Good Broker, Great Broker, Amazing Broker

The ambition for the next 20 years in freight brokerage is to transition from being great to becoming amazing, a feat few have achieved. The journey towards this goal demands solving complex supply chain problems for shippers.

Good Broker, Great Broker, Amazing Broker

Reflecting on 20 Years of Brokerage and Envisioning the Next 20 in Brokerage Excellence

The past two decades in the freight brokerage industry have been remarkably transformative. If you look back to the early aughts, freight brokerage was an industry battling to prove that it had a right to belong in a shipper's routing guide, and freight broker technology was starting to digitize. Today, freight brokers have proven to shippers that they can be competent partners in their routing guide, and when properly deployed, broker tech is a critical service differentiator. 

My name is Andy Tomka, and after spending 15 years creating technology at Echo Global Logistics, I joined MVMNT. At MVMNT, my mission is to empower small and medium-sized brokers with technology once reserved for the industry giants. You last saw me on FreightCaviar in the Love Letter to Brokers, and building on that article, I want to give you a window into how I view freight brokers today and where I see the brokerage industry going in the next two decades.  

Love Letter to the Brokers Who Know There Are No Short-Cuts
This blog post was contributed by Andy Tomka, the Vice President of Product at MVMNT.

A few definitions before we get started – What are Good, Great, and Amazing Freight Brokers?

  • A Good Broker understands the lanes and needs of the shippers and seeks to find the best price and best service that meets the shipper's expectations.
  • A Great Broker seeks to find a shipper's most challenging lane and addresses their needs by pairing them with a carrier from their network or finding a new network of carriers to prove that the "challenging" lane is no sweat. 
  • An Amazing Broker works to innovate with the shipper to build a more resilient supply chain. They find where the shipper needs help servicing their customer's needs. They seek to improve how the shipper connects with their customer, understand where costs have grown, improve the services offered, and innovate with the shipper. 

Being a good broker has been the goal. Over the past 20 years, a good freight broker has always been about understanding and meeting customer needs and networks while cautiously expanding within known territories. The focus was to work from the bottom up, servicing lanes already won and picking up where others fell off. Always be in a great position to get a rebound from a routing guide, but never be the one taking wild shots. With time, the broker hopes to grow their share of the wallet with the shipper and, if they offer an RFP bidding opportunity, participate in the bid cycle. 

Being a good broker has always been about understanding and meeting customer needs while cautiously expanding within known territories. In my early years at Hills Brothers Transportation, we operated within a static network meticulously managed via paper printouts. We needed to keep the printer stocked because we had to have the day and the network running on paper. Spot freight existed, but it would be one more truck in a lane you knew about. We were a good broker because we focused on strengthening the network we could see.

At Echo, the evolution from good to great broker hinged on efficiency and scale. In 2006, a Customer Service Rep (CSR) could manage only 8 LTL loads or 2 TL shipments daily. Stepping into being a great broker hinged on moving those numbers up. Over time, advancements in automated quoting, tendering, tracking, and invoice reconciliation drastically increased this capacity. By the time I left Echo, CSRs were handling 80-100 LTL loads per day, while a team of CSRs could easily manage 100+ TL shipments. Their work efficiency and ability to manage exceptions were the key performance indicators for CSRs. Limitations to the job came from how difficult the freight was to move (hazmat, special service focused) and how difficult the shipper's lanes were to cover.

Right now, there are a lot of good freight brokers in the supply chain, a testament to the professionalization of brokers over the last 20 years. Freight Brokers achieved a higher level of supply chain industry respect through enhanced training, improved customer service, and an understanding that failure to partner effectively with shippers could lead to replacement by competitors. 

Along the way, tech solutions went from "Can it access the internet?" and "Does it have a portal?" to How can a broker use the software to automate work, manage exceptions, and grow the share of wallet with the shipper and build stronger carrier relationships. 

Building a Freight Brokerage business has also evolved. It's gone from sticking to what the broker can cover to demonstrating that the broker can flex to cover more lanes. The ambition became not to be a good broker, but how can the freight broker move up to a great level?   

