Are Freight Brokers Strategic?
In a capacity-constrained freight market, freight brokers play an essential role in your freight strategy. Not convinced? For proof, look no further than UPS’s pending purchase of freight broker Coyote Logistics for $1.8 billion. UPS has more trucks than anyone – literally. They still recognized the value of gaining access to Coyote’s 35,000 carriers, customer shipping network and proprietary technology.
Freight Brokers as Safety Value
Okay, you’re not UPS. We get it. But as a freight shipper you’re dealing with many of the same challenges: capacity constraints during peak periods, empty miles, unpredictable demand, and driver shortages. For freight strategy, a reliable freight broker becomes your safety value. They're the partner you rely on to augment your existing carrier arrangements. UPS, with the Coyote acquisition, is positioning itself for success. Not just for today, but they're planning for the long term as market dynamics shift. You should be doing the same.
The reality is that the current driver shortage will only get worse as several government regulations – including ELD mandates, HOS rules, and drug testing – go into effect by 2017. As capacity tightens further, most shippers don’t have the time or resources to line up back-up capacity for multiple lanes. That’s when freight brokers become key to your freight strategy. They have an in-place network of small to mid-sized carriers who want your freight and may be ideal for particular lanes.
In fact, some brokers have the ability to match your lanes with their own database of static lanes for all their carriers. Let’s say you need capacity out of Michigan. A broker, like Redwood Logistics, can immediately tell you how many carriers in its network are already delivering into Michigan daily and are looking for backhauls. That kind of freight matching capability leverages the capacity of the entire market to cover your loads and can drive down your costs.
Freight Brokers Have Evolved
Many shippers that avoid liberal use of brokers have done so, in part, because of a perception that brokers are just middle men who add costs without adding enough value. The low barriers to entry in the freight brokerage industry mean that there are many mom and pop operations. Their assets may include no more than a desk and a phone.
But a new breed of freight brokers has emerged. They have highly sophisticated freight management technology, superior to even the largest asset-based carriers. Walk into one of these elite brokers and you’ll see freight managers using automated processes to book, manage, and track shipments. Not quite the harried broker with a phone to each ear that many imagine.
Are freight brokers strategic? Absolutely, today more than ever.