What is Dedicated Transportation Service? (Definition, Pros, Cons)


There are a ton of ways for companies of all sizes to manage their transportation logistics. With hundreds of thousands of for-hire trucking companies in the U.S., businesses don’t have to search too far to find a company with the service proficiencies they’re looking for. 

However, in an industry where there’s no shortage of options and alternatives, choosing the correct transportation service for your business — right now — isn’t easy. But it’s not impossible, either. 

Here at Anderson Trucking Service (ATS), we get questions all the time about the services we provide and where they fit within the modern supply chain — one of which is dedicated transportation services. In the right situation, using dedicated logistics can make your business more efficient and reliable. That’s why so many companies — large and small — use dedicated service.

In this article, you’ll garner four major takeaways to help you decide whether dedicated services are worth pursuing for your business. These are:

  1. What dedicated transportation service is
  2. What the advantages of dedicated transportation service are
  3. What the disadvantages of dedicated transportation service are
  4. 2 tips for choosing a dedicated transportation provider

What is Dedicated Transportation Service? 

Dedicated transportation service is a logistics solution offered by for-hire trucking companies where a shipper is allocated a fixed portion of a carrier’s fleet for a contracted period of time. In doing so, the carrier agrees to handle a significant portion of the business’ freight needs over the contract’s duration. In many instances, this service plugs a carrier into becoming its customer’s dedicated transportation resource, handling all shipments. 

Unlike traditional trucking services where trucks are dispatched to multiple customers, by offering dedicated trucking services, carriers focus solely on fulfilling the transportation requirements of a single client.

Dedicated service is different from other services in a number of key ways. First, carriers usually offer this solution over an extended period — three to five years in many instances. 

Additionally, dedicated services aren’t generally offered to companies with over-the-road transportation requirements regularly shipping freight of 400 miles or more). Instead, dedicated service is best for short-mile shipments of 250 miles or fewer. As a result, this solution is widely popular for middle-mile shipments — like those between a distribution center and a store, for example.

The level of customization offered by dedicated service can provide a number of benefits for businesses, including improved supply chain efficiency and increased control over the delivery process. That said, there are also some downsides to using dedicated transportation service. 

Dry van semi truck parked in loading dock

What Are the Advantages of Dedicated Transportation Service?

Like any other transportation service (i.e., power-only trucking, expedited shipping, less-than-truckload shipping) dedicated services have their pros and cons. These are important to understand if you’re to decide where they fit within your current supply chain model.  

The top four advantages of using dedicated transportation services are:

  1. Predictable and consistent pricing 
  2. Guaranteed capacity 
  3. The opportunity to optimize alongside your carrier
  4. Heightened visibility over your shipments

1) Predictable and Consistent Pricing 

The term length of dedicated transportation agreements is typically more pronounced than those associated with other service types; often, companies lock in for 3-5 years at a time. These agreements establish an inbound capacity cadence at a set price. While these rates sometimes change as necessary — with the ebbs and flows of the transportation marketplace — they remain relatively stagnant. 

In turn, this gives the shipper a close ballpark estimation of what their freight spend will look like into the future, allowing them to budget for these expenses months in advance. 

2) Guaranteed Capacity 

Death and taxes aside, nothing is truly guaranteed in life. So saying that onboarding a dedicated trucking solution will guarantee your capacity until the end of time wouldn’t be realistic. However, by onboarding a dedicated carrier, you’re essentially outsourcing this portion of your supply chain to the selected company

When implemented properly, this establishes enhanced two-way visibility; your provider understands and sees your production/shipping schedule and you know which truck is set to arrive and when. 

Over time, this visibility makes it easier for your transportation provider to line up a truck for every shipment — turning it into a habitual action after a while. 

Additionally, with a dedicated agreement in place, you don’t have to host a bid or tender out freight every time you have a shipment ready to move. Instead, your dedicated carrier understands your capacity needs and has already pre-allocated your solution.

While something can always fall through — there are a lot of factors out of everyone’s control — dedicated services all but guarantee capacity for participating companies. 

3) The Opportunity to Optimize Alongside Your Carrier

In most instances, companies work with a variety of transportation providers, hand-picking which ones are awarded each shipment — or group of shipments. 

This process is both effective and tedious, requiring oversight and patience as each provider learns your business’ processes at a different time and pace. Depending on how frequently you onboard and offboard transportation companies, this can quickly become difficult to manage. When you have too many providers in the mix under this system, it can be difficult to gain efficiencies and truly familiarize them with your systems, processes, products and goals

This is where dedicated transportation solutions make their mark. When you decide to leap into this realm, the carrier you select will become your outsourced in-house fleet. In becoming so, after a period, this trucking company’s knowledge of your supply chain will mirror yours, making them a seamless extension of your business

Flatbed trailer with three coils on it

4) Heightened Visibility Over Your Shipments

Dedicated trucking services give businesses heightened visibility over the transportation portions of their supply chains. With a dedicated fleet of vehicles, a point of contact they know well and familiarity with their provider’s load-tracking systems, companies can easily track each shipment and leverage detailed reports on delivery times and performance

This data will help you make informed decisions about your transportation needs.

This kind of visibility is harder to achieve with a network of providers you use less frequently. With a dedicated system in place, you’ll never struggle to verify the location of each inbound truck or outbound shipment. Instead, all of this data will be at your fingertips — or your point of contact’s fingertips at the very least. 

What Are the Disadvantages of Dedicated Transportation Service?

