Freight brokers see shippers ignoring smaller motor carriers at their own peril

Smaller fleets see best growth in driver capacity, but shippers only tap them once in a while, creating more volatility.

If you wonder where the truck drivers are, look to smaller fleets as their driver numbers surged over the past eight years. But with customers only tapping this pool of drivers occasionally, shippers leave themselves exposed to volatile spot rates, according to freight brokers.

Data from the Federal Motor Carrier Safety Administration and freight brokerage Tucker Company show that since 2011, the number of drivers working for fleets with 500 or fewer trucks grew 32 percent to just over 1.5 million. By comparison, fleets over that size saw driver growth of 20 percent to 944,781.

Driver supply has grown even faster in even smaller segments. Fleets with up to 100 trucks saw driver supply grow 40 percent to 1.1 million, while micro-fleets up to six trucks saw 69 percent growth.

“If you’re a large truckload carrier, the driver shortage is real, but it doesn’t mean there aren’t drivers out there,” said WIlliam Cassidy, senior editor of trucking for the Journal of Commerce, at the TPM 2019 conference.

Jeff Tucker, Chief Executive Officer of Tucker Company, said the perceived driver shortage stems from shippers that became less willing to work with freight brokers to secure truckload capacity.

“Two years ago, our sales reps were hearing from shippers that ‘we’re not adding brokers, we’re  cutting back on brokers,” Tucker said. “The data show that by a ratio of two-to-one, drivers are going to smaller fleets. Big shippers are not dealing with small trucking companies. The brokerage community is.”

With most of those smaller fleets looking to the spot market rather than contractual freight, Tucker said “shipper behavior” has to change in terms of tapping those smaller fleets on a more regular basis. Instead of using them for surge capacity, Tucker said more consistent use of those fleets could smooth out volatile spot freight rates.

“Many shippers will use brokerage as a safety valve,” Tucker said. “That’s not integrating regular capacity into your program. [Shippers] are perpetuating that spot market and perpetuating high prices.”

Despite that shipper reluctance, freight brokerages are on a growth path, now accounting for 23 percent of all loads, a five-fold increase from 2000.

Further growth may be challenged as trucking capacity is at its loosest in a year. C.H. Robinson’s (Nasdaq: CHRW) shipper routing guide index was at 1.4 during the fourth quarter, Cassidy said. The number is the average number of carriers C.H. Robinson brokers have to go through before a tender is accepted. That number is considered a balanced market, Cassidy said. Last year, the index occasionally spiked as high as five, he added.

Matt Pyatt, co-founder and Chief Executive Officer of Arrive Logistics, agreed that shippers should integrate brokerages on their routing guides more consistently, rather than approach them only in a capacity crunch.

A commitment for regular freight at a fair rate, Pyatt said, means shippers hold brokerages more accountable for when the market goes up and down.

“In 2018, [shippers] were adding as many capacity providers as they could to get their freight moved,” Pyatt said. “Now we see a lot of these of shippers isolate themselves by consolidating their broker base and actually giving them a meaningful award.”

“You are starting to see shippers realize that playing the market every single year, one year at $1.70 a mile and the next year get exposed to $1.90, it’s not sustainable.”

“With technology, whether it’s FreightWaves or any other data, there’s so much more transparency in the market that the shippers are learning to lean on their partners more and give them a more substantial award,” Pyatt said. “It’s easy to blow up a routing guide when you give 100 brokers two or three contractual lanes rather than 10 brokers 30 to 50 lanes.”

This article has been amended to reflect that quotes originally attributed to Mark Ford may not have been accurate or correctly reflect his thoughts. We apologize for any inconvenience this may cause.