DC Velocity - August 2015

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46 DC VELOCITY AUGUST 2015 www.dcvelocity.com has been under pressure virtually all year. Spot loads in June were down 21 percent from June 2014 levels, though they were up 5. 7 percent sequentially, according to DAT.

June’s load-to-truck ratios, which
measure the number of loads posted
on DAT’s load boards for every truck
posting, were down year over year by

44 percent for van, 51 percent for refrigerated, and 49 percent for flat-bed transport, the consultancy said. Spot rates were down 10 percent for van, and in the high single-digits for the other two equipment types, DAT added.

DRACONIAN CUTS

At some shipper companies, the broker cutbacks are resulting in reductions of just a few providers. Other cuts, however, are more draconian. For example, on March 1, a large beverage shipper completed a revamp of its 3PL/broker network that reduced its provider universe to 25 from 130, according to Albrecht, who declined to identify the company. In addition, a big food shipper that had used as many as 90 brokers has a mandate to shrink the count to 36, according to an executive at the company, who spoke on condition of anonymity and asked that the organization not be identified.

Because their products have seasonal spikes, food and beverage shippers typically use more brokers than shippers in other industries so they can accommodate the potential freight overflows during the busy cycles.

The food shipper has so far narrowed its 3PL/broker count to 40, according to the executive. It allocates about 20 percent of its volume and spending to brokers, down from around 29 percent for the past five to 10 years, the executive said. Meanwhile, the shipper is spending more time working directly with carriers, the executive said.

The decision to narrow its broker universe has been in the works for some time, according to the executive. The company has long sought to reduce, if not eliminate, the practice of supporting carrier and broker markups on the same transaction (“margin on a margin,” the executive called it). It had also become dissatisfied with geographic overlaps, inconsistent service, and incidents of price gouging that came with having so many brokers. These shortcomings became especially evident during the 2013–14 winter cycle, the executive said.

The executive emphasized that the rationalization of brokers is a long-term strategy that would unlikely be altered even if truck capacity tightens further due to a shortage of equipment and drivers. The company mostly uses regional carriers and therefore, largely relies on brokers with regional capabilities bookended by three or four core nationwide brokers.