Freight brokerages are among the fastest-growing segments of the supply chain. According to Supply Chain Game Changer, “The transportation industry has seen a rapid influx of interest and growth over the last several years, and this includes the professionals who work as intermediaries between shippers and carriers. Licensed freight brokers operate around the country in various markets, helping make the transport of goods a reality for their customers. Currently, more than 17,000 freight brokers work in the United States, either as independent businesses or as part of a team.” As a result, finding a way to make a brokerage stand out from its competitors is challenging at best, despite the use of freight negotiations and other strategies for lowering total costs. Fortunately, successful freight brokerages can unlock the secrets to more substantial profit margins and more productive schedules by looking beyond the essential pricing factors and getting more granular data, like origin and destination market details, that provide actionable, prescriptive insights.
The problems with not looking at origin and destination data
Some problems modern freight brokerages have occurred due to limited ability to see beyond the business’s four walls and a handful of carriers. While carriers may promise lucrative discounts to brokerages based on freight, the inability to see the whole market and actual freight rates for all lanes will create inefficiencies and missed opportunities. Remember that all freight management segments are looking out for one thing – their profit margins. Thus, failure to look at the whole picture, including the origin and destination data, only provides a fraction of what’s happening. As a result, freight brokerages may be paying significantly more than needed. Or they could be seriously undervaluing freight and seeing tender rejections soar.
Successful freight brokerages depend on the full picture
Successful freight brokerages need the full picture of market activity to secure and negotiate rates as well as communicate effectively with carriers and shippers. It’s a fundamental part of benchmarking. And it allows companies to stay ahead of their competitors and look beyond their company’s limits. Gaining holistic freight market visibility will enable brokerages to improve performance through key performance indicator tracking. Further, with real-time data-flows into a platform via API or by using a web-interface, a brokerage can ensure broker agents are sourcing the most competitive loads at the most competitive rates and delivering the highest level of service and transparency to customers. Like any successful business entity, the use of holistic and granular level data will yield an opportunity to continually optimize practices that lead to a competitive, effective and profitable business. However, is it critical that those who turn to a platform to gain freight market data understand the applications of that data.
How to apply true freight market data to increase profitability
The biggest opportunity to save company resources at a brokerage and gain efficiency lies in measuring the real-time true freight market. Due to the recent historic increase in outbound volumes and tender rejections, the spot market has seen an increase in trucking costs per mile, and contract rates are either not being honored or are being re-negotiated on freight bids via a short-term contract known as a truckload mini-bid. However, the modern supply chain is much more complicated than a two-pronged pricing strategy. Individual lanes may have unique costs. Accessorial charges have expanded to include different surcharges, delivery handling fees and peak season impacts. The dizzying volatility in the freight market has contributed to a lost opportunity for profits among all segments. Unfortunately, freight brokerages are usually the first to realize these losses. With that in mind, it’s essential to have a few strategies ready to increase profitability, including:
- Connect rating and carrier sourcing systems to a freight analytics resource, like FreightWaves SONAR via API.
- View SONAR Lane Signal data to understand who’s in the running for buying power.
- Confidently go into new freight bidding negotiations, whether a short-term, mini-bid or a longer contract conducted via a more traditional truckload RFP process using Lane Scorecard. Lane Scorecard is a dynamic SONAR feature that guides pricing decisions across multiple lanes in one view.
- Work with shippers and carriers to proactively explain price deviations and costs.
- Avoid risks by pre-empting market volatility with predictive lane rates.
- Maximize the use of backhauls to avoid deadheading.
- Reduce dwell time with proactive scheduling and planning processes.
- Automate communications and quoting, using data to generate realistic, affordable rates and tender offers.
- Review brokerage performance based on profitable shipments booked, frontline success and metrics that use SONAR data to justify such performance.
Become a brokerage of choice by deploying the right freight forecasting software
The global supply chain marches to the beat of countless drums. And successful freight brokerages must break through the chaos to recognize the most lucrative loads, carrier and LSP relationships, and lanes. With so much uncertainty permeating the market, today’s efficiencies and proactive pricing strategies do indeed lead to healthier businesses and more productive workplaces. It’s time for freight brokerages to realize these facts, start applying the tips outlined above, and put the power of an advanced freight forecasting platform to work. Request a SONAR demo to learn more about how your freight brokerage can rise to the next level.