As 2008 winds down I think back to the hurdles we as transportation intermediaries, 3pls, freight brokers or whatever you want to call our industry experienced. I recall the first quarter when fuel prices were climbing as freight rates were irrationally going down, which led into the second quarter where we saw even more trucking companies to go bankrupt as fuel prices continued to climb, and then somewhere around the end of the second quarter or beginning of the third quarter freight rates shot back up as truck capacity tightened and fuel continued to hit new highs. And finally the fourth quarter saw fuel level off and actually drop; and freight rates drop as fast or faster than fuel as companies battled for business.
I have been in this business for 15 years and I can say this has been the most unpredictable, unstable year I have ever seen. Through those fifteen years I saw fuel surcharges come and go. I saw the new hours of service rules go into effect and everyone say that it would do away with milkruns because of stop off requirements and on duty hours, (stop charges went up because of it, but they have since dropped back down). I experienced the craziness caused by Hurricane Katrina as oodles of trucks went to that part of the U.S. to haul high paying FEMA loads. And every now and then I have heard trucking companies complain about the lack of qualified truck drivers and how we are one day going to have an extreme shortage because all of the older experienced professional drivers are going to retire. I could go on with many more examples of adversity and changes I have seen in this industry, but time limits me.
What will 2009 hold in store for us??? I have no clue. All I can say is that 2008 was a rollercoaster ride like never before and I hope 2009 has less corkscrews in it.
But don't worry, I'll have my safety harness on just in case.
Wednesday, December 10, 2008
Thursday, December 4, 2008
Recent bumper sticker
In my recent travels I saw a bumper sticker that made me smile. It stated, "I'm voting for the Old Man and the Hot Chick"-in reference to the recent presidential election. As the truck turned left in front of me I began to recall other bumper stickers that have humored me and the one that stands out in my mind relevant to the transportation industry is the large sticker on the rear door of some trailers that reads, "Say no to cheap freight." Each time I see this message I wonder where the truck is going and how much the load is paying to the truck.
The "Say no to cheap freight" approach sounds simple in theory, but we live and operate in a real world that is driven by capitalism. I only wish it were this simple. But alas the market determines the price and until we define what cheap freight is, we can't even attempt to adopt the "Say no to cheap freight" creed. What might be cheap to one company isn't cheap to another. One company might require higher rates on loads than another because they have a higher overhead. You could go on and on with the debate and it wouldn't amount to a hill of beans since it is all relative. In the free market supply and demand rule with iron fists and technology contributes even more to the fluid nature of rates by allowing information to be sent within seconds.
The "Say no to cheap freight" approach sounds simple in theory, but we live and operate in a real world that is driven by capitalism. I only wish it were this simple. But alas the market determines the price and until we define what cheap freight is, we can't even attempt to adopt the "Say no to cheap freight" creed. What might be cheap to one company isn't cheap to another. One company might require higher rates on loads than another because they have a higher overhead. You could go on and on with the debate and it wouldn't amount to a hill of beans since it is all relative. In the free market supply and demand rule with iron fists and technology contributes even more to the fluid nature of rates by allowing information to be sent within seconds.
Monday, December 1, 2008
Old files
As I was perusing through the bottom drawer of my file cabinet I stumbled across quite a few files of customers I called on in the past that are no longer in business and I couldn't help but wonder which companies might be next. It was officially announced today that the United States has been in a recession since December of 2007. I believe I speak for most everyone in the transportation industry when I say; "Who didn't know that?"
Our industry is the first to feel upswings and the first to feel downswings in the economy. I could have told some economist this news around January 2008 and it would have saved a lot of research money in the process. The difference between now and then is that the rest of the world is locking in on the recession mode as well with banking and financial troubles spreading like a pandemic.
And so it is with economic cycles.....we go up, we go down. We go up and then down. How low will it go? How long will the downturn last?-both million dollar questions. And another question that weighs heavily on transportation company minds is; will GM, Ford and Chrysler be able to weather the storm?
Our industry is the first to feel upswings and the first to feel downswings in the economy. I could have told some economist this news around January 2008 and it would have saved a lot of research money in the process. The difference between now and then is that the rest of the world is locking in on the recession mode as well with banking and financial troubles spreading like a pandemic.
And so it is with economic cycles.....we go up, we go down. We go up and then down. How low will it go? How long will the downturn last?-both million dollar questions. And another question that weighs heavily on transportation company minds is; will GM, Ford and Chrysler be able to weather the storm?
Monday, November 24, 2008
Giving Thanks for every Load
I apologize for the long hiatus, but I have returned just in time for Thanksgiving and I wish everyone out there a happy turkey day.
My, oh my, how things have changed since my last post. We made it through extremely high fuel prices, we made it through another Presidential election and now we are going to have to make it through a bad economic period; and each company out there should give thanks and be grateful for every bit of business they get during this time.
In a weak attempt to be optimistic, low fuel prices should help companies stay within their transportation budgets. And any RFQs by shippers should show favorable returns as transportation companies again try to retain market share through pricing.
Survival of the fittest still applies as companies tighten their belts and keep a close watch on debtors and creditors. I suspect bankruptcies will continue to thin the ranks of U.S. Corporations and I remain hopeful that we will not see a tremendous trickle down effect caused by these bankruptcies.
The Green movement seems to have lost some momentum with lower energy prices, but it isn't dead. Money is the driving force behind almost everything and as long as going green is cost prohibitive, it will have to ride in the back seat for a while.
My, oh my, how things have changed since my last post. We made it through extremely high fuel prices, we made it through another Presidential election and now we are going to have to make it through a bad economic period; and each company out there should give thanks and be grateful for every bit of business they get during this time.
In a weak attempt to be optimistic, low fuel prices should help companies stay within their transportation budgets. And any RFQs by shippers should show favorable returns as transportation companies again try to retain market share through pricing.
Survival of the fittest still applies as companies tighten their belts and keep a close watch on debtors and creditors. I suspect bankruptcies will continue to thin the ranks of U.S. Corporations and I remain hopeful that we will not see a tremendous trickle down effect caused by these bankruptcies.
