Riverside Logistics

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21st Century Freight Brokers are here to HELP!!

Trucking was deregulated in the 1980’s. Freight Brokerage activity really began when this happened. Brokerages have grown significantly in size and scope since then.

The current outlook for freight brokerages (in 2023) looks pretty good. However, it will not be a smooth or steady-as-she-goes environment. It will have ups and downs. As businesses continue to put emphasis on the efficiency of their supply chains, freight brokers will become an integrated part of their clients supply chain processes. Demand for freight brokerage services should remain strong going forward.

The “global” freight brokerage market has been estimated to be around $50 billion dollars. It is growing substantially each year and could reach over $100 billion by the end of this decade. With an industry estimated Compound Average Growth Rate (CAGR) of around 6% this seems achievable. Please remember that there are many components to the freight brokerage market. These segments depend on the types of customers served as well as the type of services offered, and the different modes of transportation deployed.

A key question is “Are you giving away money when using a freight brokerage?” Current average gross margins in the business typically range between 10% and 20% of net sales. For every $1 you pay in freight to the broker for freight, the broker takes away less than $.20 to cover all his costs. This margin (20 cents) must cover technology, negotiations, carrier relationships, contracts, and all back-office costs.

Just to be clear, the basic distinction between freight brokers and 3rd party logistics providers (3PL’s) is their range of services. Freight brokers focus specifically on transportation. They work marrying clients and carriers to move client shipments. 3PL’s on the other hand, may offer a much broader set of services, some of these include Warehousing, Supply Chain Consulting, Distribution, Order Fulfillment, Inventory Management, Kitting, and others. In short, freight brokers are much more narrowly focused and 3PL’s can offer brokerage services and additional services that increase their value and lower your total cost.

In the late 1990’s and early 2000’s only about 6% of shipper freight moved on broker’s paper. Since then, brokers have steadily increased their market share penetration. Now, they handle over 20% of the freight moving in the U.S. More importantly, they have become a necessity instead of a nuisance. More and more shipper routing guides feature brokers nearer the top of their transport service providers. In the earlier 2000’s, it was uncommon to see a freight broker in the primary position of a shipper’s routing guide. Back then, freight brokers usually handled freight that asset-based carriers didn’t want or that was priced too low for the carriers to make any money on. Freight brokers would primarily serve as a last resort during freight surges that the carriers alone could not handle.

Things have changed dramatically. Freight brokerages invested in technology and customer service. They tended to offer a better all-around product than their asset-based competitors. This allowed them to take on a greater role in routing guides.

Today, it’s common for freight brokerages to be a top choice in Shipper’s routing guides or in their TMS. Moreover, the quality of freight that brokers handle now is far better than it was in the old days. Now, freight brokers often are assigned highly desirable, carrier-friendly freight. They’ve come a long way.They ensure that the goods arrive at the final destination in the right condition. A freight broker can be a tremendous asset to organizations looking to quickly secure carriers specific to their needs and budget. Freight brokers really act as Shipper’s transportation managers. They find the best carrier at the best price to move freight when it is ready and when it needs to be delivered.

Here are some key reasons you should use a Freight Broker

  1. They provide flexibility by offering a myriad of transport alternatives.
  2. They save resources. Essentially you buy a shipping department.
  3. They cultivate working relationships with a large stable of carriers.
  4. They know freight markets. Their expertise gives you the best cost/service.

Another big advantage of a freight broker is providing efficiency. Shippers want a solution that is an easy way of doing business along with the right results! With the right freight broker, you get all the benefits of a shipping department.

Here are some questions to ask before giving a freight broker any business.

    • Business Tenure: Longevity is important. Don’t go with a broker who is less than a year old and has a lot of new employees. Look for staying power.
    • Carrier Sourcing: How do they find and on-board their carriers. Carriers are the most important asset in a freight brokers portfolio. If they source them (all) from Load Boards without real long-term relationships, bad service and poor results will follow.
    • Certified Team Members: Experienced Brokers are worth their weight in Gold. If the broker has a lot of newbies who don’t have a lot of experience under their belt, you’re in for a rough time. If a broker is TIA certified (CTB) and has been on-board for an extended period, that speaks positive volumes about their capabilities.
    • Customer Retention: If the broker is churning through customers every 6 months, then walk away. You do not need to go through the hassle of finding a new broker every 6 months. It costs you time, trouble, and expense to do so, with poor results to show for it.  
    • Ratings: If the broker can’t point you in the direction of great reviews, in forums such as DAT or Google, then they probably don’t have any and you should find someone else.
    • Tech: Strong technology used to be a game changer in the brokerage business. Now it’s the norm and is mandatory to do business. You need a broker with the ability to provide tech that makes your supply chain efficient.
    • Tracking: Good brokers can provide you with accurate details from the moment they pick up your freight until the moment they unload it. They should be able to tell you where it is at any time and alert you when there is a problem enroute.

