2017 was a successful, high-volume year for freight brokers, but it brought challenges, as well. Freight brokers moved 16% more loads, according to Steve Blair of DAT. DAT’s Keypoint benchmark project drew data from 100 companies whose average annual revenue of $19.5M grew 26% compared to 2016.
That strong revenue growth was based on two metrics: higher volumes of freight and higher rates. Everyone remembers what happened to the spot market last year starting in August—rates went through the roof and stayed there. But spot rates rose so quickly that that brokers’ costs increased faster than their billings, creating downward pressure on margins. The 100 brokers in DAT’s benchmark saw their gross margins drop from 14.8% to 13.7% from 2016 to 2017.
DAT found that other cost increases helped hold down gross margins in 2017, as well. “Labor costs rose to 66% of net revenue in Q4 2016 and stayed in the 65% to 67% range for all of 2017,” wrote Steve Blair.
Did you know?
According to the Hellenic Shipping News, spot rates for oil tanker ships have fallen below operating costs, in what is traditionally a strong month for the industry. Analysts blame a combination of lower OPEC production and growth in fleets over the past two years.
“It's becoming almost like an epidemic for Amtrak,” said Najmedin Meshkati, a University of Southern California engineering professor who has studied positive train control, regarding the three Amtrak train crashes since December.
In other news:
Amtrak blames CSX for latest collision
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PS Logistics buys Shelton Trucking
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2017 was exciting and challenging for freight brokers. In a tight capacity market, shippers needing trucks will lean on brokers more heavily—but it’s the brokers’ job to manage volatility. Large shifts in rates create wild swings in brokers’ margins, and they will be squeezed in runaway markets favoring carriers.
Hammer down everyone!
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