News / Slow recovery drives more US trucking firms to dedicated contracts

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As the long awaited recovery in the trucking sector remains mired in contraction, large US carriers are shifting a growing portion of their fleets to dedicated work.

Meanwhile, in Canada, Walmart rewrote the playbook with the sale of its trucking unit to Canadian Cartage.

The trend to more dedicated capacity arrangements has been building for some time, said Satish Jindel, president of ShipMatrix and SJ Consulting, pointing out that the push has come from both sides.

It translates into less headache for shippers on costs and volatility, while carriers trade-in the (currently remote) possibility of higher returns for certainty and predictability of volumes, he explained.

Given conditions today, he sees little likelihood of the spot market offering huge temptation to carriers, which ties up a large chunk of capacity for an extended period. Contracts for dedicated capacity usually run for at least a year, often three, he noted.

“There is usually a provision to terminate early, but that doesn’t happen frequently,” he said. “The customer needs a long time to adjust.”

Truckers ought be in a stronger position than where they are, not having to rely on the vagaries of the market, Mr Jindel argued.

“The truckload industry has not evolved in 40 years as to their value proposition. There are thousands that can provide a truck and a driver; they’re not managing the business as you could with today’s technology and data,” he said. “There’s no role for AI in trucking before they change and make use of technology. We still have trucks on the road that are 50-60% full.”

Carriers’ lack of progress in embracing technology to redefine their value has benefited brokers and left them with better margins, he added, and the shift to dedicated capacity should worry them, he thinks.

“Brokers lose out when carriers go to dedicated capacity contracts. They have less capacity to offer to the market,” he said, adding that “a lot of brokers are not having a good quarter”.

Uber Freight’s bookings and EBITDA in Q4 24 declined both from the previous quarter and year on year. EBITDA has been negative for nine consecutive quarters, stretching to a $22m deficit.

Despite low spot rates, shippers continue to favour arrangements for dedicated, if not proprietary, capacity. However, one of the largest players, Walmart, has made an about-face in the Canadian market, signing an agreement for Canada Cartage to take over its trucking fleet, including staff.

Already the largest national provider of dedicated fleet services, Canada Cartage is gaining a large operation that supplies over 400 Walmart stores across the country and will run this as a dedicated operation for the giant retailer.

“This decision is part of our broader growth ambitions and strategy to focus on what we do best, delivering value to our customers,” said Matt Kelly, VP supply chain at Walmart Canada. “We are confident fleet employees will benefit greatly from Canada Cartage’s leadership. They’re very well-respected, and we know their culture is the right fit for fleet employees and our business.”

The sale of its Canadian trucking operation to a carrier does not mark a strategic rethink at the retail behemoth, Mr Jindel commented, noting that Walmart is maintaining its approach in the US market. The trucking operation in Canada is viewed as a potential distraction at a time when the retailer is embarking on a $4.5bn expansion that aims to open dozens of new stores across the nation, starting with five large outlets in Ontario and Alberta, scheduled to open in 2027. A new distribution centre near Toronto is due to open in the next few months.

That said, Walmart management seems to have no hesitation in cutting the in-house elements of its logistics set-up. A year ago it sold its intermodal assets to JB Hunt, while increasing volume and capacity commitments with the intermodal and trucking provider.