TCP Business Expectations Survey: As Carriers Continue to Shy Away From 3PL Providers, Higher Spot Quotes Draw Brokerage Usage Up

According to Transport Capital Partners (TCP)’s First Quarter 2012 Business Expectations Survey, the majority of carriers reported utilizing broker services as a means of obtaining freight lanes less within the last 90 days compared to previous months.

survey

The survey shows that 67% of carriers have drifted away from brokers in the last three months, slightly lower than last year in which 86% acknowledged drawing away from 3rd party logistic services in February 2011 and 82% in August 2011, yet accounting for over twice the number of carriers pulling away in May 2009 (which was around 31%). 1

On top of that, TCP’s Richard Mikes explains that in a time where capacity is tight, more and more carriers are turning towards forming their own brokerage arms. 2

And with concerns over vicarious liability, chameleon carriers, double brokerage, and false 3pls, among other issues, shippers are becoming more careful on who they trust to transport their freight, vetting out carriers based on safety scores.

Let’s look at a recent ruling involving a double brokerage scheme.  Between 2004 and 2005, Kulwant Singh Gill operated as a California broker under several false names in order to obtain loads posted on brokerage loads.  Presenting false social security and driver’s license numbers, Gill presented himself as transporting the loads himself, and once given the load, would then repost the lane as a broker, handing off the load to another carrier.  Once the shipment was transported, Gill was paid by the original broker and never compensated the actual carrier, scheming over 100 trucking companies. 3

Gill was indicted in 2006 and again in 2008 for continuing his scheme, being found guilty in 2009.  After continuing to double broker loads, the court sentenced Gill to 10 years, 10 months in jail and ordered to pay $443,388 in restitution on March 28, 2012. 3

But despite the majority of carriers shying away from brokers, better rates have led to an increase in the number of carriers using 3rd parties.

Looking at TCP’s survey, 33% of carriers stated that they have increased their broker utilization in the last three months.  This number increased from 15% in August 2011 and 12% in February 2011 but is still less than May 2009 which reported 65%. 1

TCP gives the reasoning of higher spot quotes compared to contract rates (along with the need to fill lanes) to account for this brokerage increase.  As TCP’s Lana Batts explains, trucking companies, especially larger carriers, “are going back to brokerages because there is a shortage of equipment and they are getting better spot market rates than they are getting out of their contract rates.” 4

Although only 45% of carriers recently increased their rates, 77% believe that freight volumes will increase within the next year, which Batts believes will lead to an upward rate trend, spiking in early summer, and leading more carriers to utilize brokers since “carriers can get more money for non-contractual freight,” she states. 5

Need help deciding on whether to choose an asset-based carrier or a broker?  We’ve constructed a list of what an asset-based carrier, such as Road Scholar Transport, can provide versus a typical 3PL broker below.

broker vs. rst

click to enlarge

From your experience, what do you consider to be the benefits of utilizing an asset-based carrier over a broker?

1http://www.truckinginfo.com/news/news-detail.asp?news_id=76593

2http://www.truckinginfo.com/trucks-trailers/news-detail.asp?news_id=74969&news_category_id=29

3http://www.overdriveonline.com/broker-sentenced-11-years-for-defrauding-carriers/?pg=1

4http://www.logisticsmgmt.com/article/tcp_survey_shows_that_carriers_continue_to_be_active_in_the_spot_market/

5http://www.ontruck.org/imispublic/Home/AM/ContentManagerNet/ContentDisplay.aspx?Section=Home&ContentID=10822

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