Taking stock of the freight brokering business

Taking stock of the freight brokering business

As October and November roll in and many freight brokers apply for their yearly bond renewal, it is time to look back to what has happened in this past year. The new US administration, challenges by Uber Freight and Convoy, and the recent catastrophic hurricanes are just a few of the changes, challenges, and disruptions the trucking and freight industries have faced.

So what is the overall pulse of the freight brokering industry, and where may it be headed?

Even as the trucker shortage still looms large, freight brokers are increasing at a steady pace. A total of 17,723 active licensed brokers were registered at the end of August, based on data by My Carrier Resources.

This marks an increase of about 1,000 freight brokers per year. Based on this trend, by the end of 2017, there should be close to 18,000 registered freight brokers in the United States.

The reason for the increase in brokers is, of course, the increase in freight to be moved. According to the American Trucking Associations, the freight industry is set to grow 2.8 percent this year, and another 3.4 percent per year on average through 2023.

Its Freight Transportation Forecast 2017-2028 predicts that trucking will continue to own the largest share of the freight market, although it may decline slightly with pipelines and rail intermodal chipping off a few small bits.

While truckload tonnage is also expected to grow steadily over the next several years, less-than-truckload will be ahead of it — even if marginally. According to the ATA, this indicates the continuing trend of shorter lengths of haul, which have dropped from 800 miles on average in 2000 to 530 miles in 2016.

There have been few highly important legislative changes for freight brokers over the past few months, but one does warrant attention.

The new food safety rules, part of the US Food and Drug Administration’s Food Safety Modernization Act (FSMA), came into effect earlier this year. It is important that freight brokers know these rules apply to them in many ways. Brokers are considered equivalent to shippers and need to comply with the same requirements shippers are subject to.

Although the Final Rule on Sanitary Transportation of Human and Animal Food came into effect on April 6, 2017, for most brokers, shippers, and carriers it will come into effect a year later on April 6, 2018. Only the largest shippers, carriers, and brokers in the industry are currently required to comply with the rule, whereas smaller businesses still have time to align themselves with the rule's requirements.

Generally, the rule addresses four areas of the food transportation market that need to improve to guarantee better sanitary conditions of food shipments and, ultimately, greater safety for the final recipients of such food.

These areas include:

  •  the improvement and compliance with new conditions of the equipment used to transport foods
  •  the transportation operations themselves, including the handling and storage
  •  the proper training of staff to uphold certain sanitary conditions when handling food
  •  the keeping of records showing the implementation of the requirements

Despite the initial push of the Federal Motor Carrier Safety Administration (FMCSA) to make the Unified Registration System (URS) available to all applicants for a broker, forwarder, or carrier license this year, this has been postponed indefinitely. Some progress has been made, however, as since the beginning of the year, new applicants for licenses have been able to go through the licensing process entirely by using the URS.

 

For current holders of a broker license who need to renew the required freight broker bond and license, this means following the standard procedure known to them already. Unfortunately, whether the URS will become available for all license holders, whether new or old, anytime soon is not clear.

Uber made headlines when it launched its service Uber Freight in May. Talk of Uber "disrupting" the industry immediately surged, although this may not be as simple as it sounds to some. While Uber may truly present new and unique challenges to the market — thanks to its technological know-how and competitive pricing — freight brokers will hardly go down without a fight.

Yet, the appearance of Uber Freight and Convoy, another on-demand trucking company, certainly raises questions for the future of the freight brokering industry. What freight brokers are now called to do is to team up with their partners, look for, and adopt solutions that help them improve their operations, and possibly even automate some.

Instead of Uber taking the industry by a storm, what seems more likely to happen is for the industry to react by matching Uber's technological advantage with decades of experience that come out of braving more than one crisis.

 

Vic Lance is the founder and president of Lance Surety Bond Associates.