Riverside Logistics holds themselves out as both a 3PL and as a highly qualified freight broker. We have well experienced TIA certified Brokers who are ready to help you with all your shipping needs. We can provide the technology necessary to manage and track your shipments all the way through the supply chain, with carriers who will treat it like it should be treated. We are efficient and cost effective and have a lot of long-term customers to prove it. Please give us a call to start the ball rolling. We can be reached at 804-474-7700 Option #4.

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Part 2: 2024; logistics nightmare or a re-awakening?

In Part 1,  we looked at the logistics environment to see what is going on right now and what could happen in the future. Our conclusion was that it’s a toss-up and so it is better at this point to prepare for either scenario, a nightmare, or a re-awakening, in-order-to keep your supply chain functionally whole.

In Part 2, we would like to look at how a third-party logistics company (3PL) could help you navigate this environment. 3PL’s are major players in the logistics marketplace and when used correctly they can improve your supply chain’s performance by lowering overall costs and improving service levels.

How does a 3PL fit into the mix for 2024?

Let’s look at some interesting 3PL info. Over 90% of 3PL’s offer EDI related solutions for everything from Order Tender to Freight Invoice. 3PL’s (like Riverside Logistics) can provide technological solutions that make it easier rather than harder to do business in the logistics space. They are tying API-related (Applied Programming Interface) feeds which marry up requests and responses, to EDI (Electronic Data Interchange) feeds to carry all necessary data. This results in seamless informational flows, which provide more information to shippers. The logistics process becomes more “real time” and much more transparent.

The highest portion of out-sourced logistics activity is currently domestic transportation, however, 3PL’s also provide warehousing, international logistics and other useful services that shippers need. They tailor their processes to fit each client. So, instead of a cookie cutter logistics process, you get a custom-made client specific process. Not only do you get improved information flows, but you also get the ones you need, when you need them. 3PL’s are very focused on providing a helpful portfolio of logistics services. Most importantly, they allow you to focus on your company’s core business, while they focus on theirs. They are tasked with making it easier to execute your logistics not harder.

Knowledge-based work related to logistics is going to move more and more towards AI-type automation and will keep increasing penetration levels as long as it produces efficiency and saves money for providers. The IoT (Internet of Things) is a big reality eye-opener for Logistics-related companies. More and more “process stuff” is being handled directly over the internet. More processes are being automated as well. “Big Data” analytics is also coming on strong in Logistics. Data analytics allows 3Pl’s, carriers and shippers to analyze their logistics information, spot trends quickly and make the proper adjustments to ensure that they are operating according to plan. This is being done more and more at a real-time pace,  and not after the fact, when the damage is already done. Data analytics also allows shippers and carriers to set up a better negotiation platform for doing business in the long run. Better data means a better contract where performance metrics are not guessed at, or generalized, but rather they are specifically spelled out for both parties and are “fact-based”.

A recent, new development is “Smart Contracts”. They allow computer programs to automatically monitor and adjust contracts based on their terms and conditions. This eliminates the normal contract review and enforcement processes and ensures closer-to-perfect contract compliance between the parties over time. This also allows Shippers and Carriers and 3PL’s to spend more time on the operational aspects of their deals and less time reviewing their contracts. As more smart contracts are put in place less manpower time will be required to monitor and manage them. Less time haggling, more time executing. This bodes well for tighter partnerships between the 3PL community and the Shipper community.

After reading Part 1 and Part 2, does it feel like a Logistics nightmare is coming in 2024? I don’t think so. Will 2024 provide a Logistics Re-awakening? I don’t think that either. What I get from the above is that rates will stabilize during late 2023 and early 2024. Capacity will remain soft until the stabilization is complete. Then when rates are stable, capacity will start to tighten, and we will see freight costs increase.

How can you best prepare for this middle-of-the-road scenario? By biding your time before entering contracts with your suppliers. My advice is for you to look to a 3PL for help in navigating the logistics environment. 3PL’s usually have more negotiation leverage across a larger carrier base than medium or small shippers. 3PL’s can provide a technological eco-system that allows for better visibility, lower costs, and more process efficiencies that an individual shipper alone cannot. If you think about it, it’s the business that they’re in, so they are good at it.

