Photo: Jim Allen/FreightWaves at Edge Logistics
The freight brokerage industry has traditionally focused its attention on the training and development of its customer sales staff. In a buy-sell brokerage, customer sales are incentivized to hunt and gather more freight, to bring in more revenue. In a cradle-to-grave freight broker business model, customer sales are overly attentive in building their customer base, while tending to carrier needs when time permits, due to their common commission-based structure. And Beth Carroll of 3PL Magazine further explained that sentiment, “How hard can it be to develop a commission plan? [Should] you just figure out if it should be 5% or 6% [without data]?” That’s why the only way to figure out a real commission plan rests with knowledgeable sales.
In our recent white paper, we discussed the growing importance of carrier utilization. In a recession market, there is pressure to operate efficiently and maximizing asset utilization.
This will be key in 2021.
Managers will need to train carrier sales teams to understand the importance of using the correct carrier at the right time, and they must be able to negotiate effectively in order to maintain recurring revenue. Shippers will not be willing to accept a lack of trucking capacity or last-minute price changes in an industry that is becoming more transparent.
Lane Signal simplifies SONAR indices to allow carrier sales representatives to execute their load matching responsibilities. Lane Signal tells users whether a shipper or a carrier possesses more bargaining power on a certain lane. Unlike other tools in the market, the Lane Signal considers an abundance of data from multiple sources, not just dirty data that flows through one system like other industry tools.
Lane Signal considers the following indices:
Carrier sales employees can negotiate with the confidence of having the Lane Signal dashboard at their fingertips.
In the top left corner, your representatives can enter in their lane, and in seconds, everything they need to know is on one screen.
Below that widget, you will see a simple representation of the bargaining power at that time.
The hard-line on the curve represents the current bargaining power, and the dotted line represents the past bargaining power. If the dotted line is before the hard-line, carrier sales representatives should understand the carriers power is improving in that area.
You can find today’s rate for this lane, as well as the week-over-week (WoW), month-over-month (MoM), and year-over-year (YoY) pricing, to give carrier sales representatives leverage when negotiating potential contracts or when building a long term relationship with a carrier.
Using these tools can allow carrier representatives to book more loads and maximize the full potential of your carrier networks. Additionally, they can drive down costs and improve margins in an environment where shippers are not willing to move.
As an example for these negotiating capabilities, let’s take a look at the following lane, Los Angeles, CA to Dallas, TX.
While looking at the Origin SONAR Signal and the Destination SONAR Signal, it is very clear that the carriers have negotiating power in both markets. With the port congestion issues we have been dealing with in LA, and the lack of outbound and inbound shipments in Dallas due to recent weather trends, these signals are not surprising.
A shipper representative may look at these signals and think, “I have no negotiating power at all”, as they begin to discuss rates with carriers who immediately start asking for $1000+ on top of the rate you are hoping for, but that is not true.
Here are three examples for how to use this product in real-time.
Carriers love having the power in their market, so be sure to let them know that this load will get them to a place where they have even more negotiating power than the one they are in currently. Dallas, TX also has an increasing headhaul index, meaning an overall decrease in capacity, allowing that carrier to build relationships in a market that is only getting worse.
A lot of tools that carriers use are a month or more in the rear, as a lot of rating tools are based on 90+ day invoice data. It is important to let your carriers know that they can continue to shoot for the stars, but freight rates are beginning to fall, and there is nothing more than a carrier hates than going a day without taking a load.
A big mistake carriers make is going into a market (like LA) because they heard through the grapevine that there is an abundance of freight. While that can be true, a lot of carriers get themselves trapped in these markets because they do not have the correct relationships built to get them out of that market. Send them a screenshot, like the one below, to let them know the current rate trends. Discuss the importance of getting them a load today so they do not layover empty, at this point, I would also discuss example 1.
The spot freight market is great; carriers that have the correct tools can theoretically make more money in some markets, compared to contract carriers. Historically, comparable to the stock market, chasing the dollar today, instead of chasing the long-term investment, rarely beats out the latter. If you are working with contracted freight, work with the carrier to develop a long-term rate strategy. If that carrier is in LA regularly, discuss a rate to Dallas that will favor both parties in the long run. If the carrier is in LA off chance, but needs to be in Dallas regularly, work with your managers to find him a better rate to LA in the future.That is the way you can negotiate the return trip to Dallas down and improve your margin in both lane scenarios.
Your carrier sales representatives should be, and eventually will be, your greatest asset as a transportation brokerage. With the volume and technology advantages that brokerages have on individual shippers, finding the shippers and customers will not be an issue. Creating a profitable margin will quickly become your greatest hurdle.
As large and digital brokerages continue to gain market share, the barrier of entry, or the ability for shippers to get rates from multiple brokerages, becomes easier. Your asset will be the market knowledge that your carrier sales team possesses.
To learn more about the Lane Signal dashboard, reach out to your SONAR representative or check out the Knowledge Center.
If you are not a FreightWaves SONAR user, click below to schedule a demo, and begin providing your carrier sales representatives with the knowledge they need to compete.