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
- They provide flexibility by offering a myriad of transport alternatives.
- They save resources. Essentially you buy a shipping department.
- They cultivate working relationships with a large stable of carriers.
- 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.