Why Mid-Sized Freight Brokers Have Freight Capacity When Others Do Not
February 25, 2021 •Rick LaGore
Conventional wisdom for many shippers is the largest freight brokers are the logistics companies with the only keys to the trucking capacity castle.
This article is to dispel the thought that one needs to go big or go home on their freight broker selection by sharing the top 5 reasons why mid-sized logistics companies can often bring creative freight capacity options for particular lanes in a challenged freight market when the larger freight brokers cannot.
The content of this article comes from real-life experiences the ownership team has had over the past three decades working at and with both mid-sized and large logistics companies.
From those experiences we can say with confidence there are several sets of keys to the capacity castle. Over the next several paragraphs we will share why that is the case and give reason to shippers to search out those mid-sized freight logistics companies that can help them in a capacity constrained freight market.
Top 5 Reasons Why Mid-Sized Logistics Companies Have Freight Capacity When Others Do Not
- Alliances & Partnerships
- Contractual Commitments
- Corporate Structure
- Freight Network
- Team Focus
The reasons associated with both mid-sized and large freight brokerages being able to connect shippers with freight capacity options vary from structure to execution.
Alliances & Partnerships
The freight industry has long been built on relationships and while technology is taking over several freight capacity fronts, the relationship aspect of the business is still a big part of the industry.
With over 700,000 motor carriers registered in the USA and hundreds of thousands of shippers buying freight capacity for their business opens up the opportunity for alliances and partnerships to run across both mid-sized and large freight brokers.
At this time, because of the fragmentation and the lack of technology with so many of the smaller motor freight carriers there is just no way one company can pull in all the freight capacity options available.
One of the big plays and reasons for the tremendous merger & acquisition activity in the logistics space is to build larger logistics companies with scale.
While scale brings many blessings, it can come with challenges. The blessing is the amount of committed capacity buys it can offer major asset carriers and the favorable cash flow draw for beneficial pricing that fits their customers’ network.
On the flip side, to meet the demand of their customers' requirements and pricing commitments they have contracts they need to have in place to, as best they can, to guarantee pricing and capacity throughout the year or they suffer margin and service as they go to market for large spot market freight buys. So as a result, these contractual commitments can limit their ability to shuffle volume off to “other” capacity options available in the market when a creative capacity solution comes through their doors.
An example, as it relates to intermodal freight capacity, is where a larger IMC (intermodal marketing company) is locked on their options to utilize other intermodal options because the commitments they have to their own assets and railroads that move their customers' freight today.
While the corporate structure does not inhibit a freight broker from engaging in conversations and opportunities for freight capacity outside the normal channels, the ability for the freight capacity opportunities to meet the customers where they stand can be an issue.
The larger freight brokers will clearly have more conversations with carriers offering creative capacity solutions because of the sheer size of the motor carrier development department, but their ability to be able to take those conversations and drive them down into their organization is the challenge.
Adding to the previously mentioned comment, the ability to take the greatest opportunities and drive them through the organization to help its customers can also be troublesome because of layers and silos. The flatter, mid-sized logistics company does not have this challenge and as it often works out the person learning of the opportunity from the motor carrier community is the same one that will drive it out directly to their customers for an immediate win.
To sum it up, we all know the saying that time is money, but in the freight market time is also capacity.
There is a thing to be said for the freight networks operating under a particular logistics company, combined with the technology to help drive favorable service and price results.
There is also something to be said that every logistics company has a different network of freight they are moving by freight mode, which puts each freight brokerage company in a unique position to find those special opportunities to balance a lane or mode with the next call or web inquiry that comes through their sales funnel.
And while one would think that the largest of freight brokers could do more with the balance, there is quite a bit more impact to a mid-sized logistics company and less freight required to obtain the perfect balance in a freight lane.
Every organization has the challenge of focus. No one group can focus on hundreds of opportunities and because of this the large freight brokers will miss the chance to throw out a new capacity option, while a mid-sized may miss another.
It is a matter of timing and the focus of the team or the special call out from a customer which puts focus on the list of reasons why mid-sized freight brokers can also be a great option for creative new capacity options for shippers.
While all logistics companies, no matter their size, can miss opportunities to help their customers because of focus, there are other reasons focus comes into the conversation. They include the following and often become sacrificed because of time:
- Ability to Look Beyond the One-Time Shipment
- Tough to Find The Needles in a Haystack
Conclusion on Why a Mid-Sized Freight Broker is Worth Connecting with for Additional Capacity Options in a Challenging Freight Market
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