The recent push by brokers into the LTL arena began in
the 2006–2007 period, when a nasty freight recession
spawned truck overcapacity. As demand waned and LTL
carriers were stuck with too much supply, they became
increasingly receptive to the services of brokers to help procure freight. The attraction intensified as the broader economic recession caused shipper demand to plummet further. The adoption of sophisticated and functional information technology made it easier and more efficient for
brokers to match loads with capacity, but to do so on the
shipper’s terms rather than the carrier’s.
However, that economic environment is history. In the
past four years, LTL carriers have rationalized capacity,
repeatedly raised their rates, and become more selective in
the companies from whom they’ll accept freight. As the
pendulum has swung, so has carrier executives’ antipathy
toward third parties who they feel do little more than scour
load boards looking for the lowest price.
Jeffrey A. Rogers, president of YRC Freight, the long-haul
unit of LTL carrier YRC Worldwide Inc., acknowledged that
brokers and 3PLs have become increasingly embedded in
YRC Freight’s traffic mix. That doesn’t mean he likes it,
though. Rogers warned he will use the hammer of capacity
allocation, if necessary, to thwart the efforts of those inter-
mediaries he calls “rate trolls.”
“The big [intermediaries] are figuring it out,” Rogers said.
“They’d better bring value to the relationship or they will be
out of capacity.”
Several 3PL and broker executives are keenly aware of the
shift. The days of brokers’ being welcomed to the table by
carriers only to work some type of capacity arbitrage are
over, they say.
“If a broker already has a lot of LTL freight, he will be OK.
But if you don’t, you may find yourself struggling” to get
adequate capacity at reasonable prices, said John E. Wagner
Jr., president of Wagner Logistics, a Kansas City-based 3PL.
Wagner said 3PLs often underestimate the unique and
challenging characteristics of LTL transport, notably the
complex pricing scenarios and carrier rules as well as the
multiple stops and cross-docking events that can result in
longer transit times, delivery variability, and added risk of
freight damage. For these reasons, along with the carriers’
newfound pricing and capacity leverage, Wagner is leery
about making a big push into LTL; his company solicits LTL
freight only for customers that have an existing warehousing relationship with his firm.
CHANGE IN STRATEGY
In contrast to four or five years ago, when a broker courting
LTL users would often lead its pitch with projected price
savings, today’s savvy intermediaries emphasize the mutual
benefits for shippers and carriers, and are honest with ship-
pers about what they should expect to pay. “I can guarantee
to a shipper that an LTL carrier will be asking for more
money,” said Ben Cubitt, senior vice president, engineering
and consulting for Transplace, a Dallas-based 3PL. “I will
tell them that six months out, they will be looking at a 3- to
6-percent rate increase.”
Cubitt said Transplace is very active in the LTL space,
mostly with larger customers that mainly ship truckload
and have a peripheral amount of LTL business, and for
smaller, less shipping-savvy customers who tender a rela-
tively small amount of LTL and often get taken to the clean-
ers due to their lack of leverage and their ignorance of the
pricing landscape. Cubitt said Transplace works hard at
maintaining strong carrier relations, something many third
