How Tight Capacity, Changing Rules, And Smarter Vetting Is Reshaping Freight Brokerage | Episode 332

SPEAKER_00: 0:19

Lots changing in the freight brokerage and transportation market. We're going to break it all down on today's episode. If you're brand new, make sure to check out all of our other content. Share us with your friends. Got the Freight Broker Basics course on the website if you're looking for an educational option. Leave us those YouTube comments. We we do answer those questions on our QA show. But Ben, today's episode that we just wrapped up was a really good one. There's a lot changing with capacity going down. There's speculation about what's going to potentially happen with demand in 2026. But how you can, you know, screen and select your carriers is going to look a little bit different potentially. And you're going to have to have some conversations with your with your shippers. So what is your take on the episode here?

SPEAKER_01: 1:04

Yeah, it's a really good one because we cover like what's shifting and changing in the market, what's different about this year than the past, you know, probably four years, and not only why it's changing, but we really cover what you can do about it. So make sure you stick to the end because at the very end of the episode, we really dig into like what and how you can approach these situations with both your existing customers, existing carrier base, as well as how you can turn this into a huge advantage to grow your book of business with prospecting and sales this year.

SPEAKER_00: 1:34

Absolutely. Well, stick around till the end and let's hop into it. All right, Ben, how's everything going down in Florida? You guys uh staying warm at all?

SPEAKER_01: 1:42

Yeah, it's a little chilly this week, but again, compared to what you guys are going through, and some of my uh clients and friends up in uh Boston, up in that area. Oh man, dude, it looked like the apocalypse up there. Some of the videos they sent me.

SPEAKER_00: 1:54

Nasty um Nor'easter that came through. This uh this yeah, this week, a couple days ago. So yeah, but hey, that's winter time. Um I'll be down your way in about a month. So looking forward to some warmer weather and some palm trees, man. Um did you watch the Olympics, uh, the men's hockey game on Sunday?

SPEAKER_01: 2:17

Some of it, and I watched the recap and the highlights. But it was pretty good.

SPEAKER_00: 2:21

Absolutely insane. So, first of all, I had to pull up a stack because I was curious on the viewership. It was the second most watched professional hockey game on NBC ever. Um only beaten out by like the 2010 Olympic game between US and Canada. Um I think because of the time difference. Like this was a this was an 8 o'clock a.m. Eastern game, which means if you're in California, it was 5 a.m. I was at drill for the army, so like I like I'm up early, right? And we were watching it, and then it goes to overtime, and we had a meeting to to go to, and so couldn't watch overtime live, but everyone's phone started buzzing, so we knew something happened. Got to rewatch that, but absolutely just insane, man. That was uh it felt pretty good. I saw a um I saw a meme on Twitter or something this week that showed like it said like the current state of North America, and it showed like a crying maple leaf in Canada, a bald eagle holding an American flag in the US, and then just Mexico on fire because of like the cartel stuff down there. I was I was like, alright, that's wild. But just as it was a good feel-good game, man.

SPEAKER_01: 3:32

First time in 40 years.

SPEAKER_00: 3:33

Yeah, 46 years, man. Just absolutely wild. So congrats to those guys, the girls too. We took the took the gold for both men's and women. So um I saw the men's hockey team was at the State of the Union address and um the goalie's getting like some like national award um or something. I don't know. Either way, dude, dude's nuts. Yeah. Um all right. So yeah, Olympics are over. Um this is the weird sports time or like baseball hasn't started yet. Well, I guess hockey will be coming back into full swing, but um golf is coming up, right?

SPEAKER_01: 4:14

Yeah, the uh actually the tournament down here, which used to be the Honda Classic, the cognizant classic, is I think this yeah, this week. So their practice rounds today. Nice starts tomorrow up at PGA.

SPEAKER_00: 4:28

Uh cool. Well, uh in the news, um, we had this out in our newsletter. So obviously we we've had Tim Hyam from Ascend TMS on in the past. Um Ascend acquired load pilot TMS. So that's kind of a big deal for um you know small to medium-sized S SMB brokerages that are looking for a versatile TMS. Um, because obviously, like when you're when you're evaluating TMSs, you got to decide like where, you know, what kind of where am I in my brokerage, you know, journey, right? Am I because if you're a you know 500 person brokerage, odds are you're probably at a stage where you're gonna build something custom in-house, right? If you're like, you know, 200 people, you might be looking at one of the enterprise level TMSs. When you're newer or smaller, oftentimes you've got to look at ease of use, cost is a big part of it, and um, you know, without giving up on certain tools, integrations, et cetera. And uh Ascend does a really great job. We recommend them. Uh we've both used it. You can get a free 90-day um access to the pro version. Use the uh link in our show notes. You'll get just use that referral code, you get the free um 90 days. But it's a bit a big deal with that acquisition. When you see a tech company by another tech company, both of which are sizable, that usually tells me that one of them was um financially, you know, mismanaged or something of that fact. What would you what would be your take on that? Did you read the press release?

SPEAKER_01: 6:03

I did. It's always really hard to know what's going on behind the scenes. I mean, there's so many reasons. Sometimes companies sell because the previous owner's just ready to retire, do something else, right? Like some of it is just like, hey, ready to move on, do something different, right? Sometimes it's raised a lot of money and they just couldn't keep up with the objectives and the milestones of the scale, right? Which is true. With I I think that's probably more common across like logistics software companies right now, is that a lot of them that have raised money. We've had like that, you know, four-year period of basically a flat market, which has been really tough on everything across the industry. So that's probably a contributing factor to a lot of these. But I mean, it's good news for I mean, the customers are gonna be rolled into a really good TMS, really good news for Tim and the folks over to send. I mean, so I mean, all these things happen for a reason.

SPEAKER_00: 6:54

Yeah, absolutely, for sure. Um, what you got on the Indiana thing?

