Check Call: The grim future

October 24, 2023

Welcome to Check Call, our corner of the internet for all things 3PL, freight broker and supply chain. Check Call the podcast comes out every Tuesday at 12:30 p.m. EDT. Catch up on previous episodes here. If this was forwarded to you, sign up for Check Call the newsletter here.

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Over the course of the past week, the news cycle has his a little closer to home. Convoy is closing up shop, aside from a few workers who were helping facilitate a sale, and now Slync is looking at bankruptcy as well. After a few years of the highest of highs, the lowest of lows has come and it paints a bleak future.

How did we get to this point? Freight brokerages came on to the scene in a significant way in the early 2000s, moving the occasional load here and there for shippers. It wasn’t very common to be a major part of a shipper’s organization. Fast forward to now and it’s extremely common to have 3PLs and freight brokers moving a majority of a shipper’s freight. There’s an entire service of managed transportation that companies offer so a shipper doesn’t have to build out an entire logistics department.

During the pandemic, anyone who ever thought of becoming a freight broker did. Starting off 2023, there were roughly 300,000 active freight brokers, according to the Federal Motor Carrier Safety Administration. That was an all-time high. July turned broker registrations negative, and as of Oct. 1 there are 5.6% fewer brokerages active and authorized than in October 2022, according to Brush Pass Research.

It’s been hard for everyone in a down market. Why is Convoy’s closure different? Convoy raised money quickly and grew even faster. Offering discounts to early shippers and introducing the tech options shippers were desperate for, they made a big splash in the industry. They were the leading investors to consider FreightTech and supply chain as strong investments.

Everything was in their favor until the hard times came.

Convoy’s impact will be felt for years to come. It forced everyone to up the status quo and improve their tech stack. It helped set the new standard table stakes that will be required by most shippers.

As for the rest of us, it’s going to get worse before it gets better. Bid season is different this year. Less-than-truckload shippers are going to want to look at strong options or rebid the network if they were caught up with Yellow earlier in the year. The short-term solution to keep the network moving is likely not a long-term solution.

Truckload doesn’t look much better as spot rates leave a lot to be desired. When there is too much capacity and spot rates are barely at a breakeven point for carriers, it’s going to make for soft contract rates. Margin will shrink to very little. When the spread between contract and spot market widens, it decimates margin and exacerbates any financial issues a brokerage may have.

How much longer do we have to go? Depending on whom you talk to, the answer could change. The Q4 retail peak season didn’t create as much demand as expected. It’ll likely be the middle of 2024 before rates start to tick up, but not likely in a dramatic way. If you’re going off FreightWaves CEO’s call, it looks like about 78 more weeks.

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Market Check. The Outbound Tender Market Share Index shows which markets have the most impact on truck volumes. A larger market share means the market demands more trucks and has a stronger impact on freight market capacity. When market share levels change, network imbalances can show up, creating potential spot market activity. The above chart focuses on month-over-month (m/m) changes. Southern California has made a comeback to have Ontario as the top freight market. In most industries, October kicks off peak season. While it’s expected to be a muted peak season, November and December are going to see elevated volumes compared to now. There have been few dramatic changes m/m, as Harrisburg, Pennsylvania, drops double digits (10.2% decrease) and Phoenix takes a nearly 20% increase in market share.

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Who’s with Whom? It’s my favorite time of year, when the LTL carriers are ranked against each other. Mastio & Co. has released its annual survey of LTL carriers, and this year’s winner was Averitt. The carrier that started in the Southeast has ousted Peninsula from the top spot. Peninsula came in at No. 4 this year. The top 5 this year, in order, were Averitt Express, Daylight Transport, Old Dominion Freight Lines, Peninsula and Southeastern Freight Lines.

Todd Maiden’s article breaks down how the survey is conducted: “The survey ranks carriers on numerous metrics, including on-time pickup and delivery, shortages, damages, weighing accuracy, transit times, pricing and technology, as well as back-end functions like billing accuracy, claims processing, problem resolution and carrier responsiveness.”