The Green movement seems to have lost some momentum with lower energy prices, but it isn't dead. Money is the driving force behind almost everything and as long as going green is cost prohibitive, it will have to ride in the back seat for a while.
Friday, May 9, 2008
Changes and Challenges
The transportation industry always seems to be constantly changing with new challenges (or opportunities-however you want to see it) right around the corner and no advanced warning of what lies ahead. And this is where the industry is today. Higher diesel fuel prices and low rates have driven many carriers out of business or caused one truck shows to park the rig to wait things out. Produce season has begun in Florida, paying large sums of money for trucks to haul fruits and vegetables and rates are as volatile as the availability of empty trucks.
The changes I have seen are:
1.)The days of a truck dead-heading a hundred miles to pick up a load or more are over. Dead-head is now limited to 50 miles or less, because it costs around $.75-$1.00 per mile in fuel for every mile the truck travels.
2.)Carriers have realized they can't turn a profit unless they take into account reasonable rates and a consistent fuel surcharge. They are demanding higher rates than before.
3.)Service issues are more common. Having less trucks equates to more problems.
4.)We can cover loads for a competitive rate on one day and then have to pay much more to secure trucks for the same loads the rest of the week.
5.)The weak US dollar is causing some U.S. manufacturers to change to U.S. based suppliers rather than buying goods from other countries. Canadian manufacturers will feel the brunt of this burden as their currency retains value.
And possible changes I see for the future are:
1.)Different organizations are lobbying to increase the bond to become a broker from $10,000 to $100,000 or more, which will make it more difficult for individuals to start their own company. But at the same time, it might keep some of the dishonest people out of this industry, reducing the number of crooks who double broker loads, or broker loads and never pay the carrier. (I have mixed feelings on this legislation. I believe this goes against the spirit of deregulation and the business freedom that makes this country great. But at the same time I despise the unscrupulous brokers out there who are nothing more than scam artists, cheats and liars).
2.)Deadhead surcharges for customers could become common. The higher diesel climbs, the more burden it places on carriers and the more critical deadhead miles become.
3.)The government could mandate a national fuel surcharge scale to be paid by all shippers and brokers. (I support this wholeheartedly. It would put everyone on a level playing field and the carriers would know whether or not they are being paid fairly.
4.)The green movement will continue to gain momentum. The effort to be green will be good for our environment, but it will come at a price and this price will eventually trickle down the customer. Are we willing to pay this price?
5.)Rates will continue to rise. As service issues for brokers and carriers increase, more and more customers will begin to focus on reliability and consistency rather than price. Relationships between brokers and carriers, brokers and customers, and carriers and customers are more important now than ever.
The changes I have seen are:
1.)The days of a truck dead-heading a hundred miles to pick up a load or more are over. Dead-head is now limited to 50 miles or less, because it costs around $.75-$1.00 per mile in fuel for every mile the truck travels.
2.)Carriers have realized they can't turn a profit unless they take into account reasonable rates and a consistent fuel surcharge. They are demanding higher rates than before.
3.)Service issues are more common. Having less trucks equates to more problems.
4.)We can cover loads for a competitive rate on one day and then have to pay much more to secure trucks for the same loads the rest of the week.
5.)The weak US dollar is causing some U.S. manufacturers to change to U.S. based suppliers rather than buying goods from other countries. Canadian manufacturers will feel the brunt of this burden as their currency retains value.
And possible changes I see for the future are:
1.)Different organizations are lobbying to increase the bond to become a broker from $10,000 to $100,000 or more, which will make it more difficult for individuals to start their own company. But at the same time, it might keep some of the dishonest people out of this industry, reducing the number of crooks who double broker loads, or broker loads and never pay the carrier. (I have mixed feelings on this legislation. I believe this goes against the spirit of deregulation and the business freedom that makes this country great. But at the same time I despise the unscrupulous brokers out there who are nothing more than scam artists, cheats and liars).
2.)Deadhead surcharges for customers could become common. The higher diesel climbs, the more burden it places on carriers and the more critical deadhead miles become.
3.)The government could mandate a national fuel surcharge scale to be paid by all shippers and brokers. (I support this wholeheartedly. It would put everyone on a level playing field and the carriers would know whether or not they are being paid fairly.
4.)The green movement will continue to gain momentum. The effort to be green will be good for our environment, but it will come at a price and this price will eventually trickle down the customer. Are we willing to pay this price?
5.)Rates will continue to rise. As service issues for brokers and carriers increase, more and more customers will begin to focus on reliability and consistency rather than price. Relationships between brokers and carriers, brokers and customers, and carriers and customers are more important now than ever.
Friday, April 11, 2008
Update
It has been a while since I have posted due to many reasons and factors, but I won't waste time by elaborating.
Needless to say, our transportation world continues to be tilted by the extremely high fuel prices being paid. More and more truckload carriers are beginning to park trucks rather than lose money and more truckload carriers are shutting their doors. The combination of low freight rates and high diesel prices is finally hitting home and we are seeing the first steps in the correction process.
From a broker standpoint, trucks are beginning to demand higher rates to take loads and they are justified in every way. Their expenses have been outpacing their revenue and customers continue to push for lower rates to control their transportation costs. But this is beginning to change.
We are also beginning to have more service issues as less trucks are available to take loads. Depending on the day and the area, trucks can be difficult to find or they can be relatively easy to find. But one thing is certain; they all want more money to haul the same loads they have been moving for the past year or more. The supply of freight is beginning to increase with the arrival of the Spring season and more produce moves. At the same time we are seeing a reduction in the supply of trucks caused by recent bankruptcies, etc.
I predict the next 6-12 months will be difficult for carriers, brokers, shippers, 3PLs, 4PLs and everyone involved in the transportation industry as the correction gains momentum.
Carriers will continue to face daily challenges by trying to balance revenue and rising costs.
Brokers/3PLs will continue to face daily challenges as trucking companies demand more money and customers continue to try control their freight spend. And the reduction in the number of carriers will impact their ability to provide lower rates and quality service.