SPEAKER_01: 6:58

Couple things that I was reading this week. One was um uh the Senate, which I'm gonna be curious to get more info. You're up there every fall, basically working on these things with the TIA, but they the Senate just advanced legislation that would restore the FMCSA's power to fine on unauthorized brokers directly without Are they rolling that into the um the transportation infrastructure the reauthorization bill? I have to dig into it. I don't have more than this headline that I just recently saw. But that's why I was telling you, because I'm gonna read into this later today or this week. But it means basically faster hits for double brokers that are siphoning or stealing freight payments, also spinning up new MCs like burner phones, and the bill's also gonna require real physical addresses, meaning you can no longer have a brokerage under a P.O. box, and it's gonna force applicants to disclose shared ownership or even family ties to past clouds.

SPEAKER_00: 8:02

It's almost like they uh were listening to the things that we've been lobbying about for years. Like, literally, the I remember two years ago, one of the guys in our group, um the I forget whose office we were in, but one of the congressmen was like, All right, like break this down super simple for me. Like, what's one thing we could change? And the guy's like, no P.O. boxes. Like, trucking companies don't operate from a P.O. box. Yeah, they need to have a physical address.

SPEAKER_01: 8:29

They're physical operations, correct. Um, the other one, um, this is crackdowns in Indiana. Uh, this was from their governor, Mike Braun. The crossroads of America, Indiana must do all we can to ensure our roads are safe. In addition to strengthening our CDL licensing process, Indiana will now revoke the CDLs of drivers who are illegal immigrants and penalize. This is the big kicker, the companies that employ them. That is the big shift because previously just the drivers or people violating these laws were being penalized. Now they're going to go after the companies that employ them, right? So now that revoking CDLs from drivers in the country illegally and fining the carriers$50,000 per violation if they knowingly employ them, right?

SPEAKER_00: 9:21

And where does and the fine is coming from FMCSA?

SPEAKER_01: 9:25

No, this is state level.

SPEAKER_00: 9:27

The Indiana's state. Oh, you did say the governor, yeah.

SPEAKER_01: 9:30

This is the first real state-level enforcement mechanism targeting both the companies and the drivers. It followed, you know, multiple fatal crashes in the past month that involves undocumented drivers operating commercial trucks. So the amendment is going to unqualified drivers face a$5,000 fine and a level six felony. The carriers that knowingly employ them,$50,000 fine. The English proficiency requirements will be strengthened and enforced, and they've already begun revoking hundreds of non-domiciled CDLs after the federal audit found widespread compliance failures. Interesting. Yeah. So I mean, that matters a lot because even though this is just one state, and even though Indiana can't revoke your CDL from another state, like it's kind of like a dominoes effect, right? Where once states start doing this, like other states tend to follow. So if we start seeing other states with similar amendments, similar enforcements, like I think we're absolutely going to see a shift in the market. I think you're already seeing that for a number of reasons where like that hasn't really occurred ever in the history of our industry. In fact, I saw something else that speaks literally exactly to that. I think it was from let me see if I can find this. Yeah, this was from RXO. Their spot rate index is up almost 19% year over year through Q1, with the highest tender rejections since 2022. During what's normally the slowest shipping stretch of the year, carrier attrition, CDL crackdowns, and ELD enforcement, which is a really big one, are doing what three years of market pressure didn't. Structurally tightening truck capacity. RXO called it the biggest structural change to the U.S. carrier market since deregulation in 1980. Goes on, you know, when spot rates outrun contract in the middle of winter, brokers holding cheap contracts are about to have a very interesting and very, very depressing spring, which kind of segues into what we were going to talk about, you know, obviously today. Freight brokers changing and pricing, how to handle this, how to manage, you know, rate environment changes. And to be honest, like this is what we did for 40 years pre-2023, like the market cycle between tight and loose every year to year and a half. So this is something that any broker that had a career longer than two years experienced both markets.

SPEAKER_00: 12:06

Most brokers have never. A lot of people have because the average tenure of a broker is only like a couple of years, right? So the average 50% or more of people working in brokerage probably never experienced a market ship like that. I want to add in here, too, kind of on the news side of it. So Ryan Joyce from Gen Lux, who we've had on before, he had posted the other day, I think it was like Friday on LinkedIn or something like that. He said he he compared Ken Adamo's post on Twitter to Craig Fuller's post on Twitter. He's like, these were back to back on my feed. What's actually going on? And so, like, this is regarding the Chicago outbound market. So Ken Adamo posted, um, softening trend continues for Chicago outbound van freight. To quote one large broker, capacity is wide open at the moment. Okay. And then back to back, Craig Fuller, like about 20 minutes later, posted, or 20 minutes before that, posted the outbound tender rejection index out of Chicago is absolutely on fire right now, hitting 17.4%. This is being led by truckers focused on big box retail, non-grossery, and industrial freight activity with no sign of slowing.

SPEAKER_01: 14:24

Well, those two things both can be true. I I here's my take on those two things that seem mutually exclusive, or they're saying the opposite, right? When spot rates are higher than contract, meaning, like as a truck driver, if I told a shipper, I'll pick up your load or broker for a shipper, I'll pick up your load for$2 a mile from Chicago to Memphis every Monday. We'll go trucker to shipper, right? Now, when there's more freight to be moved and less carriers, okay, and a broker has a load for another shipper and that shipper doesn't have a truck but will pay$2.30 a mile. The carrier getting two bucks a mile will give the load back to their shipper. That makes the rejection go up. And then they will take the load from the broker at$2.30 a mile. So if you're a broker, it seems wide open because carriers are willing to drop their loads directly with a shipper to take your load. So I can cover all the freight I want because I got$230 a mile to book my loads. But if I'm a shipper, I just lost all my capacity to the shippers in Chicago paying more than I contracted maybe six months or a year ago, right? So this is what you absolutely see when the spot market jumps above the contract. Carriers give their loads that they had with shippers for the past couple years back and will go and take a load from a broker to get more money. So the rejection goes up and the capacity seems to loosen, but all it really is is I'm taking the truck that you as a shipper have been getting for the past six months. They booked my load because I'm going to pay more, right? Interesting.

