Editor’s Note: This is a blog post about the state of the freight brokering business in 2015. Cerasis is a freight broker and holds a $250,000 TIA Broker Bond. We bring this information to the community so that both shippers and those in the industry understand the state of the industry. Many shippers have been burned by freight brokers who work on behalf of the shipper for transportation procurement, accounting services, freight claims management, and more. This is because there is not a lot of education on how a freight broker must adhere to certain standards and what shippers need to look out for. If you are a shipper, this post will bring light to you on how the freight brokering business works. IF you are a freight broker, this post will give you great insight. We hope you find it educational.
CORRECTION (we received the following suggested edit from the AIPBA trade group in response to this article, which we wanted to share with the public here): You may remember back in 2013 when the price of the freight broker bond (BMC-84) was suddenly increased by 750%, and around 35 percent of freight brokers were driven out of business. At that time, according to FMCSA records, there were 21,565 brokers in the census. Although there is an appearance of an increase in the freight brokerage population over the past two years, there is reason to believe that many of the new broker entrants are actually motor carriers who were reminded by MAP-21 that they should not be brokering freight without a separate broker license (notwithstanding bona fide interlining when carriers take possession of the freight at some point in the shipment), rather than your traditional mom and pop small broker entrepreneurs.
The State of the Freight Brokering Business Today and Beyond
For a majority of the freight brokering business, the deadline for this year’s freight broker bond renewal has passed. As we approach the end of the year, it’s a good time to turn back and see how the industry did in 2015.
Whether you’re a shipper, a current broker looking to revise your strategies, or an aspiring broker who might be hesitating to join this niche profession, a recap of the last year is in order. We’ve prepared this analysis, which examines not just the year in freight brokerage, but also the trucking industry as a whole.
More and more people choose to become freight brokers
You may remember back in 2013 when the price of the freight broker bond (BMC-84) was increased, and around 35 percent of freight brokers were allegedly driven out of business. The freight brokering industry has more than recovered since and has been enjoying steady growth each month.
Michael Curry from My Carrier Resources has prepared month-by-month statistics of the number of licensed freight brokers in the U.S. Starting at 13,565 at the beginning of 2014, their number has risen to 15,203 in Jan. 2015, an impressive growth rate for just one year. And there are no signs of slowing down– as of September 2015, the number had already grown to 15,909. All of this is a clear indication that freight brokering is still a profitable industry, where demand remains stable.
Getting into the Freight Brokering Business has become cheaper
Many people decried the sudden sevenfold increase in the price of the freight broker bond in 2013– after all, it had remained untouched since the 1970s. But since then, the price of obtaining the bond have steadily been going down.
Why is that? The explanation is simple. Freight broker bond premiums are calculated on the basis of the risk the surety company is taking when underwriting the bond. In the years before 2013, the industry was rife with violations. Ever since the regulations got tighter, the overall industry’s standards increased. This means that the freight brokers that remained, as well as the ones that joined afterwards, are people doing fair and ethical business, with a solid credit history and relatively good credit scores. This raises the overall trust in the industry, and sureties have been responding by lowering the bond premiums.
Demand for freight moved by trucks remains strong as ever
Despite monthly fluctuations, 2015 remains a time when trucks are still the most important mode of transporting goods, both inside the country and within the NAFTA partner countries. Around 70 percent of all freight is still moved by trucks, and there are no signs that this trend will reverse in the near future.
This, naturally, is good news for freight brokers, who act as the intermediaries between shipper and carriers. The only setback for now seems to be the ongoing truck driver shortage. Trucking companies, however, are already taking steps to address the issue.
Freight broker salaries have been going up
Even though more and more people are getting into the freight brokering business, economic growth has been strong. The economy shrunk by 0.2 percent in Q1 but performed great in Q2 rising by 3.7 percent. Strong growth drives tightening freight capacity, which in turn leads to higher rates.
Higher rates are a good thing for freight brokers, who charge a certain percentage for every piece of freight they help move. A sharp increase in salaries was already observed once at the end of 2013 and according to Indeed.com, yearly salaries now average $92,000.
Carriers and shippers are using LTL
Carriers often prefer to not wait for a full load to gather, but rather move a less-than-truckload order. They have also started to warm up to the idea of outsourcing their logistics, which is of course, good news for freight brokers.
Shippers will surely be looking to adapt to the new situation, as LTL shipments will streamline their deliveries and make their customers happy. This means that shippers, too, will more often be using the services of freight brokers.
Are you an active freight broker? Was 2015 a good year for you? Start a conversation in the comment section below.