Shippers will begin to see their freight spend go up and not just based on fuel surcharge increases. Base rates will rise. It is the only way the true trucking companies can stay in business.
Needless to say, our transportation world continues to be tilted by the extremely high fuel prices being paid. More and more truckload carriers are beginning to park trucks rather than lose money and more truckload carriers are shutting their doors. The combination of low freight rates and high diesel prices is finally hitting home and we are seeing the first steps in the correction process.
From a broker standpoint, trucks are beginning to demand higher rates to take loads and they are justified in every way. Their expenses have been outpacing their revenue and customers continue to push for lower rates to control their transportation costs. But this is beginning to change.
We are also beginning to have more service issues as less trucks are available to take loads. Depending on the day and the area, trucks can be difficult to find or they can be relatively easy to find. But one thing is certain; they all want more money to haul the same loads they have been moving for the past year or more. The supply of freight is beginning to increase with the arrival of the Spring season and more produce moves. At the same time we are seeing a reduction in the supply of trucks caused by recent bankruptcies, etc.
I predict the next 6-12 months will be difficult for carriers, brokers, shippers, 3PLs, 4PLs and everyone involved in the transportation industry as the correction gains momentum.
Carriers will continue to face daily challenges by trying to balance revenue and rising costs.
Brokers/3PLs will continue to face daily challenges as trucking companies demand more money and customers continue to try control their freight spend. And the reduction in the number of carriers will impact their ability to provide lower rates and quality service.
Shippers will begin to see their freight spend go up and not just based on fuel surcharge increases. Base rates will rise. It is the only way the true trucking companies can stay in business.
Wednesday, March 12, 2008
The Tide is Beginning to Turn
The escalating diesel fuel prices are beginning to impact truck capacity, at least in the short term. We are finding it more difficult to assign trucks to loads on all of our lanes, not just specific ones. Locally, I know of one truckload carrier that had more than 100 tractors that closed its doors last week, more than likely a casualty of cash flow problems created by the spike in fuel prices.
Truckload carriers are beginning to park trucks after finally realizing they will lose less money with a truck parked than a truck hauling low paying freight and deadheading to pick up the next load of low paying freight. The cut rate brokers/logistics companies in the industry will have to take a different approach to gain market share in the near future as less trucks will be available to pick up freight and the available trucks begin to demand higher rates.
All of the information I can gather doesn't tell me that our freight recession is over. The information only tells me that we are seeing a correction in our market place with supply and demand coming closer to each other. Factor in the beginning of produce season and we could see more freight than trucks in certain areas of the U.S. soon.
In summary; carriers are beginning to see the light at the end of the tunnel. They are finally taking trucks off of the road, (some voluntary, some involuntary), and this will affect rates that shippers pay. Shippers and brokers will begin to see more service issues as the truck supply begins to become strained and relationships will be tested as service failures become more common. Higher rates are on the way.
Don't you just love our dynamic industry?!
Yours truly, the transportation peddler
Truckload carriers are beginning to park trucks after finally realizing they will lose less money with a truck parked than a truck hauling low paying freight and deadheading to pick up the next load of low paying freight. The cut rate brokers/logistics companies in the industry will have to take a different approach to gain market share in the near future as less trucks will be available to pick up freight and the available trucks begin to demand higher rates.
All of the information I can gather doesn't tell me that our freight recession is over. The information only tells me that we are seeing a correction in our market place with supply and demand coming closer to each other. Factor in the beginning of produce season and we could see more freight than trucks in certain areas of the U.S. soon.
In summary; carriers are beginning to see the light at the end of the tunnel. They are finally taking trucks off of the road, (some voluntary, some involuntary), and this will affect rates that shippers pay. Shippers and brokers will begin to see more service issues as the truck supply begins to become strained and relationships will be tested as service failures become more common. Higher rates are on the way.
Don't you just love our dynamic industry?!
Yours truly, the transportation peddler
Friday, February 29, 2008
February 29th-a rare day
With it being the last day of the month and leap year at that, I thought I would write a quick blurb about the week and what I have noticed.
Trucks are beginning to demand more money to haul the same loads than they have in the past six months. Is this because of the higher fuel prices or is it because it is the last week of the month? Trucks traditionally become scarce during the last week of the month as freight picks up with shippers trying to get everything they can off of their dock and out of their inventory. If the demand for higher rates continues, it could begin to create a disparity in the market with some customers continuing to pay lower rates and others paying higher rates, but it should eventually level out.
Economic indicators continue to be bleak with concerns over inflation and stagflation. Citizens should receive their checks from the economic stimulus plan sometime in May, giving everyone a chance to spend it on vacation or Spring spruce-ups around the house. Will it be enough to revive our sagging economy? Will it help jump start more business in the transportation industry?
The company I work for is hell bent on growing, which is a good goal. A company never wants to get smaller or back up if at all possible. And we have been fighting the good fight, battling with the oodle of other brokers/logistics companies out there, using lower rates as one of the primary weapons. For the past year, service has not been an issue. Everyone has been able to find trucks and it has been a struggle for everyone to try and capture new business, making relationships critical as competitors call on our customers every day. In a way, I'll be glad when business picks up and we aren't in such a price driven market. Maybe some of these people I have been making sales calls on will finally give us a chance to handle their business.
Yours truly....the Transportation Peddler
Trucks are beginning to demand more money to haul the same loads than they have in the past six months. Is this because of the higher fuel prices or is it because it is the last week of the month? Trucks traditionally become scarce during the last week of the month as freight picks up with shippers trying to get everything they can off of their dock and out of their inventory. If the demand for higher rates continues, it could begin to create a disparity in the market with some customers continuing to pay lower rates and others paying higher rates, but it should eventually level out.
Economic indicators continue to be bleak with concerns over inflation and stagflation. Citizens should receive their checks from the economic stimulus plan sometime in May, giving everyone a chance to spend it on vacation or Spring spruce-ups around the house. Will it be enough to revive our sagging economy? Will it help jump start more business in the transportation industry?