SPEAKER_00: 15:57

So either way, though, the the big thing that we want to talk about here is like a changing environment and how the pricing works. And what's crazy, man, is I remember having we had like a very similar episode like five years ago, maybe, or four and a half years ago, when we went through like that whiplash of like everything shut down and like there's no freight shipping. And then all of a sudden everything turned back on and you just couldn't get a truck. And we were talking about like how do you handle like dealing with a customer when it comes to you know rates changing? And there's like there's kind of like that, it's almost like a sign curve, like the sine wave or whatever, where your capac your um, if you want to look at market capacity tightening and loosening, like it goes up and then it comes back down and then it goes back up. We this market cycle was just it has just been super elongated, so it's been very loose for like four years, and now we're seeing it shift. So the conversation you because the reality is if you're operating on the spot market like most brokers are, you're dealing with the price of a truck today, not contracting a tr uh driver out six months in advance, which some shippers will do directly with carriers, um, and then they know reject those tenders, um, like you just mentioned. But um, the conversation you have to have with your customer is gonna set up.

SPEAKER_01: 17:26

Before you go into the customer side, right? The thing I just want to kind of I guess lay out for everyone to think about like how this happens. It happens in like a few different ways, right? One is there's more freight or there's less freight, right? Which is the demand to hire a truck, right? So when everything shut down, we're literally producing nothing. So the loads being shipped went to zero, right? Then it picked back up, and then it got really big. So then the volume went up, but the number of carriers probably stayed the same, maybe even got a little smaller because some drivers just didn't want to be out during COVID, right? Yep. The other side is the carriers enter the market when the rates go up, which means you get more of them. And once you get to a certain amount, there's too many, then the rates come back down. So normally, right, it is the number of loads being shipped, how much we make in the country, right? Up and down stuff we buy, and the number of drivers willing to move it, right? Those two things will make rates go up and down based on too much freight, not enough carriers, too many carriers, not enough freight, right? But the other thing that occurs, right, is the shifting of who has loads and doesn't load. Because the other piece that I don't know that people think about as much is like the stickiness of a shipper and a carrier. A carrier only keeps running contracted loads when a shipper has contracted loads of the ship. So as a shipper, if I ship 10 loads a day all year and all of a sudden nobody's buying what I make. Maybe it's too expensive, maybe I can't get the supplies, or maybe no one's buying it. Whatever. I just don't have any loads to ship today. All the cares that were contracted with me will go take loads from someone else because I literally don't have work today, which makes my carrier go from contract rate to the spot rate. That gets you capacity, right, as a broker, as a shipper that I'm not using. So you also have the shift, which used to be really prevalent in produce, like you could just see it because things, right, grow in California when it gets warm. When it's cold, nothing grows there, but we still all buy the same produce at our grocery stores. It just now comes from Central America. So the carriers that we're loading in California for these seasons then will go and shift down to Texas and Florida and then move imports to the same places. Different shipper, same receiver, right? So you also have the carriers moving around the country based on where things are coming from. And that also happens across all of this, right? Like it's not just produce, that's where you see it the most, but also like the biggest driver in flatbed rates and where capacity is is home building and home remodeling. So when we haven't been building homes, there's less flatbed work there. They're going to run loads for like data centers and things. And you know, Dean talked about a couple of weeks ago. And then normally you'll have them go and do commercial real estate because lots of things that go into a building are big and they've got to be crane lifted onto a flatbed. That's where those carriers go. And then you take the whole steel market, which is where a lot of flatbed run, right? So, how much steel are we manufacturing or bringing into the country? Well, where does steel go? It goes into cars, it goes into buildings. Not a lot of car sales are up, not a lot of buildings are going up, and manufacturing's down, so there's not a lot of work there. What's going on in oil? Not really a lot of drilling. Oil prices aren't really high, so there's less work there, but there's more work in data centers. So even though there are things being shipped and maybe the economy to some degree looks like it's doing well, that doesn't mean it's equally spread amongst everything we buy in the country. So not only is it the up and down of both freight being moved and freight going down and carriers entering and leaving the market, but you also have what we buy that changes throughout a year or year over year, which is really shaking up the market. All those fluctuations create less reliance on contract freight between shippers and carriers. And it requires shippers to give more of their loads to brokers, because we're the only ones when something shifts in a day or two, can get them a truck with short notice. So a lot of that freight that has been contract is moving back to brokers because of all these shifts. Not only what we're buying and making as a country, which changed a lot, but also what we just talked about, the crackdown on CDLs, the ELDs, where drivers were keeping rates very low because they were driving illegally 20 hours a day and then working on false logs, manipulating ELDs. As that crime, I guess you would say, like, is being enforced more, it's more of a level playing field where drivers are now more equally staying within the work hours, which is creating a lot of fluctuations and driving all the rates up everywhere, right?

