within about 10% of the volume awarded to them. At 20% over, they often cannot. That is a US finding. Thai carriers will differ, and the right figure for you is whatever each of yours will put in writing. The arithmetic below works with any figure.
The same logic is why some shippers split a route in the first place. A surge of ten loads is easier for two carriers supplying five trucks each than for one carrier supplying ten.
Call a carrier's spare room h, as a share of the volume it normally carries for you. Split a route equally between n carriers. If one fails, each of the others has to take on 1 in (n β 1) more. Here is how much of the failed carrier's work gets covered:
| Carriers on the route | Extra each other carrier must take | Covered if h = 20% | Covered if h = 50% |
|---|---|---|---|
| 2 | 100% | 20% | 50% |
| 3 | 50% | 40% | 100% |
| 4 | 33% | 60% | 100% |
| 5 | 25% | 80% | 100% |
| 6 | 20% | 100% | 100% |
The covered share is (n β 1) Γ h, capped at 100%. Read the first row as the usual advice. Two carriers, each able to add 20%, cover one fifth of a failed carrier's work. A contracted second carrier is partial cover, not full cover.
Uneven splits make it worse. Give one carrier 70% and another 30%. The 30% carrier adds 20% of its own volume, which is 6 points. That covers 8.6% of the work that was lost.
Whatever is not covered goes to the next layer: a spot truck, goods that wait a day, or stock at the receiving end. That is a perfectly good answer, as long as you know it is the answer and have a price for it before the day arrives.
Thai fleets make this lumpy. The Department of Land Transport counts 40,909 non-fixed-route truck operators. Of these, 33,799, or 82.6%, run ten vehicles or fewer. For a carrier with eight trucks, spare room is not a percentage. It is one more truck, or none. So ask in trucks, not in percentages.
A worked route
Say a route needs 6 trucks on a normal day. The biggest carrier fails.
- Two carriers carrying 4 and 2, and the one carrying 2 can add one truck on notice. If the 4-truck carrier fails, 1 of 4 is covered. That is 25%.
- Two carriers carrying 3 and 3, the other adding one truck. 1 of 3 is covered. That is 33%.
- Three carriers carrying 2 each, each able to add one truck. The two survivors add 2 trucks, and 2 were lost. Fully covered.
The rule: the spare trucks of all the other carriers must be at least as many as the trucks the biggest carrier normally brings. Run the same sum for your peak day. If the route needs 9 trucks at peak and three carriers bring 3 each, the survivors add 2 and one truck is still short.
Step 2: what a second carrier cannot fix
Failures come in two kinds.
- Carrier-only failures. A breakdown, too few drivers, a bigger customer pulling its trucks away, trouble with money, trouble with its licence. A second carrier fixes these.
- Everyone-at-once failures. A diesel price step, long-holiday truck bans, floods, month-end peaks, a market where every carrier is short on the same day. A second carrier is in the same market, so it fails in the same way. The truck bans around Songkran apply to every truck of ten wheels or more on the banned sections, whoever owns it. See planning around Songkran and long holidays.
A small model shows the difference. The figures are made up to show the shape, not measured in Thailand. Suppose that on 5% of days something hits the whole market and no carrier can supply the trucks. On the other days, each carrier fails by itself 5% of the time, independently of the others.
| Carriers | Days the route is uncovered |
|---|---|
| 1 | 9.75% |
| 2 | 5.24% |
| 3 | 5.01% |
The second carrier removes 4.5 points. The third removes 0.2. The floor is the 5% of everyone-at-once days, and no number of carriers lowers it. Other things do: longer notice, moving work forward before a ban, stock at the receiving end, or a spot premium you have agreed in advance.
Test it on your own record. List every refused, late or short job from the last twelve months. Mark each one as carrier-only, or as a day when the whole market was short: a holiday, a flood week, a diesel step, a month-end. If most are carrier-only, a second carrier will pay for itself. If most fall on calendar days, the money belongs elsewhere.
Step 3: the risks of one carrier that are not about trucks
Money. The Handbook of Logistics and Distribution Management describes companies that moved to a single source and found the supplier insolvent, with their own plants halted. It also tells the story of Toyota, which cut its supplier base so far that one fire at a brake-parts supplier in 1997 stopped its Japanese lines for a week, while Honda held a policy of dual supply for all raw materials. Those are manufacturers, not truck operators, but the arithmetic is the same. Check a carrier's finances before you give it the whole route. The checks you can do in Thailand are in how to check a transportation company is licensed.
Licence. This risk is rare, but it is written into the Land Transport Act. Section 46 lets the registrar order a licensee to correct a breach, such as losing the qualifications in Section 24 or breaking the licence conditions in Sections 31 to 34. If it is not corrected, or the licensee plainly cannot operate as required, the registrar can revoke the licence with the Board's approval. The carrier must return the licence within fifteen days (Section 47). It can appeal to the Minister within fifteen days, but under Section 48 the appeal does not suspend the revocation. So a carrier you depend on for the whole route could stop with little warning. This is a reason to know what share of each route sits with one name, not a reason to expect it.
Step 4: why not just add more carriers
Because every extra carrier costs something, and the number has a ceiling.
- Each carrier needs a steady flow of loads. The MIT study measures how often a shipper tendered at least one load to a carrier on a lane in the previous four weeks, and finds that carriers are more willing to hold to their contract prices where that share is higher. A second carrier that only sees your work on bad days is a stranger on the day you need it. So the number of carriers cannot exceed the vehicle-days the route needs in a week. A route of 5 truck-days a week supports two carriers, perhaps three. It does not support six.
- A new carrier has a switching cost. Shippers who run optimised tenders commonly favour incumbents by 3% to 5% in bid evaluation, to reflect the cost of bringing a new carrier into a site. On a route that costs 2,400,000 baht a year, 3% to 5% is 72,000 to 120,000 baht.
- Thin slices cost more. MIT research on truckload tenders also finds that one carrier serving several of your routes can cost less than several carriers each serving one, because the truck can connect one load to the next. Another rule shippers use is a threshold volume: a carrier wins a minimum amount, or nothing. Slicing every route into tiny shares works against both.
Tender designers write this down as a rule: a minimum and a maximum number of carriers per route. The two limits in this article are how to choose those numbers. The floor comes from the cover in Step 1. The ceiling comes from steady loads and switching cost.
So choose where a second carrier goes. Put it where the weekly truck-days are high enough to keep it busy, and where a failure would cost the most.
What to do this week
- For each route, write down the weekly truck-days, the trucks on a normal day, and the trucks on your peak day.
- Ask each carrier in writing: how many trucks a day on this route, and how many more on 24 hours' notice, on a normal day and on a peak day. Tender practice is to let carriers state the most they will accept on each route, so nobody is given more than they say they can handle.
- Work out what share of your biggest carrier's trucks the others could cover. Do it for the normal day and the peak day.
- Sort last year's failures into carrier-only and calendar days. That tells you how much a second carrier is worth.
- Decide what covers the rest, and agree its price before you need it.
- Check the ceiling. Every carrier on a route should get at least one load a week. If it cannot, you have too many carriers.
- Give the second carrier a regular share of the work, not just the leftovers and the emergencies.
- Check each carrier's licence and filed accounts once a year.