The company I work for is hell bent on growing, which is a good goal. A company never wants to get smaller or back up if at all possible. And we have been fighting the good fight, battling with the oodle of other brokers/logistics companies out there, using lower rates as one of the primary weapons. For the past year, service has not been an issue. Everyone has been able to find trucks and it has been a struggle for everyone to try and capture new business, making relationships critical as competitors call on our customers every day. In a way, I'll be glad when business picks up and we aren't in such a price driven market. Maybe some of these people I have been making sales calls on will finally give us a chance to handle their business.
Yours truly....the Transportation Peddler
Tuesday, February 26, 2008
Update on Market Climate
I receive a regular report from Morgan Stanley listing a Truckload Freight Index and according to the information provided on the report, truckload carriers are not doing enough to take truck capacity out of the equation to bring supply and demand closer together. Trucking companies are still purchasing new trucks to replace their older models, (they held off on doing this in 2007 because of emission standards being changed). It appears most carriers are in a Catch 22 situation, trying to gain incremental revenue by not reducing capacity. If capacity is not voluntarily reduced by the carriers, the market will correct itself when companies begin to go out of business.
This report takes me back to my previous post-higher fuel prices will cause carriers to change their strategy in the marketplace. We are seeing the continued corrections in the residential construction market and financial market. Freight rates have dropped tremendously due to competition for market share-the correction in the trucking industry will involve trucking companies going under unless the economy makes a quick U-turn. The problem is, we don't have a GPS to tell us when to turn, where we are and where we are going.
This report takes me back to my previous post-higher fuel prices will cause carriers to change their strategy in the marketplace. We are seeing the continued corrections in the residential construction market and financial market. Freight rates have dropped tremendously due to competition for market share-the correction in the trucking industry will involve trucking companies going under unless the economy makes a quick U-turn. The problem is, we don't have a GPS to tell us when to turn, where we are and where we are going.
Monday, February 25, 2008
Higher Diesel Fuel Prices
Each week the Department of Energy releases a report showing the National Average price of diesel fuel as well as showing the average price in different regions throughout the country. The California region consistently leads the average among the regions with their strict emission standards and taxes included in the price of diesel at the pump and this weeks jump in diesel prices is causing a stir among the trucking companies that travel to and from California. We are experiencing multiple California carriers requesting rate increases due to the sudden spike in diesel prices and they are doing this for a good reason.
Trucking companies have already felt the pinch of lower rates due to excess truck capacity and the freight recession that has been in play for the past year and I believe they are about to cry "Uncle" with the recent climb in diesel prices. The National Average price of diesel is reaching levels that will affect freight rates, despite the fact that almost every customer pays a fuel surcharge.
Sure the fuel surcharge is intended to compensate the truck for higher fuel costs, but it only pays for the miles the truck is hauling the freight and doesn't take into account any deadhead miles the truck might face before picking up the load or after delivering the load. These are the miles that eat into any profit made on the load in the first place and the expense for the deadhead miles is difficult to recover, and it makes the dispatcher/driver manager's job that much more important. Too many deadhead miles and the truck is losing money no matter how much the load pays.
Will the higher fuel costs turn the tide on rate reductions??? Only time will tell. But if fuel prices continue to go up, I believe trucks will become more selective about the loads they haul and begin to demand higher rates.
Trucking companies have already felt the pinch of lower rates due to excess truck capacity and the freight recession that has been in play for the past year and I believe they are about to cry "Uncle" with the recent climb in diesel prices. The National Average price of diesel is reaching levels that will affect freight rates, despite the fact that almost every customer pays a fuel surcharge.
Sure the fuel surcharge is intended to compensate the truck for higher fuel costs, but it only pays for the miles the truck is hauling the freight and doesn't take into account any deadhead miles the truck might face before picking up the load or after delivering the load. These are the miles that eat into any profit made on the load in the first place and the expense for the deadhead miles is difficult to recover, and it makes the dispatcher/driver manager's job that much more important. Too many deadhead miles and the truck is losing money no matter how much the load pays.
Will the higher fuel costs turn the tide on rate reductions??? Only time will tell. But if fuel prices continue to go up, I believe trucks will become more selective about the loads they haul and begin to demand higher rates.
Wednesday, February 20, 2008
Freight Brokers; Liability or Asset for a Shipper
As the freight world sits in a somewhat static freight recession, most of the business out there is being driven by rate reductions and cost savings, which slightly favors freight brokers and logistics companies. But it doesn't mean that every company will be opening their traffic doors to the non-asset based model, because asset based carriers are catching up to speed, trying to capture or recapture business based on price.
In my drivel today, I want to address the issue of shippers turning away brokers and logistics companies based entirely on the premise that they are an extra liability.
The fact of the matter is non-asset based companies can add liability to a companies transportation department if they are not run well or do not have the proper procedures in place. There are a lot of freight brokers and logistics companies out there who do not carry a Contingent Cargo insurance policy, which is not required by law for them to operate. And if you delve deep into most Contingent Cargo policies, you will find a lot of them have way too many exclusions. And speaking of exclusions, there are a lot of truckload carriers out there that have Cargo and Liability insurance only on scheduled autos. This means that the broker should verify coverage any time they see an insurance certificate showing coverage only for scheduled autos to make sure the VIN # of the truck hauling their freight is listed as one of the scheduled autos.
Another major risk posed by brokers is the unscrupulous get rich quick scheme of moving freight for some shippers, billing the shipper for the freight moved, collecting the money for the service and never paying the actual truck that moved the freight. Legally, the actual carrier of the load can bill the shipper for the service provided if they can prove they were never paid. (This actually protects the truck that moved the goods, which is the way it should be). And another form of this scam is the double brokering scheme, where a crooked company accepts loads from other brokers, posing as a carrier, (with what appears to be valid contract carrier authority and insurance), and then the same crooked company brokers these loads to actual carriers who move the freight. The crooked broker/carrier then collects money from the original broker, but never pays the actual trucking company that moves the load. These schemes happen every day in the transportation industry and they are the reason freight brokers earned a bad name in the 1990's.
