Whether it’s picking up raw materials, moving cargo between internal facilities, or delivering finished goods to the end customer, most shippers can’t actually ship without assistance from carriers. While some shippers may have internal fleets, most rely on contract carrier partners to fulfill these needs. Even fewer shippers have their own capabilities for rail, air, and ocean travel. Unfortunately, carriers across modes can be relatively volatile, as shown in recent years by multiple capacity crises, Hours-of-Service implementation, and the persistent global COVID-19 pandemic.
Rather than handle these problems alone, many shippers have chosen to outsource carrier activity to one or more third-party freight brokers. Using a vendor to broker freight helps shippers who depend on external carriers as part of their business model to mitigate the various challenges involved with freight management. This article will explore some of the ways that using third-party freight brokerage services can help alleviate some of the risks and headaches of the carrier market.
#1 – Capacity
A growing truck driver shortage, new regulatory challenges, and various other factors have contributed to several major trucking capacity shortages in recent years. When trucking capacity maxes out, it also impacts alternative modes—such as rail and air—as shippers seek alternatives that will keep their shipments moving.
When truckers have available capacity in a tight market, it doesn’t necessarily get passed out on a first-come, first-served basis. In the midst of a capacity crunch, carriers will dole out capacity to partners who have brought them continuous and reliable business. Using a third-party logistics (3PL) provider or freight broker gives a shipper access to that vendor’s trusted carrier network and their preferred status with carriers.
#2 – Rates
When discussing carrier volatility, rates are perhaps one of the most volatile factors that shippers must contend with. Carrier rates can shift dramatically in a short period of time based on a variety of market trends, such as capacity, natural disasters, regulatory changes, political pressures, and much more. Furthermore, rates are split into two primary types: contract rates and spot rates.
Freight brokers and 3PL’s monitor the carrier markets and lock in long-term contract rates when current rates are favorable to the shipper, then pass those lower rates on to their shipper customers. Conversely, spot market rates are determined based on market fluctuations. Brokers and 3PL’s can often achieve cheaper spot market rates as well by purchasing capacity in larger volumes on behalf of multiple clients.
#3 – Collaboration
While it does happen on occasion, it’s logistically challenging for shippers to collaborate directly to lower shipping costs. This can be difficult when freight must move that doesn’t require a full trailer, as the shipper must locate a less-than-truckload (LTL) carrier with available capacity on the appropriate lane.
3PL’s and freight brokers can often take cargo piecemeal from multiple clients to build less-than-truckload (LTL) shipments. This enables them to secure regular capacity with LTL carriers while passing on more affordable rates to the shipper.
#4 – Time
Freight management is very time-consuming. Scheduling and tracking shipments alone can be draining on the logistical resources of the average shipper, so effectively navigating sudden rate hikes or market shifts may range from difficult to impossible.
Using a freight brokerage service takes the varied complexities of day-to-day freight management off the shipper’s plate. Freight management tasks such as scheduling and tracking, customer service, and problem solving are handled by the vendor, freeing up the shipper’s personnel to focus on core competencies. “In short, working with a freight brokerage service allows you the time and materials to dedicate yourself to the larger picture and goals of your enterprise,” says Frank P. Crivello, Chairman & Founder of Phoenix Investors, Phoenix Logistics’ affiliate.
Freight Brokerage From Phoenix Logistics
At Phoenix Logistics, we provide standalone freight brokerage services to shippers, or we can implement freight brokerage into a more comprehensive transportation management plan. For more information about our portfolio of services, please contact us today.
As an affiliate of the real estate firm Phoenix Investors of Milwaukee, WI, Phoenix Logistics has unique and preferential access to an expansive portfolio. Phoenix Investors’ Senior Management includes Frank P. Crivello as Chairman & Founder; David Marks as President & CEO; and Anthony Crivello as Executive Vice President. Robert Kriewaldt serves as Phoenix Logistics’ Senior Vice President.