Why OEMs are optimising for the wrong number in finished vehicle logistics

In automotive logistics, procurement teams are under constant pressure to reduce transportation costs. The easiest metric to focus on is freight rate: what does it cost to move a vehicle from A to B? But that singular focus often creates a much larger problem. The lowest transportation rate is not always the lowest transportation cost.

Across finished vehicle logistics, many OEMs continue to evaluate carrier performance primarily through contracted rates and annual procurement exercises. While this approach can deliver apparent savings on paper, it often overlooks the hidden costs that accumulate elsewhere in the supply chain, from vehicle dwell times and storage fees to missed delivery commitments and strained carrier relationships. The result is a system that frequently optimises for the wrong number.

According to Royce Neubauer, founder and CEO of Auto Hauler Exchange, when you chase the rate to the bottom, you’re not saving money, you’re just moving the cost somewhere harder to see.

He says this is what led him to create Auto Hauler Exchange – a finished vehicle logistics marketplace and carrier management platform. “That brokerage model was simply just pushing trucking companies out of this industry because the rates just kept going down and down and down and down,” he explains. “You start to get below that threshold that these trucking companies can actually grow and maintain their equipment properly and hire and train good drivers properly."

“That's kind of been going on for the last 15, 20 years where you just have these large fleets that feel pressured to gobble up as much market share as they possibly can, even though they can't physically move those units,” he adds.

Most carriers are overcommitting as a result of the pressure. When contracts are awarded primarily on rate, the carriers willing to make the boldest promises often win the most business. 

In many cases, the pursuit of lower rates can actually reduce network efficiency. Large contracted carriers may win significant volumes but lack the capacity to move all of the units awarded to them. Those shipments are often brokered into secondary networks where rates are further compressed, creating delays as carriers search for work that remains financially viable. It means that an OEM assigning 10,000 units to its largest asset based trucking partner will not have all 10,000 units picked up by that trucking company that won the contract. “That’s depressing the market and pushing those shipments out to other carrier partners in the network,” Neubauer explains. “We’re all circling for the same resources."

The consequence is a supply chain that appears cost-efficient on paper but performs poorly in practice.

When transportation savings create inventory costs

One example illustrates the issue clearly. Neubauer recalls a situation where a vehicle sat at a US port for more than a month awaiting transport. The shipment had been tendered through a contracted carrier but was subsequently brokered to other providers. Because the rate had been pushed so low, it took weeks to find a carrier willing to move the vehicle.

While the transportation cost remained low, the overall cost did not. The OEM continued paying storage fees while the vehicle occupied valuable space, and the customer experience deteriorated significantly. What looked like a transportation saving ultimately generated additional operational expense and customer dissatisfaction. 

“The rate was so low that it took them a month to finally find a carrier that would actually do the shipment,” he says. “For that rate, to me, that's not success.”

Across North America, OEMs frequently face mounting dwell times at ports and railheads because carrier networks are unable or unwilling to service specific lanes at contracted rates. The downstream impact can be substantial, particularly when rail facilities charge penalties for exceeding allocated storage capacity.

The carrier sustainability challenge

Another consequence of aggressive rate compression is the effect on carrier sustainability.

For more than a decade, finished vehicle logistics providers have faced persistent pressure to lower rates. While productivity improvements and technology investments can create efficiencies, there comes a point where rates fall below what carriers require to maintain equipment, recruit drivers and invest in growth.

"When rates keep going down, you start pushing trucking companies out of the industry," says Neubauer. "Eventually you're below the threshold where they can properly maintain equipment, train drivers and grow their business."

The challenge is especially acute among smaller carriers, many of whom perform a significant share of the industry's actual vehicle movements. These operators often find themselves working through layers of intermediaries while absorbing the operational risks associated with the transport itself.

As market conditions tighten and driver shortages persist, those carriers gain more flexibility in choosing where they deploy their capacity.

The implication for OEMs is that the organisations that build sustainable carrier relationships will secure access to capacity when they need it most.

Data-driven logistics decisions

As market volatility increases, visibility is becoming a competitive advantage. Finished vehicle logistics networks today generate enormous volumes of operational data, yet many organisations still struggle to convert that information into actionable insight. Real-time visibility into inventory locations, carrier performance and network bottlenecks enables faster decision-making and more accurate forecasting.

Rather than relying solely on annual procurement cycles, OEMs can use operational data to understand where capacity constraints exist, how regional market conditions are changing and which carrier relationships deliver the strongest long-term value.

This becomes particularly important during periods of market disruption, when labour shortages, fuel costs, regulatory changes or seasonal surges can rapidly alter transportation economics.

"The way companies operated two or three years ago isn't going to set them up for success today," Neubauer says. "You need visibility into your entire network and the ability to make proactive decisions instead of reactive ones."

Measuring outcomes instead of rates

The good news is that this problem is solvable, and the industry now has access to tools that simply did not exist a decade ago: real-time carrier performance data, greater transparency into logistics spend and analytics capable of measuring total delivered cost rather than rate alone.

These capabilities allow OEMs to evaluate transportation decisions based on outcomes, not assumptions. Neubauer believes a more effective approach focuses on measurable outcomes across the entire vehicle distribution network, looking at:

• Vehicle dwell time

• On-time pickup and delivery performance

• Storage and bay utilisation costs

• Damage and claims rates

• Carrier capacity utilisation

• Administrative workload and exception management

• Dealer and customer satisfaction.

By analysing transportation through a total-cost lens, OEMs can identify bottlenecks that may have little to do with carrier pricing.

In some cases, the issue may be insufficient carrier capacity. In others, inefficiencies at a railhead or vehicle processing centre may be discouraging carriers from accepting loads. Without visibility into operational performance, these issues can remain hidden while procurement teams continue negotiating rates.

Auto Hauler Exchange built its carrier management platform, AHX MAP, around answering those questions. Its goal is to provide shippers with visibility into what carriers are actually being paid, where bottlenecks are developing and whether procurement decisions hold up when measured against total delivered cost.

“Our system eliminates the guessing,” Neubauer says. “It gives OEMs real time data at all times on where their units are, where their inventory is across the country, how it's moving through their network and allows them to make data driven decisions with their ad hoc freight.”

A shift in thinking

The finished vehicle logistics sector has spent years pursuing transportation savings through lower rates. While that strategy can produce short-term gains, it often ignores the broader economics of vehicle distribution.

The industry's next phase of improvement may come not from driving rates lower, but from improving network efficiency, reducing dwell times, strengthening carrier relationships and increasing operational visibility.

It could reveal that the cheapest shipment was not the most cost-effective one after all.

The challenge to the industry

For OEMs looking to understand the true economics of their transportation network, Auto Hauler Exchange has developed a Total Cost of Finished Vehicle Logistics Calculator, which helps quantify the hidden costs that traditional rate-based procurement often overlooks.