DC Velocity - June 2014

34 DC VELOCITY JUNE 2014 www.dcvelocity.com transpor tationrep ort

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sive to procure space.

For the last three quarters of 2013, C.H. Robinson, the nation’s biggest broker and a large third-party logistics service provider (3PL), saw net revenue (revenue after the costs of purchased transportation) from truckload brokerage decline year over year or rise just incrementally. Robinson’s net margins from those activities fell year over year during the same period. John G. Larkin, analyst for Stifel, Nicolaus & Co., reckons that Robinson is unable to fully pass through its higher costs to shippers in the form of higher rates. (Robinson had not released first-quarter 2014 results as this story was being written.)

Eden Prairie, Minn.-based Robinson, with more than $12 billion in 2013 total revenue, can afford to insulate itself from the commoditization of its core business. In 2012, it paid $635 million in cash to buy Phoenix International, an international freight forwarder and customs broker. However, few brokers have Robinson’s financial muscle to go beyond their dry van knitting. Those who can’t will find their margins “getting narrower and narrower,” according to C. Thomas Barnes, president of Con-way Multimodal, a big broker and 3PL that operates under the Menlo Worldwide Logistics banner. Menlo is a unit of Con-way Inc.

DEMANDING CUSTOMERS

Coming to the table with a singular capability may no longer earn many points with today’s shippers, who tend to want more services from their brokers and may whittle down their provider universe to get them. High-performing companies increasingly seek a strategic relationship with their brokers, a challenging proposition for smaller firms that can’t go beyond the transactional world of load-to-carrier matchmaking. That opens the doors for the big well-heeled truckers like J.B. Hunt Transport Services Inc. and Schneider National Inc., as well as the parcel carriers such as FedEx Corp. and UPS Inc., to lock up all aspects of a customer’s business. Conversely, it threatens to slam the door on brokers that aren’t in a position to offer more products and services.

rapidly changing. There are between

10,000 and 14,000 registered property brokers in the U.S., depending on the source of the estimate.

Many are one-trick ponies, perform-
ing domestic dry van “transaction-
al” services that match loads with
trucks. Though that will always be
an important job of brokerage (ask
any traffic department if it wants to
sift through the rates and services of
thousands of truckers), it is expect-
ed to become a less profitable one
because of the fierce competition
and a shift to a seller’s market for
increasingly scarce trucking capacity