But there a positive sides to shippers using a broker/logistics company. The first being that in the situations shown above, the broker should have procedures in place to keep these scenarios from happening. And if something does happen, the broker should protect the shipper by making sure the actual carrier is paid for the load, (even if it means they have to create a payment plan or borrow the money).
Other positive aspects of using a broker include added protection for the shipper through these procedures, technology for data and tracking, reduction in freight costs and additional insurance, (if it is a quality policy that carries merit). The broker can be an asset through the relationships it has developed over time with small, medium and large trucking companies and the broker can help a shipper fill its need for trucks, especially if their shipping volume is very inconsistent or volatile.
But probably the most important consideration for using a broker or logistics company is the ability of the broker to be flexible. The broker/logistics company must be able to adapt to the individual needs of the customer, (whether it be rates, equipment, time constraints, etc.). And this is where the people and technology of the broker have the chance to stand out.
I know I haven't addressed all of the pros and cons of using a broker. (There are far too many with most of them being basic arguments ie. control of the driver, knowing where the freight is, etc., but all of these can be defended by a reputable, experienced broker).
In my drivel today, I want to address the issue of shippers turning away brokers and logistics companies based entirely on the premise that they are an extra liability.
The fact of the matter is non-asset based companies can add liability to a companies transportation department if they are not run well or do not have the proper procedures in place. There are a lot of freight brokers and logistics companies out there who do not carry a Contingent Cargo insurance policy, which is not required by law for them to operate. And if you delve deep into most Contingent Cargo policies, you will find a lot of them have way too many exclusions. And speaking of exclusions, there are a lot of truckload carriers out there that have Cargo and Liability insurance only on scheduled autos. This means that the broker should verify coverage any time they see an insurance certificate showing coverage only for scheduled autos to make sure the VIN # of the truck hauling their freight is listed as one of the scheduled autos.
Another major risk posed by brokers is the unscrupulous get rich quick scheme of moving freight for some shippers, billing the shipper for the freight moved, collecting the money for the service and never paying the actual truck that moved the freight. Legally, the actual carrier of the load can bill the shipper for the service provided if they can prove they were never paid. (This actually protects the truck that moved the goods, which is the way it should be). And another form of this scam is the double brokering scheme, where a crooked company accepts loads from other brokers, posing as a carrier, (with what appears to be valid contract carrier authority and insurance), and then the same crooked company brokers these loads to actual carriers who move the freight. The crooked broker/carrier then collects money from the original broker, but never pays the actual trucking company that moves the load. These schemes happen every day in the transportation industry and they are the reason freight brokers earned a bad name in the 1990's.
But there a positive sides to shippers using a broker/logistics company. The first being that in the situations shown above, the broker should have procedures in place to keep these scenarios from happening. And if something does happen, the broker should protect the shipper by making sure the actual carrier is paid for the load, (even if it means they have to create a payment plan or borrow the money).
Other positive aspects of using a broker include added protection for the shipper through these procedures, technology for data and tracking, reduction in freight costs and additional insurance, (if it is a quality policy that carries merit). The broker can be an asset through the relationships it has developed over time with small, medium and large trucking companies and the broker can help a shipper fill its need for trucks, especially if their shipping volume is very inconsistent or volatile.
But probably the most important consideration for using a broker or logistics company is the ability of the broker to be flexible. The broker/logistics company must be able to adapt to the individual needs of the customer, (whether it be rates, equipment, time constraints, etc.). And this is where the people and technology of the broker have the chance to stand out.
I know I haven't addressed all of the pros and cons of using a broker. (There are far too many with most of them being basic arguments ie. control of the driver, knowing where the freight is, etc., but all of these can be defended by a reputable, experienced broker).
Tuesday, February 5, 2008
1st Quarter 2008 Freight Broker Trends
I report to you from the trenches on the front lines of the brokerage industry, giving you up to date information on what I see.
Although the big rig called the U.S. economy appears to have hit the air brakes, it might be more akin to it hitting the jake brake. For our company, January was a very good month with great revenue weeks, besides the first week of the year. Was the freight held over from the end of 2007 with the slow shipping weeks of Christmas and New Years? Possibly. Or it could be a good push off for the beginning of 2008 that could stall out in February.
I recently had a customer call me to propose a 3% rate reduction for 2008, and if most of their core carriers agree to do so this customer will not put their freight out to bid until 2009. It protects the business for a year and guarantees (a word I never like to use in the transportation business) that the customer will reduce cost in their transportation department. For the record-we are on board and hope the rest of the core carriers vote aye with us.
Most of the forecasts I have seen or heard about call for the freight recession to make its rebound in the 1st quarter of 2009, which means more rate reductions are in line for the brokerage industry. The company I work for has been around since the early 80s and lucky for me, we have experienced slower trends before. We will rate joust with the best of them if the business is deemed worthy, so look out CH Robinson.
Mumblings and Rumblings about Rates-the lowdown on the cheapes rates I have heard
SC/NC to CA $.94/mile + fuel surcharge
SC/NC to TX $1.02/mile + fuel surcharge
SC/NC to IL $1.05/mile + fuel surchage
Talk about cheap. These prices are reflective of rates seen in the early 1990s. If this continues we will all be wearing Members Only jackets and parachute pants (both popular styles in the 80s).
Although the big rig called the U.S. economy appears to have hit the air brakes, it might be more akin to it hitting the jake brake. For our company, January was a very good month with great revenue weeks, besides the first week of the year. Was the freight held over from the end of 2007 with the slow shipping weeks of Christmas and New Years? Possibly. Or it could be a good push off for the beginning of 2008 that could stall out in February.
I recently had a customer call me to propose a 3% rate reduction for 2008, and if most of their core carriers agree to do so this customer will not put their freight out to bid until 2009. It protects the business for a year and guarantees (a word I never like to use in the transportation business) that the customer will reduce cost in their transportation department. For the record-we are on board and hope the rest of the core carriers vote aye with us.
Most of the forecasts I have seen or heard about call for the freight recession to make its rebound in the 1st quarter of 2009, which means more rate reductions are in line for the brokerage industry. The company I work for has been around since the early 80s and lucky for me, we have experienced slower trends before. We will rate joust with the best of them if the business is deemed worthy, so look out CH Robinson.