SPEAKER_00: 22:03

So when I was in our Facebook group this morning, if you're not in it, make sure to check it out. Freybrokers and Carriers Network, there's over 100,000 of you in there. Um, but when you look at this is on the note of the enforcement side. So there's the there's the governments that will enforce and you know, we talked about, you know, penalizing carriers and revoking CDLs and um decertifying ELD providers and pulling them from the approved list. But the other part is let's say they're all legal, okay, and they're operating. You then have compliance tools out there that brokers use that will dictate what trucks they will choose to load and not load. And we've talked about like looking at safety scores and insurance and all that stuff. But one of the big buzz topics that I saw this morning was on Highway's non-domiciled CDL rule. Now, let me give you perspective here. So we'll say there's general, there's roughly 25,000, just average, right? Just guessing here. 25,000 licensed brokerage um companies in the United States. Okay. Highway has 1,200, roughly 1,200 um broker customers that are using their full suite of um tools. Okay. Highway is considered somewhat expensive, um, which tells you that the Those 1200 brokers, even though it's you know not even 10%, it's likely gonna be the largest by load count revenue profit brokers that are out there, right? Think think like your you know$50 million plus brokerages are the ones that are spending the money to use a tool like highway. And you've got a rule in there that says, um, basically if if the and you can the rule is not like required to have on, but most people are using this rule, which states that if a carrier is identified to have a non-domiciled CDL driver, that it will fail them in your compliance um check. Yep, right? So if you've got the top brokers by head count, load count, et cetera, that are using that rule, and that's gonna take capacity out of the market. Because you might say one individual driver, I saw this, I saw this literally the other day, right? A company had like 700 trucks and failed because of this rule. And they're like, okay, if we had one guy that had a non-domiciled CDL and maybe he was running legally, you know, maybe he was a legal non-domicid, maybe he was illegal. We don't know, right? But the guy that I'm loading, um, potentially wanting to load, is not, you know, he has a a domestic CDL. And but a lot of brokers, if they use that rule exclusively, like they're removing all that capacity out of the market. So you this has gotten to the point now, and again, this is such a new thing that like I'm sure a lot of these brokerages will re-evaluate how they're gonna utilize a rule like that. And there'll be there'll be new rules that come out in compliance suites. And I just use highway as an example. You've got my carrier portal, you've got RMIS, there's a whole bunch of them out there. Um, and people will will re-evaluate that. Um, but the reality is when you've got not only enforcement with taking drivers out of service on you know on the side of the road, but now you've got brokers that are working on the spot market that are saying, okay, well, here's what's left, and we don't want to touch that bucket of it. So you're seeing um, like on two different levels, you're seeing where the capacity is being reduced either through being removed from the market or just being decided we don't want to use you. And I think that's an interesting aspect because if you go back to 2021, like we didn't have the luxury of being that strict, right? Like it was literally like the we it was awesome to be able to call any customer and have a conversation with them, but like if I was gonna be that strict in 2021, I I don't have a business. I can't because I have to use what's available to me. And um, I just think it's an interesting aspect there of like where we're at now and how we could use choose to be picky. And I think as you know, if we see an increase in demand, I think you're gonna see brokers have a different perspective on how strict they want to be. And maybe, maybe that by that point people feel like they're they're safer with their carrier selection, that they don't have to worry so much about um all the the fraud red flags that are out there and the potential for unsafe driving and stuff like that. Like maybe, maybe we will we will have removed the the capacity that we didn't um want to use anyway. I don't know. Just my thoughts on on that one.

SPEAKER_01: 26:43

It's here's the thing, and like I the I always go to kind of like I always think try to think of things like first principles, break it down to the most simplest you can. And I feel like you can see why these things occur. And it it's it's just easier for me to think about is like, well, because that's a data problem, right? Because a lot of the fraud being committed was by non-domicile drivers, right?

SPEAKER_00: 27:06

But also, like you said, a lot of the crashes, too, is like the big one. Right.

SPEAKER_01: 27:10

But also a lot of non-domicile drivers are legitimate and could and should be used. However, those systems weren't connected to the immigration system at the FMCSA and the DOTs. So like they don't know. Like, literally, the states issuing CDLs weren't cross-referencing to see if they were legally employable when issuing the CDLs. So there is not even good data to discern this is a legitimate non-domicide, this is not a legitimate, right? So all these tools that are saying, like, hey, we want to protect you, the best they can do is say this is just a non-domicide. So to your point, you lose the good with the bad and you take a big chunk of the market out because you can't tell the difference between the two. That is the downside of automation that you and I talk about, right? And to me, the thing I keep going back with where like they're not arguments, but like I have a different opinion of the adoption of the digital freight market is yeah, everything can be streamlined and you can be picky and choosy when you can get whatever you need. However, as soon as you can't get what you need, your ability to pick and choose goes right out the window, right? So it's like, yeah, all these emails to carriers and getting these things automated are great when lots of carriers will respond to you and you get a truck. As soon as the market tightens up and you can't get your load covered, all of a sudden, my ability to pick and choose changes drastically, right?

SPEAKER_00: 28:35

If I can get can I give an example here of like where this becomes a problem, and then we'll hop back to that. So, like, um, here's the rule, I'll read it verbatim. All right, carrier has never had an authorized user with a non-domiciled or limited term government issued ID. Okay. And you could, if you use that rule and they have, and if they've ever at any point in the past had an authorized user with a non-domiciled or limited term CDL, they fail. All right. From our Facebook group, we had a guy that posted, carriers, anybody else get falsely flagged by Highway for non-domiciled CDL. I've never had anybody employed under my company with a non-domiciled CDL, and I'm being flagged, losing a lot of loads due to this flag. Edit. Excuse me, edit. I have reached out to Highway about this, and they are refusing to resolve the issue. I had a lawyer reach out to Michael Caney from Highway about the issue. He was emailing back and forth with my lawyer until we asked them to provide the driver's info, and then they stopped responding. I'm seriously considering legal action. I've lost connections with half the brokers I've worked with. And then somebody else had posted, I'm putting together an all-highway alerts case for a class action and crowdfunding. Comment with your case and I will contact you. So here's like, you know, whether or not there's truth or misconception or misunderstanding in any of what was just posted there, the reality is the rule itself does penalize people that may be operating legally, right? And we we had the same situation when we used to say, hey, if you've never had an infection, we're not going to load you, right?

SPEAKER_01: 31:50

Well, there's one thing is like if I give you a rule and you can choose to use it or not use it, like that's on the customer. If I, as the supplier of the rule, advise my customers to use it to avoid fraud because that's why you use my product. I feel like I take some of that liability and responsibility, right? It's one thing if you just put it out there and people use it. It's a whole other thing when you advise your clients to use it to avoid fraud. Because now I'm telling my clients to just basically You're telling them, you're not just saying, hey, here's an optional rule.

