TCP survey: Carriers shift from brokers as capacity tightens

Publicly traded brokers achieve gross margins of 15 to 20 percent and this typically reduces what the carriers get for loads hauled for brokers, Mikes and Batts noted. Most carriers will service their long standing shippers first because of not only higher paying freight, but also steadier volumes and the desire to assist these shippers as a priority.

The Trucker News Services

4/20/2011

DEVNER — A recent survey finds that 87 percent of responding carriers said they have used less broker services during the past three months — “a dramatic turn around” since May of 2009 when two-thirds reported using more brokers, according to Transport Capital Partners LLC’s first quarter Business Expectations Survey.

“Obviously the freight supply demand balance has shifted dramatically to the carriers, and they are using their capacity to serve the needs of their long term customers,” said Richard Mikes, TCP partner.

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“The smaller carriers who have historically relied more on broker freight reported less usage of the same magnitude as over $25 million revenue carriers,” added Lana Batts, TCP partner.

Publicly traded brokers achieve gross margins of 15 to 20 percent and this typically reduces what the carriers get for loads hauled for brokers, Mikes and Batts noted. Most carriers will service their long standing shippers first because of not only higher paying freight, but also steadier volumes and the desire to assist these shippers as a priority. 

A leading load board reported that on some high volume lanes, broker spot load rates are exceeding contract rates as brokers respond to urgent shipper needs to move freight, TCP said.

The TCP survey found that 40 percent of the carriers report that broker freight services account for less than 5 percent of their revenues and that 35 percent report 6-15 percent of their revenues from brokers. 

Only a quarter of carriers rely on brokers for more than 16 percent of their revenues.

“This reflects the traditional reliance on brokers by smaller carriers for return hauls as their outbound length of haul increases and improved technology such as electronic load boards on cell phones, and laptops are available,” Batts said, noting that the survey shows that carriers under $25 million in revenue size use more brokers.

Both Mikes and Batts envision a potential shift over time to even a more direct connection between carriers, shippers and brokers with the advent of real time electronic bidding on loads by prequalified carriers.

TCP, which specializes in transportation mergers and acquisitions, capital sourcing and advisory services, uses the quarterly survey to collect the insights and opinions of executives nationwide in order to report on the current state of the industry and future expectations. 

Mikes and Batts, both with extensive experience in transportation, directed the survey and analyzed the findings.  TCP couples the survey results with conversations they hold with carriers and others in the industry to present an insightful dialogue on key issues.  More information is available at TCP’s website.

Kevin Jones of The Trucker staff can be reached for comment at kevinj@thetrucker.com.

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