Reaching the level of a great broker requires the following:

  • Extensive knowledge of pricing and market trends: Brokers with a lot of knowledge about their prices and the macro TL market can show a shipper where they should be on price and where they expect their competitors to be.
  • A deeper knowledge of the customer: A broker's ability to offer valuable data and grow with customers has become a key differentiator in today's market. 
"While freight brokerages were initially slow to rise, it is estimated that only 6 percent of freight was handled in 2000. Brokers faced an accelerated market in 2020, and now they handle 20 percent of freight." KCH Transportation

Where does the freight brokerage industry stand in 2024? 

  • Increased Competition: The brokerage industry now faces more competition than ever before. There are more brokers, and they are good at the job of being a freight broker. 
  • Professionalization: Brokerages have become more professional in their operations and services. Good training and excellent mentorship show younger sales reps the paths to success.
  • Enhanced Industry Knowledge: Managers at Freight Brokers have more access and expertise in acquiring information about industry growth and segments of the economy than ever before. Where refrigerated distribution is growing in the US was once a guess. Now it's a data analyst, several RFPs, and a few days to see where to start sourcing. 
  • Acceptance from Shippers: Shippers have recognized the importance of including brokers in their network.
  • Understanding 'Good' vs. 'Great': Managers of Freight Brokers have a clearer understanding of what it takes to transition from being good to becoming great in the industry. 

Freight Brokers have a greater sense of urgency today than in 2020. An intense short-term storm is directly over the freight brokerage industry. A combination of excess capacity, fewer shipments, and more brokers than ever means that shippers' phones will continue ringing nonstop. 

Increased Competition 

Even with the past year's difficulties, there are more brokers now in the industry than in 2020. The market is currently forcing attrition, and we are heading for a correction, but the freight market still has more brokers than ever. 

  • Kevin Hill at Brushpass Research has dug back in time to understand the brokerage authority trends. He cites a market size of 15,000 brokers in 2003, which remained relatively flat until 2019 when it popped from 20k to 30k in three short years.
  • John Mahle, a Sales Executive with Triple T Transport and host of the Stay in Your Lane podcast, has confirmed the trend. "Five to seven thousand additional brokers have entered the market in the past five years, representing a fifty percent increase." 

Brokers leaving the market: According to the Federal Motor Carriers Association (FMCSA), more than 1,500 freight brokers have closed in 2023. While the pandemic fostered growth for the transportation industry, it also disrupted many brokerages, leading to many shutdowns.

High turnover rates within freight brokers: The grind of being a good or great broker wears down the people running a freight brokerage. The average tenure in the freight brokerage is a mere 2.5 years, while industry proficiency typically takes three years to develop. The continued margin depression will push even the best-trained brokers out of the industry. 

Continued Growth in Freight Broker Share of Wallet: The trend for the past five years for freight brokers has been significant gains in the percentage of freight awarded in shipper routing guides. The trend of incremental gains is having a significant hiccup. Margins have continued to compress, and cashflow constraints have caused brokers and carriers to exit the market in mass. 

The highs of the past five years will present itself again, and it will be the brokers and carriers that can survive the next eight months that have the most significant opportunities. Craig Fuller at Freightwaves had a prediction in 2022 that shippers would seek revenge for the price increases carriers gained. This prediction was spot on, but it was a short-sighted win for shippers. If any shippers read FreightCaviar, my advice would be to start shoring up your strategic carrier and broker relationships today. 

What does the revenge for the revenge for the revenge look like? 

Silver Lining

Not all shippers are so short-sighted. For brokers, it feels like "beggars can be choosers," but within their customer base, brokers must actively assess which shippers have been working to strengthen their supply chain and who is looking for the lowest bid. A broker preparing this analysis today and having proactive conversations with shippers about price and service needs can make better decisions as the market turns. A freight broker can shine by demonstrating their resiliency, experience, and problem-solving acumen to those shippers taking the long on rates. 

The bottom line for brokers and carriers is that the extremes in the freight markets have become wider and come on faster than in the previous 20 years. 