Mumblings and Rumblings about Rates-the lowdown on the cheapes rates I have heard
SC/NC to CA $.94/mile + fuel surcharge
SC/NC to TX $1.02/mile + fuel surcharge
SC/NC to IL $1.05/mile + fuel surchage
Talk about cheap. These prices are reflective of rates seen in the early 1990s. If this continues we will all be wearing Members Only jackets and parachute pants (both popular styles in the 80s).
Friday, January 18, 2008
Mergers, Acquisitions and Their Effect on the Transportation Industry
At the end of each year Transport Topics reviews the mergers and acquisitions that have taken place over the past twelve months in the transportation industry, giving readers a brief synopsis of changes with small and large companies. And yes, these mergers/acquisitions do impact the transportation industry, sometimes causing the big to become bigger and the small to become non-existent. The old cliche, "the rich keep getting richer and the poor keep getting poorer" seems to ring true when I review this section, but this is what our industry has become.
In the LTL world, there are only a few less than truckload carriers with true national scope, as some were eaten by UPS and FedEx. We are now left with regional LTL carriers battling with the big boys and it sometimes feels like the truckload side is heading in the same direction, even though there are many more players in the truckload field when you consider all of the brokers, agents, single owner operators and logistics companies.
But the one thing Transport Topics does not compile is a list of mergers and acquisitions that have taken place in our entire economy, (which would probably be too long to print). I bring this up, because I am currently experiencing changes to my business due to two of my customers being acquired by larger corporations.
With both of my customers, the purchasing company is closing the doors to the facilities of the company it purchased, which doesn't entirely eliminate the movement of the freight, but it does rearrange the shipments. For example; instead of loads originating in South Carolina, they now originate in Tennessee. And the people who controlled the freight in the past will no longer control it in the future. All contracts and rate agreements will become null and void. All relationships that have been nurtured over numerous years can easily become memories unless I stay in contact with those people or they find other positions where I can work with them. And yes, it can be frustrating. In our industry, change is inevitable.....whether it be the departure of a Logistics Manager, bankruptcy or the acquisition of a customer. Freight, (or business), can be here one day and gone the next.
The transportation industry is constantly changing due to competition, globalization, global warming and economic trends. All things we have no control over. But the one thing we can control is our outlook and although as bad as it may seem, there is always something positive around the next bend. You never know when the new company needs a little help moving their freight or when the former Logistics Manager might you a call from a position at a better company.
And that my friend is how we roll with the punches in the transportation industry.
In the LTL world, there are only a few less than truckload carriers with true national scope, as some were eaten by UPS and FedEx. We are now left with regional LTL carriers battling with the big boys and it sometimes feels like the truckload side is heading in the same direction, even though there are many more players in the truckload field when you consider all of the brokers, agents, single owner operators and logistics companies.
But the one thing Transport Topics does not compile is a list of mergers and acquisitions that have taken place in our entire economy, (which would probably be too long to print). I bring this up, because I am currently experiencing changes to my business due to two of my customers being acquired by larger corporations.
With both of my customers, the purchasing company is closing the doors to the facilities of the company it purchased, which doesn't entirely eliminate the movement of the freight, but it does rearrange the shipments. For example; instead of loads originating in South Carolina, they now originate in Tennessee. And the people who controlled the freight in the past will no longer control it in the future. All contracts and rate agreements will become null and void. All relationships that have been nurtured over numerous years can easily become memories unless I stay in contact with those people or they find other positions where I can work with them. And yes, it can be frustrating. In our industry, change is inevitable.....whether it be the departure of a Logistics Manager, bankruptcy or the acquisition of a customer. Freight, (or business), can be here one day and gone the next.
The transportation industry is constantly changing due to competition, globalization, global warming and economic trends. All things we have no control over. But the one thing we can control is our outlook and although as bad as it may seem, there is always something positive around the next bend. You never know when the new company needs a little help moving their freight or when the former Logistics Manager might you a call from a position at a better company.
And that my friend is how we roll with the punches in the transportation industry.
Tuesday, January 15, 2008
Freight Broker Rates
For all freight brokers out there, there is a constant internal struggle when submitting rates. Don't get me wrong. I am well aware that the price is determined by the market, (a law of supply and demand). The scenario I am referring to is one created by competition; where the broker has to submit a competitive rate to get the business, but at the same time the broker must submit a rate that will allow him or her to consistently cover loads with quality carriers. It is a tight rope walk that almost all brokers experience.
When an economic slowdown takes place, carriers and brokers begin to slash their rates in response to it, attempting to hold on to business. But where is the line drawn? Where does the broker know to stop?
Yes, there a multiple websites that have services where a broker or carrier can view the low, high, and average rate for specific lanes, but how accurate are these services? How often are they updated? Where does their data come from?
This is when experience, commitment, determination and relationships help a broker to succeed. The experience can assist the broker in knowing what rates trucks are demanding that day and an understanding of the business cycles that take place . Commitment and determination will allow the broker to continue covering loads even when there seems no hope in finding a truck for such cheap freight. And relationships can enable the broker to possibly get the business at a slightly higher rate than some of the competition, due to their history of providing great service. Relationships can also help the broker to raise rates incrementally as trucks begin to tighten and the rates begin to climb.
There is a general feeling in the transportation industry that carriers are sometimes gouged by brokers during an economic slowdown, but the carriers don't see the many times when truck capacity is depleted and brokers lose money to cover loads and protect their customer. The pendulum constantly swings and the broker hangs on to it for dear life, trying not to be thrown.
And so goes the life of a freight broker.
When an economic slowdown takes place, carriers and brokers begin to slash their rates in response to it, attempting to hold on to business. But where is the line drawn? Where does the broker know to stop?
Yes, there a multiple websites that have services where a broker or carrier can view the low, high, and average rate for specific lanes, but how accurate are these services? How often are they updated? Where does their data come from?