At Riverside Logistics, we pride ourselves on our operational expertise and the ability to get things done correctly for our clients in the logistics space. We are consistently upgrading our technological eco-system in-order-to improve the level of performance and transparency of data between our shippers and our carriers. We would love to have an opportunity to look into your supply chain and logistics network to see how and where we can help. Remember, the next year could be a nightmare, if you let it!

Call Riverside Logistics any time and talk to a professional logistician regarding your warehouse, transportation, network or logistics consulting needs and questions. We can be reached at 804-474-7700 Option #4. Good luck!

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Part 1: 2024 a year of Logistics nightmares or a re-awakening?

The Pandemic has taught companies how important their supply chains are to conduct business. When they work, everything moves along as it should. When they don’t work everything breaks down, business norms are destroyed, and it leaves a big scar that lasts a long, long, time.

What will 2024 bring to the Logistics Realm? No-one has a perfectly accurate crystal ball for Logistics going forward. However, there are Macro-level influencers that should be considered when planning your Supply Chains in 2024.

For example:  Medium to Small-sized truckers have been going out of business or shutting down in record numbers in 2023. The cost of capital, insurance, fuel, equipment, and labor have all impacted margins negatively in a big way. Couple that with lower freight rates and you have a recipe for more failures. Currently, capacity is soft, meaning that there are more trucks than loads. When this happens the law of supply and demand kicks in, and rates go down. Spot rates (a “Spot” Load is a load that usually falls outside of a contract, or a one-time shipment and the rate is usually for that specific load only) have dropped significantly over the last 90 days.

Business seems to be stabilizing lately, albeit at lower levels. If this is the trough during the rest of 2023 and heading into 2024, we should expect to see rates stabilize, capacity continues to be soft and shippers becoming more in control of the logistics purchase and sale process.  That is what the current wisdom indicates.

But current wisdom could be wrong! This could be the beginning of a slide into recession. If it is, more carriers will go out of business, putting increased pressure on those left standing to shoulder the load. Shouldering the load means covering expense and making enough profit to justify their existence i.e., higher freight rates or better freight.

Another possibility is if the recession happens and lingers, carriers will be fighting for a diminished basket of freight. Rates could go down, forcing carriers to re-think how much business they want to handle. Once again, this could hurt Shipper’s ability to attract good carriers at a fair  price point.

If 2024 is when the recession impact is felt the most, then you would be wise to hold off on long-term contracts with your Logistics suppliers. The bid-ask environment will get better for Shipper’s over time if the recession does in fact materialize.

What’s on the horizon? More of the same? Or a further deterioration in rates and a further softening of capacity?

I would anticipate both. Keep an eye on the economy. Logistics is a leading indicator for the economy, so it will feel the effects early. If the economy deteriorates further, it will impact rates and service levels. Traditionally, freight rates go down, service levels (may) go up and improve with competition.

Let’s look at some key impacts on Logistics.

Transportation companies are facing more regulation not less. This makes it more difficult to succeed in the marketplace, especially for smaller sized carriers. They will either merge with or be bought out by larger rivals or simply go out of business. Once again capacity will not increase so  rates will remain soft.

Technology is providing more sophistication to the logistics environment. This allows customers to request more information  and more real-time data about their freight. Today, technology is not cheap, and is expensive  to maintain. This strains the smaller sized Logistics providers the most.

Then there is “trouble with the curve”. The yield curve inversion has many economists (and others) concerned that we have a recession coming. Haven’t seen it yet (at least in full form), but if history repeats then we have a recession coming. Once again that would mean lower rates and excess capacity until it stabilizes.

What’s headed your way?

Customers are requiring more touch points. Digitation is allowing technology to provide real-time inputs and make them available to a broad audience. An entire digital marketplace has developed to allow carriers and shippers to connect across a much broader spectrum of loads, shippers, and carriers. The Pandemic accelerated the onslaught of new ways to look at, handle, process and manage the overall Logistics space. Integration of the Eco-Systems (technology systems) is becoming a predominant trend in the logistics environment. Shippers require integration between their ERP systems and logistics provider TMS, WMS, and visibility tools. The 3PL community is having to integrate their WMS, TMS and Visibility software into a complete eco-system. This costs money, sometimes a lot of money.

There will probably be a push by shippers towards more frequent and smaller shipments. This lends itself to LTL. LTL carriers lost Yellow Freight recently and fortunately that capacity was absorbed by the remaining LTL carriers. The absorption process will soak up a good portion of the excess capacity in the remaining carrier base. This could lead to more rate stabilization and maybe even rate increases.

