After the massive disruptions of the past couple of years (2020-22), let’s take a look at the likely problems facing freight brokers, and freight carriers beyond 2023.
5 Challenges Facing Freight Brokers
The 5 biggest challenges.
- Political dysfunction and instability of the supply chain
- Health and safety regulations
- Carrier costs and margin pressures
- Making your Freight Brokerage Company Efficient
- New Entrants to the Transport Industry.
Political Dysfunction and Instability of the Supply Chain
We have already been witnessing this.
Outside of covid these 2 acts (below), of political dysfunction are at the front and center of future supply chain issues.
- Conflict between Russia and the Ukraine driving up the prices of fuel and gas
- Farmers in Europe resisting government “green initiatives”, to reduce stock and reduce fertilizer usage. This has already seen small countries like Sri Lanka essentially bankrupted, unable to buy fuel, and unable to feed their population.
There are about 875 million people involved in agriculture world wide.
With reductions in the export / import of grains, fruits and machinery, there is a likelihood of scarcity and increased prices for commodies and other goods should governments continue down this path.
For freight brokers this could see a reduction of business turnover and reduced business opportunities.
The upside:- Some brokers could increase their handling of higher priced goods to more affluent markets.
Cost of Fuel.
Always the first thing to increase in any de-stabilization on the geo political scene.
The Russia Ukraine conflict has created massive problems for European countries reliant upon Russian oil and gas.
In an already rigged market, we see oil prices below $100.00, yet diesel prices at the pump are still in many cases, 110% or more above the historical average.
Something to think about: – In June 2008 the price of West Texas crude was nudging $190.00.
Health and Safety Regulations.
Ok, this may sound like freight broker 101, but it is worth repeating here.
HAZMAT or HAZCHEM and Dangerous Goods, regulations are always under the microscope by governments and their bureaucrats.
You owe it to yourself to keep up with any new rules that can come back to bite you..
Matching loads with carriers.
While many carriers are still trying to overcome a covid induced truck driver shortage, with new players entering the industry, freight brokers (and shippers), need to make sure the carrier is aware of a loads classification, and that the carrier has the proper endorsements to perform the work.
Governments are not at all efficient when legislating new rules (or anything else for that matter).
In the event of an accident, governments and their lawyers will trawl through the records of the load organization from the shipper to the trucker.
Protect yourself. Court is the last place you want to find yourself and your surety bond may not be enough to cover the penalties.
Although you are the “middleman” you still have a responsibility to have carriers / drivers endorsements on file, and make sure they are up to date with the latest legislative requirements.
It is up to the shipper to supply them to the trucker, but if everyone is on the same page things should flow smoothly.
Carrier Costs and Margin Pressures
I don’t know how many times I have heard that trucking is a race to the bottom when talking about pricing.
The screen shot opposite from the July 2022 OPEC report is a little ambiguous in its outlook.
It tries to be optimistic while listing some of the risks.
They are not small.
The August or September report may be more forthcoming with 2023 projections.
One of the parts I have highlighted is:- diesel and gasoline are expected to lead demand as well as agricultural activities.
I would suggest that this demand is already under pressure due to government agricultural policies in some European states.
These policies could expand to other areas, the UK, Canada, possibly Australia, putting more pressure on demand.
I seriously doubt that the price of fuel will decrease much, if at all in 2023.
US inflation is around 9%.
Most likely it will likely get worse before it gets better.
That is my opinion though, and I have been wrong before.
However carrier costs have a flow on effect that trickles down through the transport industry through to the consumer.
Making your Freight Brokerage Company Efficient.
According to the OPEC report, the years to 2025 are going to be challenging.
Any attempts to have your company running as efficiently as possible should start from within.
- Time management
- Software upgrades
- Better record keeping
- Workplace culture. A happy workplace is a more productive workplace.
- Improving communication with existing customers and carriers.
These are things that can always be improved on.
Some other questions you could ask yourself might include
- How can I Improve carrier pick up times from your customer. Is your carrier to far away?
- If you are dealing with seasonal commodities (fruit for eg), Can I improve pick up times at peak seasonal demand?
- Are your carriers reliable and efficient ? Which loads give the most trouble?
- Are new carriers you have contracted able to walk the talk?
- Can you get a better deal on your surety bond?
- Are you running your carriers at full capacity? Do you need to increase carrier capacity?
Maintaining a good relationship with both shippers and carriers can be a juggling act at times.
Particularly if a freight carrier doesn’t comply to the shippers WPH&S rules when loading.
Giving the carrier a heads up on what to expect when loading, will go some way to keeping the peace with your supplier.
Sometimes it pays dividends to go and do a boot camp.
New Entrants to the Transport Industry.
New Freight Brokers, Some tips for you
The transport and logistics industry anywhere is competitive.
Employers are not going to appreciate having someone under qualified and underperforming at the front desk.
So be upfront with your experience, or lack of it.
Gaining the theoretical knowledge can be expensive, but there are good inexpensive online alternatives to at least give you a grounding.
An example here.
Typically you would start as a freight agent.
Not everyone wants the problems of running a business in today’s environment, and many people are happy to be freight agents.
Also It is not unusual for a independent trucker to want to start his own brokerage business and run it conjunction with his carrier business.
Becoming a Freight Carrier.
With a high level of demand for Freight carriers it might be tempting to mortgage the home and buy a truck.
Before you do that I would suggest you take a look at “How to start a successful trucking company” before parting with your hard earned.
Even if you have a been a truck driver, and know how it all works, knowing the mistakes of others can be a big help to you.
As I said further up the page…
I don’t know how many times I have heard that trucking is a race to the bottom when talking about pricing
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Don’t fall into that trap.
Thanks for reading.
Share with your friends if you found it informative.
Michael.