This is when experience, commitment, determination and relationships help a broker to succeed. The experience can assist the broker in knowing what rates trucks are demanding that day and an understanding of the business cycles that take place . Commitment and determination will allow the broker to continue covering loads even when there seems no hope in finding a truck for such cheap freight. And relationships can enable the broker to possibly get the business at a slightly higher rate than some of the competition, due to their history of providing great service. Relationships can also help the broker to raise rates incrementally as trucks begin to tighten and the rates begin to climb.
There is a general feeling in the transportation industry that carriers are sometimes gouged by brokers during an economic slowdown, but the carriers don't see the many times when truck capacity is depleted and brokers lose money to cover loads and protect their customer. The pendulum constantly swings and the broker hangs on to it for dear life, trying not to be thrown.
And so goes the life of a freight broker.
Monday, January 14, 2008
Freight Broker Business
I sometimes wonder how everyone in the freight broker business began their careers, especially with the multitude Freight Broker Training classes available. Most of the original freight broker pioneers are getting close to retirement age, giving way to a younger generation, logistics companies and trucking companies that have added the brokerage model to increase revenue.
The industry once formed to help fledgling trucking companies get their trucks back to their own customer base has evolved into one that allows larger asset based companies to grow without investing in more assets. It is just another piece of the puzzle for trucking companies, freight forwarders, 3PLs and 4PLs. The terms: freight broker, transportation intermediary, transportation broker or logistics company have all become interchangeable. The lines between head-haul freight and back-haul freight are not as defined as they once were and customers are no longer sure if the asset based carrier they gave the load to is hauling the freight on one of their trucks or on a broker truck.
All of these changes have helped improve the image of the freight broker by pulling most transportation companies under the same label, because most of them have brokerage divisions. These means trucking company X will no longer bad mouth the brokerage industry in the marketplace, because in doing so, he will only damage his own reputation. But the industry still has miles to go. Codes and guidelines need to be established and brokers need to hold themselves accountable to high standards. The one force that can drive these standards is the market place. If more customers demand to do buseinss only with certified brokers or brokers who use qualified business practices, the industry as a whole would be forced to change. But this kind of goes against the grain of the deregulation of the trucking industry that spurred the brokerage business, doesn't it and I don't think all of the Old Timers would be too fond of it.
The industry once formed to help fledgling trucking companies get their trucks back to their own customer base has evolved into one that allows larger asset based companies to grow without investing in more assets. It is just another piece of the puzzle for trucking companies, freight forwarders, 3PLs and 4PLs. The terms: freight broker, transportation intermediary, transportation broker or logistics company have all become interchangeable. The lines between head-haul freight and back-haul freight are not as defined as they once were and customers are no longer sure if the asset based carrier they gave the load to is hauling the freight on one of their trucks or on a broker truck.
All of these changes have helped improve the image of the freight broker by pulling most transportation companies under the same label, because most of them have brokerage divisions. These means trucking company X will no longer bad mouth the brokerage industry in the marketplace, because in doing so, he will only damage his own reputation. But the industry still has miles to go. Codes and guidelines need to be established and brokers need to hold themselves accountable to high standards. The one force that can drive these standards is the market place. If more customers demand to do buseinss only with certified brokers or brokers who use qualified business practices, the industry as a whole would be forced to change. But this kind of goes against the grain of the deregulation of the trucking industry that spurred the brokerage business, doesn't it and I don't think all of the Old Timers would be too fond of it.
Friday, January 11, 2008
Freight and Our Economy
I read a blurb on the TIA website about the future "up tick" for our economy and I wonder when it is going to come. I have yet to see any reports of freight for the fourth quarter of 2007, but I know from experience that it is down. Our Federal Reserve Chairman speaks of cutting interest rates to stave off a recession, but I don't know if it is too little or too late. Housing continues to be in a slump and fuel prices continue to rise.
For the transportation industry, this translates into more downward pressure on prices with capacity being unfilled. Trucking companies will continue to lower prices in an effort to gain market share to keep their trucks moving and pay their set costs, while brokers and logistics companies will battle to hold ground using pricing strategies, spot quotes, etc to take full advantage of the daily market fluctuations. The ultimate transportation winner in this type of economy is the customer, who can reap the benefits of lower prices and less service issues, but it also creates challenges for the future. The number crunchers for each company/shipper expect their own Logistics department or their outsourced Logistics department to control prices, and they will be able to show some savings for this year. But when the uptick comes after truck capacity has been trimmed down-because some trucking companies have gone out of business-freight costs will increase. The one factor that can counter the higher freight rates will be lower fuel prices, which equals lower fuel surcharge costs, (but I don't forecast lower fuel prices in my lifetime).
The immediate time during and after the uptick will be a challenge for brokers and logistics companies as well. Brokers will have to rely heavily on their relationships to keep business, get trucks and raise prices, all at the same time. The broker must have strong relationships not only with customers, but with carriers as well or they will find themselves in a terrible pinch.
Yes, the slower economy will be tough for everyone, but we as brokers are conditioned to handle adversity. Adapt or fail. It's just that simple.
For the transportation industry, this translates into more downward pressure on prices with capacity being unfilled. Trucking companies will continue to lower prices in an effort to gain market share to keep their trucks moving and pay their set costs, while brokers and logistics companies will battle to hold ground using pricing strategies, spot quotes, etc to take full advantage of the daily market fluctuations. The ultimate transportation winner in this type of economy is the customer, who can reap the benefits of lower prices and less service issues, but it also creates challenges for the future. The number crunchers for each company/shipper expect their own Logistics department or their outsourced Logistics department to control prices, and they will be able to show some savings for this year. But when the uptick comes after truck capacity has been trimmed down-because some trucking companies have gone out of business-freight costs will increase. The one factor that can counter the higher freight rates will be lower fuel prices, which equals lower fuel surcharge costs, (but I don't forecast lower fuel prices in my lifetime).
The immediate time during and after the uptick will be a challenge for brokers and logistics companies as well. Brokers will have to rely heavily on their relationships to keep business, get trucks and raise prices, all at the same time. The broker must have strong relationships not only with customers, but with carriers as well or they will find themselves in a terrible pinch.