All in all, it’s a cloudy picture on the logistics front for the next 12 months. Keep your “eye on the ball” when it comes to managing your supply chain. If you need help assessing the logistics environment and or your role in it, please reach out to a consultant at Riverside Logistics. They can provide insight and recommendations for how to best tackle this dynamic environment.  They can be reached at 804-474-7700. Option 4. Good luck!

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Are you ready for the potential transportation related strikes in the US Transportation system?

2023 could really be a bad year for Logistics related labor!

Let’s recap at a high level. The Railroad Unions are not happy that Congress legislated to keep them from striking. UPS workers have a contract coming up and they have voted to strike…if need be. The first of 4 major unionized LTL carriers, ArcBest Freight, also voted to strike,  if need be. The dock workers on the west coast were working until recently without a contract.

All in all, it could have been a bad year for logistics if any or all of these various unions had decided to strike. UPS alone handles 6% of the US GDP, railroads handle 35% of the freight that moves, and the west coast ports handle more than half of the imports and exports coming and going from the US. So unionized labor in Logistics has a lot of clout.

What is some good advice to shippers? PLAN, PLAN, PLAN, and then PLAN some more. Be prepared to make moves to compensate for the loss of key Ports, carriers, and modes involved in your supply chain.  Make sure that you understand the possibility of extended slowdowns.

Plan your alternatives if someone like UPS goes out on strike. Can you divert to FedEx? Will FedEx have the capacity to handle the load if UPS goes on strike? Do you want to be around to find out? Figure out how you would shift to other modes and carriers to allow yourself to continue to conduct business. If you are deeply embedded in parcel shipping, then you only have DHS (primarily int’l ships), FedEx, UPS, and the Postal System (USPS) as options. If UPS goes out, then you must make sure that you can even use another option such as FedEx. If you don’t have rates and relationships with either FedEx, DHL, or USPS, now may be a good time to start to get them in place. If you wait until the UPS strike is imminent, you’ve waited too long and will be out of luck. Also consider pooling your freight into larger shipments so you can utilize LTL, FTL, or Pool distribution options. Talk to your customers and see if they are planning for any changes should the UPS worker’s strike. See if they are willing to order in larger quantities or use longer frequencies between orders to help compensate.

If you are a rail shipper, you’re not in immediate danger unless the railroad unions decide to stage a wildcat strike. Although this is a possibility, it’s not a strong one…yet. Your modal alternatives may be limited, depending on what products you ship. If trucking options are available, then you need to plan on how you would divert tonnage to truck or use intermodal to get past any work stoppages or slowdowns on the rails.

If you are an importer or exporter and rely on the west coast for a large portion of your containerized moves (bulk also) then you need to take a hard look at diverting tonnage into or through the east coast, since it won’t be affected. Although this may impact you in terms of both cost and transit time, it’s an easy tradeoff against doing nothing and getting caught with your pants down. Now is the time to set up a (more) risk tolerant logistics network that utilizes both sides of the nation to ship or receive product. There has already been a (strong) migration to the East coast because of the pandemic and the shortages it produced.

If the unionized LTL carriers such as ArcBest, go on strike, that will have an impact on the availability of LTL carrier capacity. If you are a heavy user of unionized LTL, especially ArcBest, then now is the time to look at alternative carriers, get the relationships going and rates and services in place. Remember that this is a game for minimizing risk profiles to your supply chain. You can’t do business if you can’t ship and receive products.

If any or all of the above come to fruition, commercial transportation will be impacted. In some cases, this impact will be large, in others it may not hurt you too badly. Let’s remember a couple of things. Logistics is a system with a network. When parts of the network get disrupted the rest of the network suffers too. If rail capacity is negatively impacted, it will influence truck capacity and availability. Same holds true for import-export container activity. If the west coast shuts down, then the network is thrown out of kilter and the impact (pain) telescopes through the entire system. As a result, trucks aren’t where they used to be and can’t get where they needed to go, so the chain breaks down.

I cannot stress enough how impactful the above companies, organizations and modes are to our logistics network and your ability as a shipper to conduct business. You must start your planning cycles now, before it is too late to really do anything but suffer the consequences.

One strong, viable option is to partner with a 3PL, third party logistics company, that can bring a variety of options to the table for you to use. Not only do 3PL’s have a variety of solutions, but they also usually have options that won’t break the bank.

