The Growth of Dedicated Truckload Capacity

Dedicated truckload capacity has been growing more than five times the rate of traditional dedicated contract carriage, according to Armstrong & Associates.

In its report, “Dedicated Contract Carriage vs. Dedicated Truckload Capacity – The Search for Untapped Capacity,” Armstrong explains that dedicated truckload capacity, or DTC, is where a provider agrees to providing ongoing trucking capacity to a customer account in specific lanes or routes and equipment can be shared between customers. This kind of dedicated business has seen tremendous growth over the past 10 years. In 2020 alone, DTC net revenues jumped 30.6% to $6.3 billion among dedicated transportation providers.

This differs from the traditional, asset-heavy dedicated contract carriage third-party logistics segment, where specific trucking assets are dedicated to a customer account for a given contract length. This segment provides core trucking capacity to buyers in a market subject to cyclical driver/tractor shortages. In 2020, Armstrong reports, the DCC segment had the second highest net revenue growth of the four 3PL market segments, but it was just 0.3% to $20 billion. The negative effect of COVID-10 made 2020 a volatile and lower-volume year versus 2019 when DCC net revenues grew 12.1%.

DCC is an outgrowth of the way contract carriage used to be regulated. Up until deregulation in 1980, contract carriers were limited to a maximum of eight customers. Today, nearly all of truck transportation in the U.S. is done on some type of contract carriage, Armstrong explains. Over time, exclusive DCC has been supplemented by dedicated truckload capacity. DTC agreements tend to be shorter than those for DCC, as dedicated contract carriage relationships tend to be more long-term and “stickier,” to use Armstrong’s term. Food and groceries are the top industry served and also the top industry for revenue growth, according to the report.

Some of the largest DCC carriers are J.B. Hunt Dedicated, Penske Logistics, and Werner Dedicated, according to Armstrong.

Armstrong survey respondents noted that when capacity tightens, the demand for dedicated seems to increase. The COVID-19 pandemic and its effects have tightened capacity and made it very difficult for companies who usually rely on the spot market. Customers want more committed capacity to combat rising spot market rates. In addition, the driver shortage is resulting in traditional truckload customers exploring a change to the dedicated model.