Yes, the slower economy will be tough for everyone, but we as brokers are conditioned to handle adversity. Adapt or fail. It's just that simple.
Monday, January 7, 2008
The past, the present and the future of freight brokers
In reading The World is Flat by Thomas L. Friedman, I couldn't help but think of the many ways our world has changed over the past twenty years, and the effect of these changes on our business. The freight broker of the not too distant past relied on the telephone and his contacts written down on a sheet of paper or stored in a rolodex file. He or she might have one containing a list of shippers and another holding the list of carriers to call if a load from a customer was called in. The carrier list was very finite giving the broker only so many avenues to pursue, unless the broker had a book, (a carrier directory), with carriers listed alphabetically by state.
Along came the facsimile machine allowing customers to fax over orders and trucking companies to fax over their truck lists, which showed where their trucks were going to get empty over the next few days. And about this same frame of time, load boards began to materialize at truckstops across the country, giving drivers the ability to view available loads in their vicinity, enabling more owner operators to find loads, thereby becoming more productive and more efficient. The load boards also gave the freight brokers another resource for finding trucks, albeit an expensive one.
And finally we enter the modern day era of freight brokering, brought about by the internet, mobile devices, email and EDI. All of these things are flatteners, which have created more competition. The internet has given brokers the ability to search online truck postings, post loads and research the industry. Our mobile devices allow us to communicate virtually any time, anywhere. Email has made the ability to communicate quickly and easily just by pointing a mouse and hitting a few keystrokes on the keyboard while talking on the phone. And EDI has sped up the billing and payment process, in a addition to providing another outlet for exchanging electronic data. Document imaging has replaced the hordes of paper laden boxes and file cabinets, and the keyboard and computer screen have replaced pen and paper.
Who knows what the future holds for us? I can envision all drivers submitting their signed Bills of Ladings to the broker straight from the cabs of their trucks, further speeding up the billing and payment process, but I don't have a crystal ball. Technology has improved our industry so much in the areas of communication, load tracking and information, but it hasn't taken people entirely out of the equation. People, whether you love them or hate them, are the one constant in our industry and they will be for some time; which leads me to this conclusion: the future is unpredictable for our industry, but as long as people are involved in the transportation industry, freight brokers will be in business.
Along came the facsimile machine allowing customers to fax over orders and trucking companies to fax over their truck lists, which showed where their trucks were going to get empty over the next few days. And about this same frame of time, load boards began to materialize at truckstops across the country, giving drivers the ability to view available loads in their vicinity, enabling more owner operators to find loads, thereby becoming more productive and more efficient. The load boards also gave the freight brokers another resource for finding trucks, albeit an expensive one.
And finally we enter the modern day era of freight brokering, brought about by the internet, mobile devices, email and EDI. All of these things are flatteners, which have created more competition. The internet has given brokers the ability to search online truck postings, post loads and research the industry. Our mobile devices allow us to communicate virtually any time, anywhere. Email has made the ability to communicate quickly and easily just by pointing a mouse and hitting a few keystrokes on the keyboard while talking on the phone. And EDI has sped up the billing and payment process, in a addition to providing another outlet for exchanging electronic data. Document imaging has replaced the hordes of paper laden boxes and file cabinets, and the keyboard and computer screen have replaced pen and paper.
Who knows what the future holds for us? I can envision all drivers submitting their signed Bills of Ladings to the broker straight from the cabs of their trucks, further speeding up the billing and payment process, but I don't have a crystal ball. Technology has improved our industry so much in the areas of communication, load tracking and information, but it hasn't taken people entirely out of the equation. People, whether you love them or hate them, are the one constant in our industry and they will be for some time; which leads me to this conclusion: the future is unpredictable for our industry, but as long as people are involved in the transportation industry, freight brokers will be in business.
Friday, January 4, 2008
So what is the deal with all of the freight broker training websites?
As I was scanning the web while doing research for our company website I came across hundreds of websites advertising Freight Broker Training. What is the deal? Are there that many people looking to become freight brokers? Or do they see only see easy $ signs??
My advice to them is do your homework. If you don't know someone in the transportation industry who can give you guidance or freight, or if you don't already have some experience in the transportation industry, you might be jumping off a cliff and not know where you are going to land.
I can tell you from experience-you will have to pay your dues and work hard to be successful. Do not believe that it is a get rich quick scheme where freight is abundant, trucks are plentiful, everyone is honest and we all live happily ever after.
The current state of the industry: Freight is scarce. Rates are being slashed by trucking companies needing freight and by brokers trying to compete in the industry. Fuel prices are rising, which will probably lead to some trucking companies going out of business. On the flip side, trucks can be found relatively easy, so if you are starting a new broker business, trucking companies will probably not be as picky about your credit worthiness. In plain English-it will be easy to find trucks and hard to get freight. And this; this is what all of the greenhorn grasshopper pilgrim brokers will learn very quickly. The freight broker business is all about supply, demand, honesty, integrity, communication, relationships and people. So come on in....the water's fine.
My advice to them is do your homework. If you don't know someone in the transportation industry who can give you guidance or freight, or if you don't already have some experience in the transportation industry, you might be jumping off a cliff and not know where you are going to land.
I can tell you from experience-you will have to pay your dues and work hard to be successful. Do not believe that it is a get rich quick scheme where freight is abundant, trucks are plentiful, everyone is honest and we all live happily ever after.
The current state of the industry: Freight is scarce. Rates are being slashed by trucking companies needing freight and by brokers trying to compete in the industry. Fuel prices are rising, which will probably lead to some trucking companies going out of business. On the flip side, trucks can be found relatively easy, so if you are starting a new broker business, trucking companies will probably not be as picky about your credit worthiness. In plain English-it will be easy to find trucks and hard to get freight. And this; this is what all of the greenhorn grasshopper pilgrim brokers will learn very quickly. The freight broker business is all about supply, demand, honesty, integrity, communication, relationships and people. So come on in....the water's fine.
Thursday, January 3, 2008
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