On Monday, Amit Mehrotra, an analyst at Deutsche Bank, stated that due to customer demand, low inventory levels, housing demand and federal stimulus, the current market constraints on trucking and international container capacity are likely to continue into 2023.
Shippers are moving to a “stronger for longer” pricing cycle, he said, pointing to many retailers increasing their transportation cost projections and retailers already beginning to increase prices by 10% to 20%.
But these issues are beginning to trickle down to another supply-chain actor as well: the freight broker.
Shippers turn to 3PLs for help
While many companies route their shipments internally, plenty of businesses turn to third-party logistics (3PL) providers, commonly known as freight brokers, to provide capacity and strategy for getting their products to their end consumers.
In times of high shipment volume, 3PLs experience immense revenue growth from shippers looking for ways to find new truck capacity.
The pandemic has pushed this trend through the roof.
In a recent statement on its earnings report, Echo Global Logistics described Q1 as the “best quarter in Echo’s history,” with gross revenues up 45.3% year-over-year and truckload volume increasing 13%.
XPO Logistics experienced accelerated growth as well, Chairman and CEO Bradley Jacobs explained in the company’s quarterly earnings press release.
“In logistics, our record first quarter revenue of $1.82 billion was propelled by the ‘big three’ logistics tailwinds: e-commerce, outsourcing and warehouse automation,” he said. “We’ve won a tremendous amount of logistics business in the first four months of this year, including a $1.8 billion contract with a longstanding customer that extends and expands our relationship through 2032. This is the largest contract in our company’s history.”
In order to achieve this revenue growth, 3PLs look to hire customer sales representatives to manage new shipper relationships and carrier sales representatives to search for new truck capacity to transport their shipment growth.
Photo: FreightWaves’ SONAR chart compares transportation hiring trends to current market volume. Click here for more information on SONAR. (Photo: FreightWaves’ SONAR)
What is surprising is that the transportation hiring data is not following the same trends as shipment volume, something that commonly trended the same in the past.
Candidates leverage their power
As trucking volumes continue to rise, freight brokers have struggled with their own internal recruiting strategies and have started reaching out to industry recruiters.
In an interview with FreightWaves, Brent Orsuga, founder and president of Pinnacle Growth Strategies, explained how the market has turned in favor of brokerage employees.
“There is currently a war for talent,” he said. “It is a candidate’s market, 100%.”
He explained that due to changes in brokerage business models, candidates are taking this opportunity to make a change in their careers.
In larger legacy brokerages, many sales representatives are being pushed to sell technology platforms.
In small to medium-size brokerages, specifically those dealing with more challenging capacity issues, leadership is aiming to focus more on carrier relationship development by moving from cradle-to-grave operations, where one individual handles the whole logistical experience, to a buy-sell model, where one individual handles client relationships and another focuses on finding capacity for available shipments.
These types of business model changes can alter the employee’s normal work experiences.
“They’re changing compensation plans and they’re altering conditions including taking away accounts,” said Orsuga. “Once you turn to change that [business] model, it legitimately makes no sense for them to stay there anymore. … These employees are saying, ‘Now it’s time to spread my wings and take my shot.”
Charlie Saffro, founder and president of CS Recruiting, is finding the same results. Her internal team found that carrier sales positions are up 18% over the past year, as brokerages aim to build relationships with carriers.
Some have significantly increased pay in order to compete. Salaries for these positions in 2017 averaged $45,000 but are now reaching $70,000, according to CS Recruiting’s data.
“The demand right now is greater than ever,” she said in an interview with FreightWaves. “The way that we can gauge that is from companies that we’ve never worked with that are reaching out to us; … a lot of companies that are starting brokerages and don’t even have a name or a website, [even] they want to hire freight brokers.”
Contrary to the trucking industry, in which barriers to entry are becoming more difficult, making it less attractive for potential drivers, the brokerage space is dealing with candidates who understand their qualifications and want a better experience than they currently have.
“The biggest trend that we’re seeing is that candidates are turning down opportunities for other opportunities. That is new,” said Saffro. “Now it’s all about the competition. These candidates are sought after and they know they are; they’re in the driver’s seat.”
The problem that many recruiters are finding is many brokers are focusing too closely on finding the perfect candidate, limiting themselves to a small pool of choices.
“Everyone wants a candidate that has two to three years of experience in the industry. … They have to have a book of business, no noncompete or nonsolicit, and they love the industry, and that candidate does not exist,” Saffro explained.
Retention brings candidates
Similar to strategies seen in trucking companies, higher pay is not the only solution to recruiting better talent. Recruiters have been advising clients that focusing on areas that retain employees will ultimately lead to better recruiting.
These recruiters pointed to a few areas of concern that focus on one huge element: company culture.
To improve culture, companies should focus on their overall missions, how they hold employees accountable and, at the end of the day, how they value their employees’ work.
“Culture is everything,” said Orsuga. “It should be a culture of high performers. If you have 20 sales reps and only four of them are actually producing, that’s a culture. That’s your brand. That means you hold on to dead weight. Why would an employee want to do that? People don’t want to be around people that aren’t doing well. People want to be around high performance. That’s a contagious energy.”
Orsuga explained that what you stand for and what you hope to change within the industry doesn’t include just helping shippers find a truck.
“A lot of these [candidates] are coming from an environment where they may be bringing business to the table, but they can’t support the company,” he said. “There’s no career there, that’s the worst dynamic. They’re looking for a vision or a differentiator. Right. You can look at a company like Flock Freight; you see their message and what they’ve done for carbon emissions. … They’ve made an identity out there to the marketplace and saying, ‘This is who we are.’ That’s an easy way to draw people in.”
While Flock Freight confirmed the candidate market has been difficult to navigate, it has received positive feedback for its brand, which is focused on eliminating inefficiencies and waste through shared truckload shipping.
“It’s been challenging for us too, but we’ve been fortunate to get through it,” said Kevin McMaster, vice president of carrier sales and operations. “We have a different hiring strategy compared to many folks out there. We’re not another broker, we’re actually solving a totally different problem that probably 99.99% of brokerages are not solving. I think at a high level, people are attracted to us, because we’re actually differentiated. And that’s not a marketing ploy, it’s genuine.”
Orsuga also described how MoLo Solutions, headquartered in Chicago, uses its company culture to organically recruit future employees.
“Look at the content that [CEO] Andrew Silver does,” he said. “He’s a prime example of a leader that is building a culture through ownership and the identity of who he is. … With candidates now, it’s all about following the leader. That’s what gravitates people towards there. Freight is freight, but when there’s a bigger mission behind it, that’s where it starts to get exciting.”
In an interview with FreightWaves, Meghan Savel, the director of talent at MoLo Solutions, explained how the company’s mission of providing the best experience in transportation is not just about its customers and carriers, but its employees as well.
“We share our mission, vision and values very transparently with the company on a regular basis,” she said. “We come together as a company on a weekly basis. Andrew speaks in it or he brings other leaders into the company wide meeting. … [Sometimes] it’s carriers or customers that come and speak with us. … We [also] have a company email that is sent out once a week called The Morning Dispatch, and it features a different employee every single week, and they can cover whatever topic they want.”
Savel explained these emails cover topics including their life stories and inspirational experiences that make employees feel valued by their company, enough so that the available job openings sell themselves.
“We’ve received so many employee referrals and that’s organic,” she said. “When you love the place you work, other people want to work with you.”