Brokers should plan for periods with no sustainable margins in spot market rates, and it is canned beans for dinner. A broker who is a critical problem-solving partner with a diverse shipper base can survive. The opposite will also be true. The market capacity can collapse, and with an economic swing for only a few quarters, it's G Wagons and caviar for lunch. I recommend that those brokers fight that instinct and be unforgiving in closing new customers and locking in great carrier relationships. Everyone should recognize how insane these trends will be. 

To break the cycle, brokers must find those shipping partners looking to innovate and create strategic pricing and service solutions – It's time to get creative or risk the future of their business.  

The Long Run: Looking to the Next 20 Years and Unlocking Amazing Brokers

The ambition for the next 20 years in freight brokerage is to transition from being great to becoming amazing, a feat few have achieved. The journey towards this goal demands solving complex supply chain problems for shippers. These issues range from storage, providing gap insurance warehousing, and inventory management to unique challenges. 

At Echo Global Logistics, the steps from great to amazing came with unique solutions deployed to address customer needs where incumbents were failing and build solutions that address service and price considerations. For several customers in reefer and dry van freight, Echo built solutions that consolidated smaller shipments that traditionally were serviced by LTL at higher cost onto truckloads and then either routed them in a multi-customer multi-stop shipment or as partially consolidated shipments that used LTL carriers for final delivery. The complexity of these solutions was challenging for the Echo technology, but the desire to differentiate and wow the customer outweighed any scale issues. 

The accurate measure of an amazing broker lies beyond securing a spot in a shipper's routing guide based on price. It's about offering unparalleled service that can't easily be replaced, becoming an indispensable problem-solving partner. Negotiating with a shipper becomes easier when you are their most effective partner. The pressure on brokers in the coming decades will not be on how they reduce people but on how they make them more effective. Experienced brokers have a Rain Man-like recall for rates, lanes, geographic constraints, location constraints, and equipment considerations. Answering how technology and processes can be a 10x multiple for their experienced operators will be critical to a broker's future. How can I make a 1-year rep look like a 3-year rep and a 3-year rep look like a 7-year rep?

As the industry evolves over the next 20 years, the real test for brokers will be their ability to tackle unique challenges that others can't. A robust carrier network and price competency are table stakes. 

MVMNT as the Future of Brokerage Tech

TMS and AI: 

MVMNT's TMS is designed to be the foundation that will fuel AI. A significant challenge in building a logistics Large Language Model (LLM) is ensuring clean and accurate data. MVMNT's TMS addresses this by enabling a more complex and expansive transaction capability, allowing freight brokers to adapt to various services requested by shippers. This flexibility ensures the load maintains its integrity and shipment records remain transparent, avoiding clutter and maintaining essential data accuracy crucial for AI development.

Long-Term Benefits and Relationship Building:

The MVMNT architecture offers long-term benefits by enhancing the broker's ability to sell relationships and access data. By ensuring the accuracy of freight rates and expanding access to carrier or shipper networks, MVMNT empowers brokers to sustain and grow relationships. It emphasizes the need for accurate historical and market TL rates and service costs, ensuring brokers can offer competitive and comprehensive services without diluting their offerings.

Building in Commissions:

As the brokerage industry continues to evolve, experimenting with various technologies to reduce costs and improve profits, MVMNT recognizes the importance of keeping the human element — the commissionable rep — at the core of brokerage while leveraging technology to enhance efficiency. With the advent of AI and other technological advancements, the industry is at the cusp of a significant shift. MVMNT's architecture is built to meet these rising demands, ensuring that logistics tech adapts and thrives in the AI era.

Brokerage-First CRM:

MVMNT addresses the broken link between CRM and TMS by ensuring a seamless two-way interaction. This connection is vital in managing the transactional nature of shippers and responding to inconsistent spot market needs. By providing more accurate quotes, fostering stronger relationships, and ensuring continuity of information even with staff turnover, MVMNT's integrated approach empowers brokers to deliver exceptional service consistently.

MVMNT is not just adapting to the future; it's actively shaping it by redefining what a TMS can do. From supporting 'Good Brokers, Great Brokers, and Amazing Brokers' to integrating cutting-edge technologies and refining the broker-shipper relationship, MVMNT is setting a new standard for the brokerage industry's future.

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