SPEAKER_00: 32:26

You're saying we made this rule, we want you to use it. And like I remember when they rolled it out, they almost like you, I think you were on part of that webinar, right? They almost like scared people into turning it on.

SPEAKER_01: 32:37

I watched the whole thing. I called it immediately. I called everybody new as soon as I got out of it.

SPEAKER_00: 32:41

Here's the other, here's the other part of it is like they haven't disclosed how they're getting that data, right? Like, if we we've had Ryan Joyce from Genlogs on and he can tell us with absolute detail how he gets his data, right? Anything proprietary that is a trade secret, he's not gonna say publicly, but he's very open about how they get their data, right? Now, I don't know that Highway has disclosed how they're getting their data on, you know, all well, it's there's probably an implied task or implied method here, which is like we have a carrier, our brokerage, Piercerwide, has a carrier entity called Warren Pierce and Co. And our folks on the carrier side, when they onboard through Highway, there is a um, there's like a um ID verification thing where you're gonna hold up an ID and it scans your face and all the things, right? Kind of like when you go through TSA.

SPEAKER_01: 33:34

But you don't put every driver's license in there, do you?

SPEAKER_00: 33:36

No, it's so this is authorized users. Like if I if I am a motor carrier and I've got 20 trucks, I might have three authorized users that can, you know, accept Raycons, book, you know, onboard with the brokerage, et cetera. And that's when I would use highway. That would make me an authorized user. So probably the owner of the company, um, a dispatcher, and whoever else would need to be using highway, which is for onboarding. Um, and if they're using load lock, it would be for uh accepting rate confirmations, etc. Okay. It doesn't even tell you if the driver had a CDL uh that was non-domicile, it's just an authorized user. And so what if there was like what if there's a mistake? Like what if it's falsely flagging them? We don't know exactly what it's checking for outside of our assumption that it's when they do their ID verification. And if we know that's a rule, why would anybody allow a non-domiciled CDL holder to be an authorized user? They would just use it as a workaround. Anyway, all that to say, adding in the automation part of it is kind of adding a potential mistake, in my opinion, on where we might be removing capacity. And yeah, sure, we might have the luxury right now to do that, but if demand pushes upward at a fast pace, we won't necessarily have the luxury of doing that. That's I guess that's the point I'm getting at is um, and not to go way off tangent on like fluctuating markets, but like this this is a big part of it. Like we talk about when the market is super tight, like, yeah, we have the luxury of being able to get any customer on the phone that we want to, right? And we have the hard work of trying to find a truck. And on the flip side, when capacity has been loose, we have the luxury of picking and choosing any carrier we want, and the hard task of having to build true relationships with customers. And that the balance of those two shifts as that supply-demand um capacity meter goes from loose to equilibrium to tight, back to equilibrium, back to loose, and it you know, ebbs and flows like that.

SPEAKER_01: 35:47

So that's a good segue into I think a part of this discussion that I think I've been doing a lot of trainings on this, and I think it's really important takeaway for any broker, or honestly, anybody in our industry. If you are providing a service like sales, which I always feel like is a terrible word because like we don't really sell anything, we establish relationships, and to me, like that caught creates issues, but like I'm not gonna go on a tangent. The point I'm getting at is like if you are offering services or in business development in like any industry, if the industry changes or fluctuates, meaning like the landscape at which you work changes, you should change how you approach it, right? Like and like anything else you do, right? Like if you I mean like played a sport or even like fishing or hunting, like if you do it in different places or different times of the year, you do it differently because like you're less likely to use the thing that works in the summer and the winter, right? Like if you fish in the summer versus fish in the winter and you ice fish, like you use different fishing rods, you use different techniques, you go to different places because the fish aren't in the same place, right? It's the same thing in our industry, like where the people aren't moving or the shippers, but the opportunities are and the needs of the shippers that you are going to solve for them or help them with, if they're changing, you have to change how you're talking to them because the same things that worked for the past three years will not be receptive now. And like you've pointed this out like three times in this conversation. 2022, any shipper will pick up the phone and take your call and say, I have freight. If you can move it, I will give it to you. Now, on the other side, getting a carrier was where all the work was and was very difficult. And you had to call lots of them to get one, right? Then four years after the pandemic, right? No shipper needs a new broker because all their loads are getting picked up. The only reason they want to work with you is because you can save them money. Because their service is good.

SPEAKER_00: 37:46

All their loads are picking up two years like busting through their shipping budget.

SPEAKER_01: 37:51

So it shifts back. So then you go from selling service and I'll get you capacity during the pandemic, to now I'll give you a better rate and I will get you better updates and communication and trust. That's what you've sold on for the past three or four years.

SPEAKER_00: 38:07

Fraud prevention, all right.

SPEAKER_01: 38:08

And fraud prevention. Now that we're moving into the market that we that was during the pandemic and used to happen every year and a half, like you can't sell on price in the same way because guess what? Like, if I offer you a cheap price, you've had a bunch of cheap rates in the past week or two and none of your loads picked up. So even offering that kind of pisses you off because you're like, yeah, everybody's calling me and has been telling me they'll get me cheap rates, but nobody actually gets me a truck. I don't want cheap rates. I want fair rates with good service. So now what your customers are asking for is changing. You have to change the way you're approaching them because what worked for the past three and a half years is going to seem like you are one, out of touch with what the market is doing, which makes your shipper feel like you don't know what you're doing when you call them just by going, I'll get you great pricing. They're thinking, like, do you even do this job? Like everybody that said that can't get a truck. I want to know you have a truck and you'll give me a fair rate and you're gonna give me good service. And if you don't change the way you approach these things, like you end up losing all of your existing business and you can't acquire any new, right? You don't only lose what you have, but you can't even get more. And that's why I think it's super important for folks that haven't been working in the industry more than four years, is like you've not seen this and you haven't sold your products, your services, or your company this way yet. So, like it's new, and you've got to be able to look at what your care your customers need and you gotta meet them where they're at. Not trying to get them to buy the thing that they used to buy that they don't want anymore.

