Trucking is a sub-category under logistics. logistics is a series of physical activities moving an item from point A to point B. Trucking is the road transportation part of the logistics.
Business Scope
What is a trucking company?
A trucking company is a company that owns a fleet of trucks to transport goods. The primary business scope of a trucking company is hauling freight from one place to another.
What is a logistics company?
A logistics company handles any physical activities moving an item from point A to point B. These activities can be freight picking up, storage of cargo, sorting, packing, or any add-on request, until delivery to the final destination.
Asset Structure
The major asset of a trucking company is its trucks. Most truck companies operate approximately 20 trucks. Several large truck companies such as JB Hunt, and Schneider own thousands of trucks plus using trucks owned by other independent contractors.
Each truck’s price is between $70,000~$150,000, so a small truck company’s asset is around 300million and a big truck company with over thousands of trucks has billions tied up on their asset.
The primary asset of a logistics company is its fleet of trucks, boats, trains, and even planes. The top 3 logistics companies around the world are FedEx, UPS, and DHL.
Based on Statista.com that FedEx owns roughly 86000 fleet vehicles, and 650 cargo air fleets and its total asset is about $86 billion in 2022. UPS operates over 290 aircraft and thousands of trucks, and its total asset is about $69 billion in 2021. DHL and its parent company Deutsche post all together own approximately 70,000 vehicles, and 198 aircraft, and its net worth is around $38 billion in 2022.
To be more accurate that FedEx, UPS, and DHL are all freight forwarders but have logistics companies under their corporations. There is not a clear line between freight forwarders and logistics. More and more freight forwarders called themselves logistics companies.
Human Resource
The major employees in a trucking company are truck drivers. Although a college degree is not required for truck drivers, long hours behind wheels and away from home, caused difficulties to hire truck drivers.
Truck driver is a high pay job without a degree required. The average salary for a truck driver is between $7000 ~ and $12,000 per month. Besides high pay, many truck companies use employee perks, and work-life balance to attract and retain trucker drivers. For example reimbursement of CDL training fee, flexible work schedule, regular home time, etc.
Logistics companies need to hire different types of people besides truck drivers. A logistics company probably needs to hire pilots, local and long-haul truck drivers, warehouse workers, and office personnel.
Human resource at a logistics company is more complicated than at a trucking company.
Startup Requirement
It is much easier to start up a trucking company than a logistics company. it also costs less to start up a trucking company. You can start up a trucking company by yourself with one truck. The only requirement is you have a CDL license and can drive freight trucks.
It will cost a lot of money to start up a logistics company because you need to purchase trucks, planes, and boats, and also you need to hire much more people than a pure trucking company.
The alternative to start a logistics company is to start a small freight forwarding company. You do not need any asset to start up a freight forwarding company as long as you can contract with independent contractors such as trucking companies, air cargo freight companies, ocean cargo freight companies.
Profit Structure
A trucking company earns its profit from transportation services. The money it received from its customers minus its drivers’ salary, and truck maintenance cost is its net profit.
A logistics company earns its profit from multiple resources. Primarily it could receive money from road transportation, air transportation, and ocean transportation. Secondly, it can earn money from its warehouse rent, loading, and unloading the freight.
A logistics company can also earn money from many add-on requests by its customers, such as labeling, sorting, and repacking the freight.
A logistics company is more resilient during an economic crisis because of its multiple income channels.
Economic Importance
According to the American trucking association trucks move roughly 72.5% of the nation’s freight by weight and created roughly $732.3 billion in gross freight revenues.
The rest 27.5% of domestic freight is moved by other transportation methods.
Trucking is the primary transportation method for domestic freight. Ocean and Air are the main transportation method for international freight.
Future Trend
More and more trucking companies will become logistics companies
To be able to compete with other trucking companies or logistics companies, more and more trucking companies will become logistics companies.
A trucking company has to open hubs in different cities so it is able to reach more customers from different regions.
A trucking company needs to compete with its competitors on price to gain more customers. Normally trucking companies consolidate their freight and use fewer trucks, making fewer trips to lower costs.
Customers like one-stop shopping same as logistics. Customers do not want to look for trucks, then warehouses, or labor to load and unload their freight. Customers would pay a premium to let one logistics company take care of everything. Customers’ one-stop approach encourages more and more trucking company becoming logistic companies to provide transportation, warehousing, and other logistics services.
Logistics companies are also freight forwarders
Many top-tier freight forwarders such as DHL, FedEx, and UPS are also logistics companies. They provide a complete logistics service, freight brokerage, and supply chain solutions to their customers.
These freight forwarders can pick up freight from multiple places and bring it all together to the US, then deliver to your assigned final destination. Their service includes route consultation, freight quote, freight pick up, consolidation, shipping document creation, and customs clearance all way to final delivery.
In the future, there will be quite a few logistics companies that are also freight forwarders to imply a high level of logistics service.
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