2018 spells doom for voice brokers

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10% of voice brokers will expire in 2018

Commentary

Over the past six months, we have made a number of predictions about the state of the freight market. We called the violent market swing in the mother of all truckload capacity crunches article and a huge upswing in contract rates in our rates will feel like a rocket ship piece. Now we are calling for the great voice broker shake-up.

We have used the term “voice broker” quite a bit around FreightWaves. It’s a term that means a traditional freight broker that is using little more than a phone, email, and load board to broker freight. These individuals rely upon their relationships to secure freight and their negotiation skills to secure margin from the carriers. Unlike large 3PLs and asset-based carriers that have brokerage operations, these voice brokers lack technology and infrastructure to enable to them to operate in a digital world.

Certainly, some of the digital brokers could be accused of having a “voice operation”, but they are investing in systems and algorithms that will make them more efficient. In fact, look at one of the best funded digital brokerages, Convoy, and you can see through their customer awards that clients are rewarding them with large volume commitments. It is true that Convoy still relies upon traditional voice brokerage operations to create the liquidity in their marketplace, but as they on-board carriers, they strongly encourage all transactions to take place inside of their mobile app. This is unusual. Most of the traditional large 3PLs offer a mobile load board or app, but it’s a secondary operation. Convoy leads with it and is very transparent about their intentions.

Their customers notice the difference. According to shipper contacts we have, Convoy is well regarded by its shipper base. The reason is they understand that the process for digitization is ongoing and will be a long fight, but the company is committed to the long game. It doesn’t hurt that they have assembled some of the top names in tech as backers, demonstrating the confidence that Silicon Valley has in their ability to digitize the process of freight brokerage.

But this article is not intended to be a love piece for Convoy--instead, I want to point out that the game has changed. The world is different now. Shippers are starting to see the need for digital-first brokerage operations. They want companies that can offer both digital and voice operations. They recognize the value of technology for optimizing the vast majority of loads, augmented with humans to deal with the exceptions.

Voice brokers are a dime a dozen, and their days are numbered. Over the next year, companies that lack technology are doomed. They will not be able to adapt to tight capacity carriers. Shippers are scrambling to secure capacity--but they are not in the mood to take a chance on their supply-chains with some hack with a phone. Shippers want the confidence they can get capacity when they need it and not be left high and dry by some unproven broker.

Voice brokers have historically relied upon their relationships with carriers to get trucks at set prices. The truckers are much smarter. They play the game as well. The lack of information and transparency in the market was the broker’s best friend, but those days are over. The ELD mandate has forced drivers all over the US to get some electronic device that can track their trucks. They figure they might as well add apps that can offer freight opportunities along with it.

Convoy does not have a monopoly on technology, nor are they the only game in town. Uber and Transfix represent the new money in freight as well. They too have proven they can attract significant market momentum by implementing technology. But Robinson, Echo, Coyote, and hundreds of other 3PLs with significant investments in technology to augment their operations also are winning the battle. The guy wearing pajamas, operating out of his basement? His days are numbered. And 2018 will be the beginning of the end.

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