SPEAKER_00: 39:38

Yeah, so um, I've had this similar conversation on our podcast in slightly different ways over the years, but when it comes down to what does the conversation with your customers sound like, I want to preface it with this. First of all, we mentioned before that the average tenure of a freight broker is like two and a half years. So 50% or more of you in this industry haven't dealt with the other side of the freight market before. Further, your customer, right? They the same people don't just work in the same job for their entire career, right? People move around, people get hired, fired, promoted, shifted from the industry, the average tenure is I think two and a half years now.

SPEAKER_01: 40:19

Yeah. At a company or in a specific role.

SPEAKER_00: 40:22

So think about your traffic manager who's used to for the last maybe he or she got hired 12 months ago, and they're just used to like, yep, here's they don't even know why. They just know that when I started, I was told these are the three brokers that I work with, and here's here's what we normally deal with, right? But when you can have a conversation and give context as to why you're stating whatever it is you're presenting to them, that will help the person understand. So um I've I've mentioned this with like seasonal changes and rates. Like, if you can show them actual data, like if you were to go to DAT and do a market overview and say, hey, here's here's what capacity looks like right now, and here's where it's expected to be in a month from now, based on you know, this time of year in this this region every single year. Like the capacity gets tighter, which means that rates are going, it's gonna be more expensive for us to get a truck, right? And further, you can have the conversation with them, because now we're talking on a macro level where capacity is is shrinking, so it's going to drive rates up on a national average. We're not, you know, I don't want to over um, I don't this is it's generalized here, right? So I want to caution with that. Um, every lane could be is gonna be different. But um the other the other part of it is like talking about this is what's happening with the market overall. So when rate or when capacity goes down and rates will tick upward, it's gonna be more expensive to get a truck. And if you get the the pushback from the customer of, well, we'll just go with another broker who's cheaper. You have to remind your customer that as brokers, we all have access to the same capacity. So if another broker tells you that they're cheaper, well, I can get that same cheap truck for you, but I'm not even gonna present that option to you. And here's why. Because I'm here's my process, here are my uh screening criteria. And yes, if I want to, I can find you the truck that's gonna do it at a dollar ten a mile, but I can tell you they're not gonna pass any of my my sniff tests because they're either operating uninsured or unsafe, or the driver is um, you know, have fudged logs or fill in the blank on the reason why they're able to run for so cheap, right? Yes, there are backhaul carriers that will take freight for a discounted uh market average because they it's a you know only when they can't get a better paying load. Yeah. Yeah, exactly. True, true. Um, but to have that conversation and give context to your customer will help them understand. And I I have sat down with not just the the the freight um like traffic manager, but I've sat down in meetings in the past with like a basically a panel of people that are in the supply chain and logistics department for a manufacturer and had these conversations as to why, you know, hey, it's great that you have this bid, but here's the reality of of what that bid could turn into if you try to make everyone commit to an annual um agreement on it. Like bids can be great for carriers to to balance their pricing throughout the year. Um, but for brokers, like we really do operate best in the spot market to give you um you know available options on the fly when needed. And those available options are gonna be more pricey um in the future than they have been six months ago that they were last year. Okay. And your contra oh, by the way, your contracted carriers that agreed to this 12-month rate, like guess what? When they find out they can go make more money on someone else's shipment, they're gonna fall off of your tender. They're gonna pay parates, they're gonna reject it, and it's gonna maybe it waterfalls to the next or the next or whatever, but eventually the damn busts here and prices will go up. So um it gets like customers never want to pay more for shipping, but they've been operating at like a discount for four years now. And I think you need to have that conversation about like, here's what's coming, here's what we're seeing, and what I don't want, and I've seen it way too much lately, is that a lot of brokers have been just honoring, not even honoring, because it's not like a contract, they've just been running the their their go-to lanes at the same price every single week when it's gotten more and more expensive, and we've seen margins thin out. So like I did a um, I looked at a brokerage's numbers on average, like I think it was like a three weeks ago or something like that. And their um they had like a I looked at like their profit per load and their revenue per load, and like their profit per lo their revenue per load stayed about the same, but their profit per load went down. And I'm like, what you know, what's going on here? And they're like, Yeah, it's just gotten more expensive to to get a truck. And I'm like, well, yeah, but like you're not you're not here to like absorb the volatility and the increased prices for your shipping, shipping customer. Like your job is to provide them with options based on the available market, like a stockbroker, right, doesn't go when when the cost of Google goes up or Alphabet or whatever it's called, like they're not just gonna be a nice guy and sell it for cheaper than it's actually trading for on the market. Like, that's just not what happens, right? Like, we have to have those conversations about the reality. And I think if you can share actual analytics that are third party with them, that's why I love if you can share like a freight waves graph or a DAT um a debt IQ graph or truck stop or whoever you're using, right? Actual analytics. And Dean, his what was the one that he referenced? Was it the um um the this was on the demand side, but it was like the manufacturer's index or something like that. When you can show, like, hey, demand, demand is not shrinking, right? It's either flat or it's gonna, it's ticking up a little bit. And then on the other side, capacity is going down, like it's on the news now. Like it's it's in all the media. We we know that like CDL enforcement and and illegal driving is is a thing. And that's you know, when you have that conversation with the right people and you can get through to them, like I'm not trying to I'm not trying to screw you here on price. Like the market's just getting more expensive. And if you like the service and you trust me, like I'm still gonna provide you with all of that, but I'm gonna make sure you're getting good quality capacity, and it's just it's going to cost more. And you should talk to your customers about freight charges that get added to their purchase orders because it's getting more expensive. We can't just we can't absorb it for you and run it at a loss.

