C. F. Lynch & Associates

Go For Broke(r)

By Clifford F. Lynch

DC Velocity, June 2004

All too often, the term "freight broker" conjures up visions of Joe Bob parked in a booth at the Flying Z truck stop with his cell phone, a pad and pencil, and a generous potion of chicken fried steak. And that’s a shame. In a few cases, the image may not be too far from the truth. But for the most part, Joe Bob’s gone the way of the dinosaur. Today, freight brokerage – the business of matching up shippers who have freight to be moved with carriers who can haul it – has grown into a sophisticated multimillion dollar profession. And it’s a profession with bright prospects, thanks to a shortage of trucking capacity.

For over a year now, the economy’s been gathering steam. Today’s DCs are bulging at the seams with HDTV systems and digital cameras waiting to be moved to store shelves. Problem is, there are fewer and fewer trucks available to haul them. Hit by soaring fuel and insurance costs in the last couple of years (insurance costs alone have risen 50 percent since 2000), thousands of truckers have closed their doors.

In ordinary times, that would simply mean more opportunity for the survivors. But these aren’t ordinary times. Truckers looking to expand quickly become discouraged by equipment prices. Last year’s engine emissions regulations have pushed up tractor prices to record levels. Then there’s the problem of finding more drivers. The new driver hours-of-service regulations that took effect in January have only exacerbated an existing driver shortage. Swift Transportation, for example, reported that by the end of December, it had lost 150 to 200 drivers, who quit because they feared the new regs would mean a big loss of income.

As the smaller, poorly managed fleets are squeezed out of the industry and the rest grapple with equipment and productivity constraints, shippers find themselves caught in a capacity crunch. Many of these shippers will turn to brokers and their expansive networks.

Freight brokers aren’t new, of course. They’ve been around as long as the trucking industry itself; but today, they’re larger and more customer-focused than ever before. In 2003, for example, C.H. Robinson, hardly a newcomer to the industry, made 88 percent of its gross profit from managing over-the-road freight, though it doesn’t own a single truck.

In the last few years, several entrepreneurs launched Internet-based brokerage sites, but the idea never really caught on. Many logistics managers still prefer more direct, personal negotiations with carriers, particularly for their more service-sensitive customers.

That caution may be misplaced. As more asset-based industry veterans concentrate on brokerage, shippers can use their services with confidence that their shipments will be handled with the same dispatch and care they’d experience through direct dealings with the carriers. A number of responsible carriers are placing their reputation and credibility squarely on the line with their brokerage operations. One of those is Schneider National. Schneider’s transportation management operation includes more than 6,500 carrier partners that are qualified annually, and it has established an electronic marketplace to help carriers secure loads.

The one thing freight brokers can’t do, of course, is create more trucks. But they can provide access to an expanded array of reliable hauling options. Shippers just have to follow one simple rule: Exercise the same care in selecting a freight broker as you would when buying any other logistics service.



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