Although the upsides may be hard to dispute in many situations, dedicated transportation services aren’t right for every company. In fact, there are a couple of significant downsides to this logistics solution. As a company that’s considering using this service, here are three disadvantages to keep in mind:

  1. Dedicated service isn’t feasible for low freight volumes
  2. Amending contracts and rates may be necessary
  3. Limited location and service-type flexibility 

1. Dedicated Service Isn’t Feasible for Low Freight Volumes

When a company has lower freight volumes — fewer than one outbound load per day — dedicated transportation service doesn’t make sense for either party. From a transportation company’s perspective, dedicated service is only feasible if they receive a dependable commitment for their drivers to rely on. Without this promise, it’s hard to justify tying up a portion of their fleet of drivers — who only make money while under a load and can potentially make far more elsewhere. 

On your side (as a shipper), one of the main upsides of having dedicated service is the cost-efficiency you can gain for a high-volume contract

High-volume freight commitments are really attractive to trucking companies, allowing them to be a bit more relaxed with their pricing on this scale. That said, tying up your carrier’s capacity for an extended period will likely cost more if you can only guarantee a low cadence of shipments per period. As such, at a certain point, it makes more sense to tender your shipments on a more intermittent basishere are five common ways to do so

2) Amending Contracts and Rates May be Necessary 

Pricing fluctuates minutely in the transportation industry from one day to another. Generally speaking, a tweak in spot rates doesn’t impact contract rates (like those associated with dedicated service) too much. However, every once in a while, a significant change in the national/global economic marketplace shifts transportation pricing on a major scale

While these adjustments typically cycle through on a two- to six-year cadence, they can happen at any time. As a result, should spot rates rise or fall significantly during the course of your dedicated transportation service contract, you may need to revisit your rates

As a general rule of thumb, expect these conversations to occur whenever your provider is wary about their ability to service your freight at the current contract rate. And, whenever you can’t reconcile the rates you’re paying because the market has changed drastically, your contract may need to be revisited and amended. 


3) Limited Location and Service Type Flexibility

Trucking companies can only operate in and around locations where their drivers live. Referred to as its driver domicile, a trucking company’s service area is restricted to where its drivers are concentrated. ATS’ dry van division, for example, is best at serving areas east of the Mississippi River; most of our dry van drivers live there. 

As a result, if you have multiple locations spread across the U.S., you likely won’t be able to utilize dedicated services from a single carrier for all of them

On another note, it’s also important to understand your dedicated carrier’s service proficiencies. Since you’re agreeing to make this provider your single-source transportation partner, you may run into issues should you need a service they don’t offer. Make sure all of your needs (and potential needs) are met by your dedicated carrier.

2 Tips for Choosing a Dedicated Transportation Provider

Regardless of the transportation service you’re looking for, you need to work on the front end to ensure the provider you select can reliably offer the highest level of service.  

When it comes to selecting a dedicated carrier, this couldn’t be more important. 

This is the carrier you’ll be using every week for the foreseeable future. Make sure they have the capabilities, wherewithal and expertise to follow through on their end of this agreement. 

While there are a lot of questions you should ask each provider you vet (here’s a list of 30 of them), here are two tips for selecting a good dedicated carrier:

  1. Verify where their drivers and assets are located
  2. Ask them to provide an onsite operational presence

1. Verify Where Their Drivers and Assets are Located

To start your dedicated transportation partnership on the right footing, it’s crucial to understand your carrier’s capabilities intimately. This will give you insight into your provider’s true ability to meet your capacity demands. 

For this arrangement to work well, your carrier has to have an appropriate number of trucks, equipment and drivers in your area. Make sure the carrier you choose can provide surge capacity (15-20 percent more capacity than your “normal” requirements)

2. Ask Them to Provide an Onsite Operational Presence

When you onboard a dedicated transportation provider, you’re essentially outsourcing your company’s trucking logistics. Facilitating this task is far easier when your carrier can house a member of their team at your location/facility. 

Having an operational presence on site who fundamentally acts as an extension of your team, scheduling inbound trucks, overseeing route planning and providing customer service, will ensure the smooth facilitation of your transportation supply chain

This isn’t always offered, however, so if this is a perk you’re looking for, prioritize it in your carrier selection process. 

Gain Efficiencies With or Without Dedicated Service!

Dedicated transportation services are a great fit for a lot of companies. These services help businesses streamline their supply chains by giving them predictable expenses and a single source of capacity. 

On the other hand, dedicated service can limit your flexibility and the rate you lock in at the beginning of your contract might not get the job done after a period, forcing you to amend your contract. 

If you decide this transportation service is worth pursuing, here’s what you need to know: Make sure to ask about establishing an onsite operational presence and the carrier’s domicile infrastructure. Doing so will help you be as successful as possible. 

ATS is proud to offer dedicated transportation service using our robust asset fleet. So, if you’d like to learn more about how ATS’ dedicated transportation service could fit your supply chain and make you a more efficient shipper, contact us here

When it comes to gaining efficiencies in your transportation supply chain, you have a lot of options — dedicated trucking service is only one of them. 

Here are five things you can do right now to gain logistical efficiencies in the future. Plenty of companies, like yours, have implemented these practices and their supply chains are better for it. 

Finally, if you have any questions about the transportation industry’s many complexities, don’t hesitate to reach out — we’re happy to help you in any way you need. 

Tags: Transportation Services, Transportation Solutions

Eric Olson

Written by Eric Olson

Eric started his career with ATS in 2010 as a carrier representative at ATS Logistics. In 2013, Eric transitioned into the role of national accounts manager at ATS, Inc. and holds this same position today. Together with his team, Eric constantly works to come up with creative solutions that meet the changing needs of every ATS customer.

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