SPEAKER_01: 46:51

Well, that I mean, there's a few things that I think.

SPEAKER_00: 46:54

I know I got kind of aggressive there.

SPEAKER_01: 46:56

No, but I think there's a few things there, right? Like one is it it's the thing you say, like what so what? Now what is like if you just tell someone the price went up, or let's go even a step back. If I just email my customer, I need more money, or the rate is now higher. All of what we just talked about is the reason, but your customer, we're assuming our customer knows that, which a lot of them don't, many of them don't, and don't even understand why that's true. So like they see a rate increase, they automatically will assume you're just taking more money to do the same work. And then they will get upset with you. It's the shoot the messenger, right? Like, yeah, if I just get the message, the person that gave me the message is getting blamed, especially if I'm paying them because I don't know any other reason why it would be going up other than they just want more money, right? So, like, you first you're gonna get like unfairly penalized because of ignorance because the person you told is more expensive doesn't know why, right? And the other way I always think about this is like it's kind of like when you're telling your kid or trying to teach your kid to do something. If you don't tell them why, they rarely listen the first time or at all. Like, hey, don't leave your toys on the stairs. Three hours later, the toys are still there. Why? Because I said so. If I go, honey, please don't leave your toys on the stairs because if you fall, like you might get really hurt and like we don't want to go to the doctors or the hospital. Now all of a sudden the kid remembers it, right? Like you have to tell people why the thing is happening for them to remember and to not blame you for it. Just like a kid blames their parents and goes, they're just mean and they won't let me play on the stairs. No, your parent wants to keep you safe. Hey, I'm telling you the rate's going up. It's not me, it's in the market. And that's the what. What is happening? The market is getting more expensive. So what? Well, this is why that should matter to you. Because even if you don't choose me, you're gonna pay somebody else more money. Maybe not today, maybe not next week, but very shortly, all of your rates are gonna go up. And all of your cheap carriers that are taking your loads, they're eventually gonna start working with me and my other customers because they're not just gonna keep running your freight at a discount when someone else will pay them more. So, regardless of me, like this is happening around you. It's my job to inform you of the market of which I operate in to help you. Now, yeah, they don't blame you, they understand the the, I guess, the why or the so what. And it's like, well, now what? Now you give them options and solutions. Hey, like I can get those cheaper carriers that the other people are offering you discounts. Here's what that means, right? Here's the so what. Now what? Now what? Now you as a shipper need to decide where are your priorities. Are you worried about fraud, still? Are you still worried about claims? Are you still worried about damaged cargo? Are you worried about liability because of an illegal driver getting into an accident after he loads there? All of these things are your shippers' decision to make. We don't make them for them, we provide them the information and the options and then allow them to choose. I'll book that cheap carrier, but do not expect a claim to pay out anytime soon, if at all. Do not expect that if there's an accident or the truck breaks down, anyone's gonna be able to fix that. So you need to let your customers know of which I'll be delivering to these are all the things that are also gonna happen if we maintain these rates. If your customer expects the same service, they are either going to pay more or you have to be willing to make less money because I can't, to your point, absorb all of the cost because things are getting more expensive. It's not my job as a freight broker or as a stockbroker to eat the fluctuations. I will for a little bit as I inform you and allow you to make different choices, but it's not a long period of time. And nobody does for a long period of time. Not the truckers directly and not the brokers.

SPEAKER_00: 50:30

I think that that three part thing, the the the what, so what, what now, I think that applies. Like I'll give you a very small example, but I think it applies very well in how to have these conversations. Let's say there's like we just had the Nor'easter come through and it it hammered New York City. If I'm a produce shipper and I'm delivering to Hunts Point in the Bronx, it's the big produce market there. I can go to my customer, right? Or if I'm a broker, then that's what my customer where they ship to. I could say, hey, um, what? There's a storm coming through that's gonna hammer a foot of snow to New York City. Um, so what? There's not a lot of drivers that are willing to drive in that kind of weather. What now? So we can either wait until next week after the storm passes to find you normal capacity, or if it's urgent, another option would be we're gonna have limited capacity of experienced drivers willing to drive in that kind of weather. It's gonna be more expensive. That's simple, right? But that applies to, like you said, the broader picture of what rates are uh capacity is going down, so what? That's gonna mean rates are gonna go up on average. What now? Well, you have to make a decision on if you want to have the same level of service and quality carriers at an increased rate, or if you want to roll the dice and um try to find cheaper capacity through an alternative broker that's not gonna be providing you with the kind of guarantees that I am. Because you gotta, and here's another thing too that you can talk to your customer about is put yourself in their shoes. What matters to them, right? What do they not want to happen? Well, they don't want to get fired, right? They don't want someone else to get promoted over them, um, right? They don't want to lose money or get penalized or whatever the case might be. And what would cause that to happen? Well, if they had a load stolen because they booked a cheap broker who maybe was in on a scam or didn't have a good vetting process and didn't verify the carrier's um authenticity when they when they booked them. Or um they used a broker who gave them a cheap rate and they hope they hired a crappy truck that broke down, and now the load gets delivered two days late, and the customer's customer is now pissed off and they might lose that account or that business. And there's all there's all kinds of like second, third, fourth um level impacts that that these decisions can have. And if you can have those conversations in an uh in a delicate and eloquent way, um it's gonna also show like your customer that, oh shit, he he knows what he's talking about here. Like good at what he does. He does you know, he's not just out here spitballing cheap rates and I can do everything and I'm the best at everything. It's like, no, he actually gave me an analysis as to why these options are different.

