The transportation and logistics industry has been undergoing great amounts of change for several years, but the last 12 months have proven a challenge for many in the freight brokerage market. A handful of trends have crept up to force evolution in freight, but the shifts have also created some opportunities for licensed and bonded brokers. For 2018 and into the next year, it is important for freight brokers and others in transportation and shipping to recognize how the market is being disrupted – and how they can take advantage of the sweeping changes for the future.
A recent report from Business Wire lays out an inspiring picture of the freight brokerage industry, both now and in the next four years. The data highlights an expected increase in the number of freight brokers by an estimated 4.33%, thanks in part to a shipping rush put in place by e-commerce growth. While the opportunities for new freight brokers abound in a growing economic environment, the increase also means the potential for greater competition in the space.
More freight brokers will enter the market over the next four years, making it more difficult for some to maintain relevance and exposure to new prospects. Employing a digital marketing strategy and strengthening current business relationship will be the key to ongoing success for current freight brokers.
Businesses in nearly all industries face increases in costs over the years, but an interesting trend in rates has started to impact the freight brokerage market. A trucking shortage in the US has pushed freight costs up significantly, and fuel costs are increasing at a similar rate. The combination of these price increases have caused some concern for brokerage businesses already competing with lower-cost operations.
While there is not much freight brokers can do to combat rising costs in the industry, now is a good time to review other expenses that can be controlled more easily. Freight brokerage bonds are priced as a percentage of the total bond amount required, but that percentage is based on the credit history and claims history of the broker. Working toward improving financial standing can help reduce this cost over time. Additionally, reducing other costs associated with business operations, like technology solutions, equipment, and marketing can also help during a time where rates are on the rise.
The Rise of Technology
The influx of technology is impacting several sectors of business in the current market, but shipping and transportation has been slow to feel the pressure. Now, however, freight brokers are being pushed to implement technology solutions to help manage their business, marketing, and accounting more efficiently. On the other side of the coin, trends in autonomous trucking are forcing some brokers to reimagine their business models to compete efficiently with tech-infused transportation platforms. The brokers who embrace change in the technology space are more likely to succeed than those who ignore it altogether.
Finally, freight brokers have seen a myriad of changes in the regulatory space over the last year. The most notable shift was the mandate for Electronic Logging Device, or ELD, implementation, effectively limiting the number of hours truckers can drive and report. The ELD mandate makes it more difficult for carriers to log hours inaccurately, but this may lead to lower wages across the board. With a pinch on earnings potential, freight brokers may see a reduced number of available trucking partners. This could adversely impact brokerage customers over the long-term.
While there are many opportunities for freight brokers in the upcoming months, several obstacles exist. Freight brokers need to position themselves now for change from a cost, technology, and regulatory standpoint if they want to succeed in the future of transportation.
About the Author:
Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.