Nimble and flexible, brokerage firms are designed to provide shippers with capacity when and where they need it by leveraging their relationships with carriers across all modes of transportation.
Their job, however, is becoming more difficult because of tightening truckload capacity, a result of several factors:
- The rapid uptick in freight volumes;
- The perceived impact of CSA 2010 and other regulatory factors on the pool of qualified drivers;
- The dramatic reduction in owner-operators from the 2009 recession;
- The reluctance of truckload fleets to invest in more capacity, and the fact that virtually every large truckload fleet shed capacity during the recession — and haven’t added it back.
All of this has put shippers in a dilemma, shifting more and more loads to rail intermodal, which is putting pressure on rail capacity.
The net effect is that the pool of go-to capacity that brokers tap is tight — and is likely to only get tighter. Brokerage firms are not immune to the capacity crunch. So the question that shippers need to ask becomes: What is the best way to work with brokers to secure the capacity I need?
The answer, in many cases, is that the typical relationship will have to change. First, make sure you choose a broker that is best positioned to see your freight through the capacity crunch. Second, put away any commitment issues you might have had with brokers in the past and establish a relationship with them before there is a real capacity crisis.
Brokers aggregate customer loads and carrier capacity to create leverage in a tight network. That’s a good thing. But brokers that are part of a larger transportation company can also leverage their existing network of assets to provide an additional safety net for shipments.
Those brokers that shippers will benefit most from also serve as a valuable source of information. They can provide data about what happens in certain markets, identifying trends and opportunities that shippers don’t have access to independently. They understand how fuel prices are impacting certain parts of the country or how carriers are balanced or imbalanced into or out of certain regions. For example, as brokers track rising import volumes on the West Coast they can alert shippers in advance about the pressure this will place on truck capacity. This gives the shipper a decision opportunity to re-route away from a capacity-constrained market. They may also choose to implement a port diversification strategy to insulate against capacity shortages.
Working with a broker that offers programs and services designed to help its carriers succeed is also indicative of its commitment to keeping capacity in the market. By offering their carriers discounts on fuel purchases and programs that help them better manage their cash flow, brokers are helping them stay in business. For the shipper this means added confidence and peace of mind that capacity will be there when they need it.
Moving from a transactional relationship with a broker to one that is viewed as a long-term strategic expansion of a shipper’s own transportation networks is prudent. Those shippers who have formed a long-standing relationship with a brokerage firm will be in a better position than those who call on the spot. Why? It comes down to supply and demand. If you’re not first in line (or even in line), you stand to lose the available capacity to those who formed the relationship before you. With that said, it’s important to interact with your broker regularly to share information about your freight capacity needs. If you aren’t working with a broker yet, engage one via organizations like the Transportation Intermediaries Association (TIA) and other forums.
According to analysts at Wolfe Trahan, 77 percent of respondents to its second quarter 2011 “State of the Freight” survey expect truckload capacity to be tight, which is the highest number since the capacity crisis of mid-2004. Market trends point to capacity becoming even more constrained as the year progresses.
With the right broker, particularly those with reliable transit times and superior customer service, the best-prepared shippers can avoid costly delays by leveraging their broker’s equipment, coverage and competitive pricing. Most important, they can mitigate risk to their bottom lines by maintaining access to reliable capacity that will ensure their supply chains continue to operate without disruption.
Tommy Barnes is President of Con-way Multimodal, a division of Con-way Inc.’s operating unit Menlo Worldwide Logistics. Barnes joined Menlo Worldwide in 2000 as transportation project manager and became president of Con-way Multimodal in 2010.