SPEAKER_01: 53:01

And that's why when things get difficult, you can end up with more business, right? So, like the thing that I I I think are the big takeaways, sort of like the longer you wait to have this conversation, the worse it will be for your book of business and your relationship with your customer, right? Because it's inevitable and you need to have it sooner than later. Because even if things get better and they go back to normal, it's not a bad thing to inform your customer of what's happening. Cause again, it makes you look better at your job, being aware of what's happening. Yep. Like the second thing is like, as it is harder to have these conversations with your current book of business and your margins will shrink a little bit as they transition through this, it's a huge opportunity to bring in new business. Cause every broker that won't have this conversation with their customer that's hoping it gets better, I'm gonna steal all their business. I'm gonna run through the market and take every one of them, doing the exact same thing I'm doing with my customers with every prospect I talk to. Oh, the brokers you're working with haven't told you what's going on. Well, let me let you know what's what you guys are in for. Because if they're holding your cheap rates, they're losing money. And inevitably in the next couple of weeks, they're just gonna start handed loads back and you are gonna be in a world of trouble where rates go up, service goes down, and your boss will yell at you. And then, like the final thing that I kind of want to point out is like people are like, oh, well, what can I email or talk to my customers about? Like, if you're really good at this and you're having these conversations, one step beyond that of me telling you my customer is me giving you the ammunition for you to talk to your boss that's gonna be mad at you when he sees the budget goes up and goes, Nate, why are we spending more? What is happening? And if you go to your boss and go, I don't know, all the brokers you told me to work with are just more expensive, you look like you're not good at your job. And if I can help you also go upstream to your boss and give your boss a heads up that, hey, like this is probably on the horizon. Hey, boss, like I know my job is to keep rates down, but like the whole market is shifting. Our service is going to be affected or price or both. I just want to let you know or to ask you how I should address this with our options. So now you trust me a hell of a lot more because I saved your ass with your boss, and you might even get promoted because no one in your company is even aware this is happening. Nobody else told you, I helped get you up to speed. Now that makes your job and your life easier, I'll get more business from you. Like there's ways to turn all of this into huge opportunities if you're willing to have the difficult conversations.

SPEAKER_00: 55:24

And here's how you can spin it too is like is think about this. When capacity has when it was so loose, um, it wasn't hard to find a truck at a decent rate, you know, and we didn't have to think about a lot of the factors like deadhead miles and you know, you know, backhaul versus head haul. It wasn't as important, I'll say. But what you can, you know, add into that conversation with your customer is that like one of the things that that we do very, very well at our brokerage is um because of our carrier network, and obviously, if this is true, this is what you want to say. If it's not true, you should get to a point where it is true. But we have the ability to select the best available driver based on their um distance from your pickup, so that we're having less empty miles. So we're not you know undercutting the carrier, we're just finding the right carrier that doesn't have to drive 200 miles empty. And for that reason, we could get you still as competitive of a rate as possible. Because other brokers that are out there, again, those newer, younger brokers that are just still learning, they just post a load on a board and pray that somebody calls them and wants to take it. They don't think like, well, where are they on their hours? Uh, how far away is the pickup from where they're at right now? And um, you know, where do they live? Where are they trying to get to for their next load? Like all those things. That's when you have to start to optimize your entire uh carrier network to figure out who is the best available carrier for this specific load. So um, and there's a lot of great tools out there, there's a lot of really good um you know, processes you can take within your TMS to make notes and know what lanes carriers like to run. Um, if like we've said it before, if you talk to a carrier and it's not they're not the best fit for this load because they need more money if they're gonna run that one. Well, make a note of it somewhere so you know that, okay, hey, you know, I know this one's 200 miles away. Where do you guys normally want to pick up and deliver to? And then you put that as a preferred lane in there. And that's how you can build out the efficiency side of your of your carrier network to be able to offer your customers. I mean, you're never gonna get get away from the rates going up or down thing, but you don't have to add any extra wasted costs um onto a specific load, if that makes sense. So any anything else on this? No, this is pretty good, man.

SPEAKER_01: 57:43

I mean, these are my favorite markets. When everything gets harder, right, you got two choices get better at your job or get another one, right? And to me, like it's the most fun time to be a freight broker because everybody that's half-ass in it, that's able to get customers, booking cheap trucks, doing little to no work, like I'll run through the whole market, take everybody's business because everybody you talk to, if you just have that conversation, again, you're not gonna get every customer you talk to, but the percentage of which they will talk to you goes up significantly. And the percentage of the people that talk to you that will give you a shot to see if you can do what you say you can do also goes up, right? Yep. And it's all just odds, right? Like more percentages, more people will talk to me, and more of the people I talk to are willing to give me an opportunity. That's all you need to grow your book of business, right? Like, yep. It's like is that thing we were talking about for the past couple of weeks, that interview I heard with Federer. Like, I still can't believe he only won 54% of the points he played over like that peak of his career. Like, you could be the best that has ever done your job by being three or four percentage points above literally everybody else. Like, you don't have to be a hundred percent better. You don't have to work 20 hours a day to do this. You just have to work a little bit harder than your competition. Get a little bit better than you were yesterday, and the sky's the limit.

SPEAKER_00: 59:03

Yeah, and hey, as a little teaser, if you're if you're looking to get better at sales, um, we've got a lot of requests and demand for a sales-focused, um, deliverable product that can help people get better at prospecting, lead generation, follow-up, what to say on the call, how to handle objections. And we did put out Freight Broker Basics um a handful of years ago, and we're gonna be putting together, based on your requests, a uh a sales-focused product later this year. So stay tuned for that. I'm really excited to put this one together. It's gonna be um, we don't know exactly how many um lessons or modules, if you want to call them that, but it there's a lot of really good sales content. And you know, we sprinkle a lot of it into our podcasts and stuff like that. But this will be a really good, just straight up, you know, advanced sales training specifically for Freight Brokers. So I'm definitely looking forward to putting that together with you this year, Ben.

SPEAKER_01: 59:58

Same here, man.

SPEAKER_00: 59:59

All right, final thoughts.

SPEAKER_01: 1:00:01

Whether you believe you can or believe you can't, you're right. And until next time, go bills.