The shadow of obsolescence seems to be hanging over freight brokerages, given the rise of digital load matching apps and other technologies.
But industry veteran Andrew Clarke says he is optimistic about the future of freight brokers due to increasing complexity of supply chains.
Speaking at Transparency19 in Atlanta, Clarke said the success of his last alma mater, North America’s largest truck brokerage C.H. Robinson (Nasdaq: CHRW), has “proven it’s been a great business to be in.”
There are currently 14,000 freight brokers registered by the Federal Motor Carrier Safety Administration (FMCSA) and “I would expect there to be even more in 2019 and 2020,” Clarke said.
He provided the example of Freightquote.com, which C.H. Robinson acquired in 2015.
Clarke said the thinking behind that Freightquote.com acquisition was that C.H. Robinson “could turn off the lights and it would take care of all the transactions.” But four years after its transaction, Freightquote.com still employs 1,000 people.
“It has great technology to connect carriers and customers,” Clarke said. “There are still people helping the customer, but they are more effective and efficient because of the technology.”
Clarke, who started out in investment banking with Deutsche Bank in 1998, said the current era in logistics reminds him of the first “dot-com” boom due to the amount of new technology and capital available to the sector.
“I’ll tip my hat to the people that are actually developing and utilizing technology right now,” Clarke said.
“But my joke is, what do the Easter Bunny and the digital broker have in common? Neither of them actually exist.”
That said, Clarke did warn that freight brokers need to up their game in terms of services beyond transportation and warehousing. Instead, brokers will need to be familiar with planning, sourcing, demand, inventory and even returns to keep a customer’s book of business.
“Simply saying, ‘Hey, I’ve got a truck and I can show you on the map where it is’ is not that interesting if you can’t tell your customer what is on that truck and what they need to prepare for when it arrives,” Clarke said.
He cited the example of large shippers such as General Motors (NYSE: GM). With different silos involved in planning, production and labor, Clarke said a supply chain partner is one that can knit them together.
“Just think of that complexity from one customer and multiply by the thousands of shippers out there,” Clarke said.
The future of freight brokers may also seem dim as some large e-commerce companies build their logistics operations and open them up to third party customers.
Clarke said the rise of e-commerce has definitely altered the trucking landscape with more distribution closer to customers and a shorter length-of-haul for carriers. But the speed of those deliveries and inventory refreshes is an overall positive. .
“E-commerce writ large is a good thing for intermediaries,” Clarke said. “The length-of-haul has come down dramatically, but your velocity has increased. That allows intermediaries to play in a much more broader field.”