DC Velocity - June 2014

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Barnes, Dr. Karl B. Manrodt of Georgia Southern University, and Dr. Mary Holcomb of the University of Tennessee made a presentation at the TIA conference urging brokers to begin positioning themselves as 3PLs capable of handling a broad range of tasks. However, a broker with under $10 million in annual gross margins may find such an endeavor far easier said than done.

Bradley S. Jacobs, founder, chairman, and CEO of XPO Logistics Inc., a fast-growing broker and 3PL, said he’s met with enough shippers to recognize that one-dimensional brokers “are just not interesting” to them. When XPO launched in 2011, Jacobs’ stated goal was to expand the brokerage division through acquisitions and organic growth. But XPO’s last three buys, last-mile delivery company 3PD, the supply chain business of Landstar System Inc., and intermodal provider Pacer International, have taken Jacobs away from brokerage. Jacobs has said the nonbrokerage acquisitions will, over time, be integrated with XPO’s brokerage operation to provide customers with a full range of logistics solutions. He added that XPO would remain aggressive in courting suitable brokers to buy.

Smaller brokers may also find themselves disintermediated by technology whose use has barely scratched the surface. By the end of 2016, all truckers will be required to install electronic logging devices (ELDs or “ electronic on-board recorders”) in their cabs. Donald Broughton, analyst for investment firm Avondale Partners LLC, reckons that embedded in these devices could be mobile application software similar to the popular “Uber” app that connects passengers with for-hire drivers of private vehicles, thus bypassing traditional taxi fleets and their dispatchers. Broughton said at the TIA conference that an app model for truckers could allow shippers to reach out directly for drivers, lessening the need for brokers to locate them.

Asked how brokers could combat this
type of disruption, Broughton—rarely at
a loss for words—initially replied that he
didn’t know, and followed up with this
advice: “Be part of the solution.”
For many brokers, the solution may lie
in just continuing to do what they do
best. And that may be good enough.
According to the Barnes, Manrodt,
and Holcomb presentation, a lot of
shippers aren’t interested in forming
strategic alliances. Many either don’t
understand the benefits, are satisfied
with the status quo from their bro-
kers, perceive the services offered by
all third parties to be essentially the
same, or a combination of all three,
they said in their presentation.