Managing Peak Seasons As A Freight Broker: Tips And Strategies For Success

How is 2018’s peak season shaping up compared to 2017? Christmas comes early for most freight brokers , as we’ve pored over freight market data, we’ve learned that sure, 2017 was unusual (capacity shocks and elevated volatility), but so was 2018 (elevated volumes, suppressed volatility). While year-over-year comparisons are intriguing and can be useful, our thesis is that as the industry continues to evolve, historical models become less reliable and real-time data becomes critical. In our view, two macro forces have created a favorable environment for freight brokers: high volumes and plentiful capacity. Notably, tender rejections (OTRI.USA) are still in the basement, suggesting just how much capacity has been added to the trucking market. ) What we’re seeing is a high volume, stabilizing national freight market that may be expensive (overall rates are still elevated compared to last year and 2016) but is not very volatile. In our view, the current environment is generally favorable for brokers, who have plenty of freight to move and are having a much easier time finding trucks now than this time last year. Waves spoke to executives at Axle Logistics, Network Transport, Transfix, and Convoy to get a better sense of how this year’s peak season compares to 2017, where the challenges and opportunities lie for 3PLs in the current market, and what margins looked like this peak.“Volume has remained high, but capacity seems to have been added into the marketplace, which seems to be trying to keep up and keep some level of equilibrium and balance,” said Drew Johnson, CEO of Axle Logistics, a Knoxville-based freight brokerage on a $100M run rate. “We’ve actually seen a pretty good year as it relates to margins.”Johnson did say that covering surging food and beverage volumes have been one of the few difficult spots in the market. Johnson said that many of his carriers avoid food and beverage loads, especially when there’s plenty of other freight to choose from.

He said that transportation providers seem to be hanging onto leverage even though capacity has loosened.“A lot of shippers have in the back in their minds the tight capacity environment we’ve been experiencing—-the power shift hasn’t happened yet,” Johnson said. A freight brokerage based in Chattanooga confirmed that volumes out of Pennsylvania have been exceptional this peak season.“I have a ton of freight out of Harrisburg, Pennsylvania,” Brandi Reid, Sales Manager at Network Transport, told us. “The Midwest and Northeast are very favorable for brokers right now.” Still, Reid said that she’s seen her margins tighten up due to high prices for capacity and fierce competition between brokers.“This peak is a lot more expensive compared to 2017,” Reid said, “and customers want the cheapest rates they can find.”With that in mind, we wanted to know how leading-edge digital brokerages Transfix and Convoy thought about the current freight climate, loosening capacity, and regional markets.“We might be causing that competition to heat up,” Drew McElroy, CEO and co-founder of Transfix wrote in an email. “It’s about cleaning up deadhead and making things more efficient.” McElroy agreed that some Midwest markets were tightening on elevated food volumes.“We are now starting to see the northern and midwestern states, mainly [Minnesota] and [Wisconsin], begin to heat up with all the food manufacturers and distributors ramping up for the holidays,” McElroy wrote. Everything’s coming at a stable, comfortable rate.” Compared to some of its larger competitors, Convoy can be choosier with the kind of freight it takes, he pointed out. Shannon said that the pronounced volatility of 2017, when few market participants had a solid thesis on where the market was headed, caused brokers to be more cautious and strategic this year.“That six months of chaos and indecision [in 2017] made brokers look at themselves and say ‘what are we good at, where are we good at it, and where do we want to play,’” Shannon admitted. The north-south I-5 corridor is Convoy’s most mature, high volume, automated, and loyal lane, Shannon said, and it’s where Convoy feels comfortable making big plays and introducing new programs: “we punch well above our weight out West.”“Moving across the country, the Southeast is our newest region and our last region to open up.

Source:https://www.freightwaves.com/

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