Operating a freight broker business in such a competitive industry requires a lot of perseverance to keep the organization moving forward. It also needs quite a fair degree of strategy to manage and grow the organization. It’s not always about the growth when it comes to a freight brokerage business. It’s also about spending resources as wisely as possible.
Most startup freight brokerage owners may be aware of the risks and benefits that go with the business. All companies, regardless of industry, go through their startup, growth, maturity, and transition phases. During the first two, business owners need to invest significant amounts of their time, money, and resources into their companies. The payback comes back during the second two phases when earnings can be distributed. During the growth phase, significant investment needs to be made in terms of both time and money.
Federal Highway Administration (FHWA) and the DOT’s Bureau of Transportation Statistics predict that, over the following three decades, freight moving across the US transportation network will increase by as much as 40%. Likewise, the value of cargo will also increase by as much as 92% during this time. It’s estimated that by 2045, over 25 billion tons of freight valuing more than $37 trillion is expected to be transported across all modes of transportation.
When it comes to freight brokerage, less-than-truckload (LTL) is a viable, relatively straightforward, and profitable option. Plenty of shippers have turned to LTL freight shipping as a means of saving on costs without sacrificing the quality of service. Less-than-truckload consolidation combines multiple LTL shipments onto a contract carrier. In this situation, we have a case of synergy where the sum of the parts is greater than the whole, which in turn creates a built-in margin.
Below are several ways to help freight brokers grow their business.
Minding Your Staff
Choosing the right staff may be more difficult than initially anticipated. Some may think that hiring personnel experienced in the transportation industry may be the best bet. However, professionals may cost more in terms of salaries and other overheads, but they can hit the ground running. You may find it easier to expand into new regions more quickly and effectively if your employees have a thorough understanding of the logistics industry. That said, they can also jump to another opportunity just as quickly, taking some of your business opportunities with them.
The other option is to choose employees new to the transportation industry. But even with those willing and eager, the learning curve will be much steeper. This process of onboarding can be made easier by implementing a solid business model, setting an explicit set of procedures, organizing formal training possibilities, and building promotion paths.
Finding Your Niche and Region
Many startup freight brokers haul truckload dry freight, mainly because it’s the simplest and most available. However, truckload is price-driven, with major players and minimal profit margins. Fortunately, the freight broker business has plenty of other niches and market segments to choose from. This also means that it’s impossible to become an expert in all of them. Therefore, it’s best to choose one or two and specialize in these lanes, trailer types, geographical locations, and/or specific industries.
The more proficient you become in these niches, the higher premium you can charge for your experience and quality service. In addition, you will also be able to continuously lower your operational costs as your progress up the learning curve. In time, you will make fewer mistakes and have a higher carrier sourcing strategy than your competition.
The purpose here is to dominate your niche. Freight brokers that spread themselves too thin and try catering to too many types of shippers often end up chasing all sorts of unprofitable business avenues for the sake of growing and expanding their organization. A more strategic and targeted approach, on the other hand, can lead to fewer total customers but higher profits overall. It’s about focusing the freight brokerage logistics company to where it can build the best relationships and add the most value. As an agile freight transportation logistics service provider, you should focus on a niche that you’re suited for and on regional markets which can offer tremendous opportunities for growth. The significant differentiators can include things such as the level of customer satisfaction, flexibility, types of freight, or responsiveness.
Managing Cash Flow
One of the biggest reasons for failing as a business, regardless of industry, is the mismanagement of one’s finances. By planning for all scenarios that can affect the company’s cash flow, even an established freight broker can be in a far better position by paying their carriers on time. This, in turn, will make them happier, greatly increasing your carrier sourcing initiatives. On the other hand, the slower your customers pay you, the happier they are. Therefore, freight brokers need to strike a perfect balance of cash flow management between the money they receive and that which they need to give away.
Cash crunches for freight broker companies can prove to be an ongoing issue. Things such as service failures, upticks in write-offs in accounts receivables, or meager contracted rates are some of the most common and pressing threats in this regard. Another issue that many freight brokers forget about is revenue growth potential. Landing a new customer means that more cash on hand is needed to pay carriers before payment is received from the customer.
Investing in Automation
The FreightTech boom of the past several years has provided the logistics industry with a series of technological advancements, particularly in areas such as artificial intelligence (AI) and automation. These have helped deliver unprecedented levels of productivity. One of the solutions with the biggest impact was the transportation management system (TMS). The TMS has completely revolutionized the way logistics companies track their daily shipments and process their freight quotes. Over the years, the use of these systems has increased, and their tasks have multiplied. That said, not all transportation management systems are the same.
When it comes to the transportation industry, time equals money. As innovations continue to enter the market, LTL freight brokers shouldn’t rely solely on their workforce to perform the tasks that a TMS could do on their behalf. As freight volumes continue to increase, carriers, freight forwarders, and third-party logistics service providers get bigger; using a TMS that doesn’t have automation capabilities is no longer a viable option. Partnering with a TMS vendor that’s not fully committed to ongoing and continuous innovation isn’t worthwhile in today’s highly competitive and disruptive business environment.
This is where Tai Software comes into play. Tai TMS is a comprehensive, all-in-one platform that provides LTL freight brokers with unparalleled visibility and scalability. It’s specifically designed with scalability in mind, helping freight brokerage businesses grow at their own pace. Simply calling and emailing individual carriers, one at a time, is not only outdated but also incredibly time-consuming. To increase your freight brokerage and remain competitive on the market, you will need to make use of automation as it connects you directly to your system, schedules, and routes.
The Tai TMS solution uses a powerful self-service client portal that organizes rates and equips your team with automated dispatching and tracking capabilities. Tai TMS has direct integrations with all major carriers and load boards. As such, it eliminates the need for a third party to transact freight. LTL Freight brokers don’t have to jump between a load board’s platform and the LTL carrier’s website, as all necessary and relevant updates feed directly into the platform.
Tai TMS automation doesn’t end with booking either. Through API and EDI carrier integration, the platform gives your staff the necessary insights and control over the entire shipment lifecycle. Automated tracking and dispatching moves freight from quote to delivery with minimal human intervention. Carrier updates are also directly fed into the TMS activity log, providing quick and easy access in real-time. This type of automation is meant to speed up freight broker logistics operation scalability. It allows for the business to take on additional shipments without increasing the labor costs.
That said, Tai TMS isn’t designed to eliminate dispatchers. The platform’s goal is to eliminate the dispatchers’ constant need to juggle between the mundane and the mission-critical tasks of the business. This extra time can be better spent on building better relationships with customers and carriers.
Tai TMS’s API tariffs also give brokers and their customers instant access to LTL rates. Clients have access to these rates directly from the self-service customer portal, which also helps increase shipment volume without actually increasing the workload. Also, Tai TMS allows brokers to track their LTL shipments directly from the shipment profile. Through direct API/ EDI integrations to LTL carriers, tracking updates feed right into the shipment activity log. This allows the operations team to keep a close eye on shipments in transit, empowering the customer service team with on-demand updates. Updates also display in the client portal giving customers the ability to track their shipments.
At the end of the day, LTL freight brokerage is all about scale. By implementing these steps and tools mentioned above, freight brokerage companies will have a better chance of remaining relevant in today’s highly competitive market and thrive in it as experienced logistics professionals.
