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Over half of all respondents in a FreightCaviar poll said rising costs are putting the biggest pressure on freight broker margins. How can you relieve it?
You're not alone if you've been feeling the pinch in your brokerage margins lately. The freight market is a beast right now, and brokers are getting squeezed from all sides. Let's break down what's going on, using real numbers and insights, to see how you can stay ahead of the game.
Overcapacity: The freight recession has left us with too many trucks and not enough loads. This oversupply means rates are lower, and while brokers might be able to offer lower rates to desperate carriers, the overall market conditions still make it tough to maintain healthy margins.
Spot vs. Contract Rates: The spread between these rates has narrowed, putting more pressure on margins despite lower carrier rates.
Rising Costs: Insurance, labor, and other business expenses are climbing. It's getting more expensive to run a brokerage, plain and simple.
Fuel: Fuel prices have seen a slight increase, adding to the operational costs for brokers. This is yet another factor squeezing margins.
According to Arrive Logistics' May 2024 Update, rates are slightly up as we head into summer. Spot market activity is inching higher, but overall economic activity is flat. This slight uptick is a glimmer of hope, but it's not enough to offset the other pressures.
But while there are some glimmers of improvement, these gains won’t be felt for a while, and with the freight brokerage market increasingly contracting, how will you survive until a turnaround? Signing new shippers, securing more loads, and pricing profitably have been major challenges in this brutal market environment.
FreightCaviar ran a LinkedIn poll on May 14, 2024, asking what you think is the biggest pressure on freight broker margins. Here’s what you said:
Over half of all respondents pointed to rising costs as the main culprit. Let’s dig into that.
Brush Pass Research highlights a significant transformation in the freight brokerage landscape:
According to Kevin Hill from Brush Pass Research, the broker population fell 12% from its peak in November 2022 to March 2024, a larger decline than the 8.5% drop in the carrier population over a slightly longer term. This steep decline in broker numbers shows the intense pressure brokers are facing in the current market
Many brokers are worried about the practicality of implementing AI, even though large brokerages like C.H. Robinson are pulling full steam ahead in that realm. But there’s a simple way to leverage AI for cost savings now and in the future.
To keep your brokerage afloat, cutting operational costs is the name of the game. Here’s one way you can do it.
Automating your back-office processes can save a ton of money. You need a tool that automates invoice processing, manages disputes, schedules carrier payments, and centralizes AR and AP operations.
So, while you may not have much control over external market pressures eating away at profits, you do have cost management strategies within reach.
Automating invoice and payment processes with tools like Epay Manager can drive significant savings, especially amid rising external costs. Using Epay Manager, brokers can handle three to five times more invoices per back-office team member.
Of course, the freight market is tough right now, and some outlooks don’t see that changing until Q2 2025. But by focusing on cost control and leveraging automation, you can protect your margins and prepare for whatever comes next.
Future-proofing starts with automating your back-office work. Epay Manager Powered by OTR Solutions has developed an AI-Driven NLP Invoice Automation that uses over 145 recognized attributes and 166 business rules to automatically classify documents submitted by carriers, reducing the amount of manual issue spotting needed. Click here to learn how Epay Manager can help revolutionize your back office.
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