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A DIFFERENT VIEW
Not everyone is seeing severe broker
rationalization taking place, possibly
because many shippers don’t work with
many providers to start with. “I haven’t
come across a situation where I’ve seen
a shipper with, say, eight brokers,” said
Michael P. Regan, founder and chief of
relationship development at TranzAct
Technologies Inc., a consultancy involved
in the 3PL sector. “What I’ve seen are
shippers with one, two, or three brokers.”
Richard Armstrong, founder and chairman of Armstrong & Associates Inc., a
consultancy that closely follows the 3PL
segment, said nearly half of large shippers
use two to five brokers, while 38 percent
use six or more.
Armstrong said shippers aren’t consolidating their universe of brokers as much
as they are becoming shrewder about
whom they use. Big shippers will continue to migrate to a core group of brokers,
commonly known today as “domestic
transportation managers,” that can reli-ably handle—and optimize—significant
volumes, he said. Most of these transactions are handled under contract; spot
market transactions are a small part of the
total, Armstrong said. These sophisticated
providers, which account for a fraction of
the 15,500 licensed brokers in the U.S.,
should see net revenue—gross revenue
minus the cost of purchased transportation—increase by 10 percent a year for the
foreseeable future, the consultancy said in
an industry report published in June.
In addition, not every carrier is experiencing an influx of shipper business that
had formerly been handled by brokers.
A spokeswoman for Schneider National
Inc., a leading truckload carrier and logistics service provider, said Schneider is
seeing no evidence of diverted volumes
being sent its way.
Albrecht of BB&T said that a shift away
from brokers to asset-based carriers might
serve shippers well for the balance of
2015 and through next year. However, he
expects the pendulum to swing back to
the brokers by 2017 as the driver shortage
worsens and new government regulations,
such as those mandating the use of
electronic logging devices in each
vehicle, drive up fleet costs, push
smaller carriers—which still account
for most of the nation’s truck oper-
ators—out of business, and tighten
capacity to unprecedented levels.
At that point, brokers’ capaci-
ty-procurement capabilities will
become more valuable than ever,
Albrecht said. Unless carriers can
resolve the driver shortage issue,
“freight brokers are likely to have
another day in the sun” perhaps as
early as next year, he said in a mid-
June research note.