Riverside Logistics is one of these 3PL options. We have been helping our clients navigate the nuances of the logistics market for over 25 years and we would be happy to sit down with you and map out a strategy to compensate for the potential labor issues headed your way. If you would like to speak to one of our Logistics Consultants, call us at 804-474-7700 Option 4.

Remember the mantra: PLAN, PLAN, PLAN!!

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How to make sure your Freight Broker is “SECURE”!!!

What is a Freight Broker ?

They are someone who arranges transportation for another company (Shippers) using someone else’s transportation assets (Carriers). The Broker can be thought of as a “matchmaker” between Carriers with transportation assets and Shippers with freight. Typically, Shipper’s contract with Brokers to handle the shipment of all or a portion of their freight. Some Brokers act as a backstop for Shippers. When Shippers can’t get enough capacity from their regular carriers, they utilize Brokers for the excess moves. Brokers find carriers, arrange the details of the loads, pay the carriers, and invoice the Shippers. Although there is a lot more to it than just that, you probably get the idea. Brokers are middlemen. They don’t own anything, either freight or carrier assets, they just marry the two and charge a fee for doing so.

Why do Shippers use Brokers?

There are a couple of reasons:

The Brokers usually have access to a more extensive network of carriers than the Shipper. This network is a single point of access for multiple freight options and modes. It also allows the Broker to negotiate lower rates due to the overall volume of business they provide the carriers and shippers they do business with.

Brokers have technology, like a Transportation Management System, that allows them to save a lot of time (and trouble) in finding the right carrier, at the right time, with the right equipment, at the right price, and then executing the loads efficiently.

The Brokerage can improve your Supply Chain’s performance and avoid potential execution problems by utilizing their superior relationships and expertise in dealing with carriers’ operations.

Flexibility is another key advantage. They can help you expand as needed without tying up as much capital while minimizing your risk to changing market conditions. The depth of their bench can help you improve your supply chain and cost regardless of market conditions.

If utilizing a Broker makes sense for your company, how do you make sure that you get a good one and not a bad one?

Ensure they have the necessary licenses and accreditations. Brokers are licensed by the Federal Motor Carrier Safety Administration (FMCSA) and must carry a (minimum) freight broker bond. This stifles fraud in the trucking industry and guarantees carriers get their invoices paid. Also see if the Broker is a member of TIA (Transportation Intermediaries Association), which works to improve the industry and its education and standards. TIA tests and provides certification to Brokers. See if your prospective Broker is TIA certified.

Make sure they meet your communication needs. You want Brokers to be responsive at all times. They should provide regular updates on your shipments. Any issues should be made transparent and dealt with effectively.

The contracts and costs should be easy to understand. Services must be clearly defined. All add-ons associated with the load must be disclosed upfront. This includes fees such as fuel, detention, and demurrage.

Some “red flags” to watch for with Freight Brokers

Is the broker difficult to reach or unresponsive to your calls or emails? This may indicate that they’re unreliable and don’t have the capacity to take on new work.

Is the broker vague about their charges. If so, you may get hit with hidden costs on your invoice. Make sure you understand all the costs involved with moving your goods.

Does the broker work with only a few carriers. If so, you may not get good rates. The smaller the carrier pool, the less the competition.

Is the broker financially stable? Do they have adequate insurance coverage. If not, this could be a significant risk to your load. Check their  D-U-N-S Number. Also request to see a Certificate of Insurance (COI), which provides details about their insurance policy.

Make sure that the broker doesn’t have a “conditional safety rating”.  This would mean the broker/carrier, or their truck driver, has had multiple violations and is not following regulations. Make sure the broker complies with all relevant regulations and standards and that the carriers they use have an excellent safety rating before booking your shipment.

Here are the key traits to look for in your Freight Brokerage:

  • Trustworthy
  • Flexible
  • Customer-Oriented
  • Proactive

Here are some key questions to ask a prospective Broker:

  • How long have you been in business?
  • How do you source your carriers?
  • How does your carrier on-boarding work?
  • Once you find a good carrier, how do you keep them?
  • What is the average tenure of your team members?

Hopefully, you are now better prepared to successfully hire a Freight Broker if you need one. Good Brokers can be extremely helpful in managing your Supply Chain. Riverside Logistics Services has been helping Shippers manage their Supply Chains for over 25 years. We are a member of the TIA (Transportation Intermediaries Association) and actively participate to improve the quality of the Brokerage community.

We have a very thorough carrier on-boarding process and go to great lengths to make sure that our carrier community is extensive enough to meet all the needs of our clients. We welcome any opportunity to discuss your Supply Chain and can be reached at 804-474-7700 ext. Option 4.

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