Let’s face it, starting a brokerage does not require significant upfront capital, relative to other businesses in other industries. In fact, many of the nation’s top logistics operations started with a telephone, a prospect list and the dream of an entrepreneur. Despite the ease of entry, growing a successful brokerage business with true staying power requires significant investments in technology and employee development. In order to stay ahead of the competition and changing market dynamics, brokerages require access to external industry and competitive data sources. In other words, successful logistics operations can thrive when their performance is continually compared and contrasted against credible and standardized scorecards.
Benchmarking is the act of comparing your performance, via a common language, against a cohort of peers in a common industry segment. Benchmarking has proven to be an effective tool for private enterprises in every industry, across the globe. Successful application of benchmarking requires an intermediary with tribal and practical knowledge of the useful metrics for forward-thinking leaders, as well as an understanding of the raw data required to translate into a standard dialect. In trucking, you don’t have to look any further than the TCA Profitability Program (TPP), of which FreightWaves is the exclusive software provider, to understand the value that companies can realize by benchmarking their performance on a continual basis. TPP is comprised of 239 trucking companies throughout North America, with a common denominator trait – wanting to continuously improve. These companies work together to strengthen the transportation industry and each of their own financial foundations.
Six months ago, the FreightWaves team, within its strategic plan, established an objective of bringing sophisticated benchmarking capabilities to its brokerage clients, using extensive internal knowledge of this industry segment, and leveraging the experience and intellectual property FreightWaves has developed within trucking-based benchmarking.
We are pleased to announce a new brokerage benchmarking application within SONAR. This new application and service will allow forward-thinking brokerages to compare their operational and financial performance to peers in an anonymous, aggregated format. In addition, our brokerage benchmarking application will leverage FreightWaves Media, Events and Intel teams to provide qualitative insights and best practices among a vetted, members-only participant group. With this new service, FreightWaves will be a conduit for clients to make a rapid connection between data and execution.
The table stakes
The foundation of our benchmarking platform is the consolidated and standardized financial and operational data submitted by its participants. In order to take part in this new service, clients will be required to submit data in order to receive the associated benchmarks. Without your data for comparison purposes, any established benchmarks can be meaningless. The most common objections to participating in any business benchmarking initiative are: 1) the security and anonymity of a participant’s data; and 2) a belief that a business is ‘too unique’ to achieve any credible value from the practice of benchmarking. These objections are voiced in every industry and every geographic region. Based on our extensive experience in transportation benchmarking, we have made significant investments to ensure that these common objections are eliminated with the appropriate countermeasures.
With respect to the security and anonymity of your data, we have constructed a set of rules applicable to SONAR and the way your confidential data is accessed and managed within the FreightWaves data infrastructure. Within the application, we have established an accepted aggregation rule requiring a minimum anonymized population (or cohort) density of five reporting companies and statistics, regardless of the filters applied to the desired population. This will apply regardless of the time interval, lane, mode or any other variable applied by the client.
There will be no interface option available within the benchmarking application to expose the identity of any comparative population. Further, the identities of any participating company are anonymized and aggregated at the database level, a step that is a requirement of third-party data security audits required by our user agreements. In summary, a successful benchmarking initiative requires participants that are willing to ‘invest’ their confidential business data, and an intermediary that is committed to safeguarding that data at all costs.
Addressing the operating nuances within a successful benchmarking program requires the intermediary to identify the common denominators despite those nuances, and establish a common language for reporting purposes. Through FreightWaves’ considerable work within trucking benchmarking, we have created a sophisticated ‘data mapping’ tool that translates the unique transactional, operational and general ledger (accounting) data into a growing set of standard measures that are not (and will not) be available via any other data, software or industry participant. This rosetta-like tool was built based on thousands of hours of dialogue with our transportation clients, and not only solves the ‘language’ issues, it also allows companies to report their data in a rapid fashion.
Instead of simply providing an endless list of metrics that are available for benchmarking, we thought it would be better to address the typical roles within each company that would benefit from benchmarking data and the sharing of knowledge among high-performing brokerages.
CFO/Controller – Budgeting and forecasting is typically an insular practice. In all industries, in the absence of credible external benchmarks, CFOs and controllers use their own historical performance and perhaps some influencing statistics (GDP, industrial production and other economic indicators) to build forecasts and objectives for the future. This behavior can be self-limiting and also rationalize poor practices and behavior that may have led to comparably lackluster results. With credible benchmark data, the finance team can establish forecasts that combine historical results with the anonymized guidance of a legitimate peer group.
Owner/Executive Team – You are beating your historical margin performance, and labor as a percentage of margin is staying even. A time to celebrate? Perhaps. However, until you know how that stacks up against your peers, perhaps the time to throw a team party is premature. The success and evolution of the skill and quality of professional sports is driven by one common denominator – a scorecard. Without benchmarking, you can be satisfying all your conceivable personal and business objectives, except those concepts of possibility will not provide an ongoing indication of what’s being left on the table. A scorecard of possibilities. Benchmarking can both reward a successful brokerage operation for a job well done, but also ground them in the understanding that there are areas for improvement within any business.
Freight Sales – Are you being efficient with your time? How do you measure success? Typically, sales practices in most brokerages are built on tribal knowledge passed down under a command and control methodology. This accepted organizational method can be both beneficial (reinforce competitive advantage), but also be slowly eroding margin and potential for the freight sales team. With benchmarking, the silo of knowledge is broken down, and forces participants to reconsider the reinforced measures of success for each member of the team, and the organization as whole.
Carrier Sales – How do you objectively measure the potential for a load, relative to your current capacity? How do you measure the propensity for carrier rejection within a specific lane? The answer, likely, is that the answer is slightly different for each member of the carrier sales team. It doesn’t have to be. Your team craves credible data at a lane, equipment-type and time-specific basis. Benchmarking this information can be counter-intuitive for most, but it can enhance the margin efficiency of the entire organization. Your team needs to understand that everyone in the business is selling time (along with service), and eliminating the decision dwell time will improve the margin capability of the company, and likely their job satisfaction levels. It’s time to turn the industry’s collective data into action.
Now that we’ve outlined the obvious benefits of the practice of benchmarking, it’s now time to see if it’s right for you and your business. To learn more, simply complete this form, and someone from the FreightWaves team will set up a review session with you.
To learn more about Broker Benchmarking, fill out the form below and a member of the SONAR team will reach out to you.