Navigating Market Trends and Carrier Assessments in Freight Brokerage | Final Mile 70

Speaker 1: 0:19

All right, welcome back for another edition of the Final Mile. We're going to answer your questions about freight brokerage right from you. Some of them are from our Facebook group, some from our YouTube comments. We've got three good ones today, ben, but first, everybody, make sure you check out all of our other content at Freight360.net, including the Freight Broker Basics course If you're looking for a full educational option, and make sure to check out the sponsors in the description to help support this channel.

Speaker 1: 0:46

All right, our first question asks this was in response to one of the videos that we did on YouTube and someone asked what's the best way to track the market trends for freight brokerage? So I think we talked about market cycles and whatnot. So I think we talked about market cycles and whatnot. And this is a great question because someone's actually going to take our advice to follow the trends in the market and see what's going on. And now they're saying well, how do I do that? So, for example, on DAT, if you just look at a big zoomed out picture of line haul rates, right. So if you can see, you know, broken down by van reefer flatbed, what have they done? You know, nationally, on average in the last year, right? Are they going up down? Is there movement there? That's a good one. Have you ever have you used Sonar from FreightWaves at all or follow any of their metrics on LinkedIn or Twitter? They got some pretty interesting metrics.

Speaker 2: 1:56

I have, but I couldn't. The only one I really keep track of and remember in my head is the tender rejection index.

Speaker 1: 2:03

is like the otvi, I think, outbound tender rejection index, right. So what? What that tells you is um what percentage of of loads that are contracted, that they have access to the data on what percentage are being rejected by the carrier or whoever it was tendered to right, and here's why I think this is when that metric is high, the market is very tight, and when that metric is low, the market is loose.

Speaker 1: 2:32

And I think their benchmark is like, I don't know, eight, ten percent, maybe I don't, I don't have it in front of me.

Speaker 2: 2:37

But so I want to say yeah, that like during covet it peaked at probably around, I think, 9, 10 or maybe even 11, a little higher I think 30 something was it? Oh yeah, like. But they said like in a tight market, typically it should, I think, between like 9 and 13 in a loose market. You see it around like three somewhere around there to give you yeah, there was.

Speaker 1: 2:58

Uh, I want to say let's see as you're looking that up right.

Speaker 2: 3:05

I want to give people context as to why this occurs. So when you see fluctuations in the market, meaning like this is where rates go up. Rates go up when there aren't enough trucks for the amount of freight in any given shipping lane or market, and a market is defined by like a city and 150 miles circle around it give or take. So when there's a whole lot of loads that need to be moved and not enough trucks, then trucks have the leverage. So the rates start to come up because trucks are like look man, there's five or eight loads for every truck. That's another good metric to look out on a specific lane. It's the load to truck ratio. When there's more freight than there are trucks, the rates start to go up because all of the people shipping have to fight for a smaller number of trucks. When there's more trucks than there are freight, then the trucks fight each other to get a smaller number of loads, which pushes loads down.

Speaker 2: 3:58

What happens is, as more freight enters the market and you see, the market shift right, what happens is is the shippers that can't get a load moved because again, there's not enough trucks to move that load, they will put the load on the load board for more than market, say. The market lane, for whatever reason, is like two grand and that shipper can't get that load covered yesterday but it has to move today. So they will put that load on the market for $2,500 to try to buy a truck because that load has to go. Well, then the truck that sees the $2,500 calls the shipper that was going to pay them the two grand they've been paying all year and goes. My truck's broken down, I can't pick it up. And then what they really do is grab the load off the load board to make the $2,500 and they reject the $2,000 load.

Speaker 2: 4:44

So the more demand for trucks or the less trucks there are in relation to demand, more loads start hitting the spot board at higher rates than contract. Then the carriers start giving back the loads that they've been running all year for the same rate because they can make more money today to grab that load. The more that happens, the more they reject their contract loads and the more they move to the spot market, the more carriers that move to the spot market. That's where we operate as brokers. So that moves rates up Again. I always find that comical because brokers that say carrier, or the carriers say that brokers don't help them. Literally, without the spot market you wouldn't see this fluctuation, like the fact that freight brokers exist creates the spot market, which allows trucking companies to go and grab a higher paying load and reject a contract rate which then hurts their service with that customer, makes it less likely to get into the bid next year. But they're making more today and most of our industry moves short-term, cited For sure.

Speaker 1: 5:44

So to give you context, the outbound tender rejection index from Freightwaves in 2021 peaked close to 30 percent and then it was in early 2022, it fell below 20 percent until it came all the way down to single digits. So it was at like three or four for a while and we'll see that tick back up. But to answer the question, freightwaves is great. Any of the news publications in the freight space like transport topics FreightWaves us. Just follow our newsletter. We put out market stuff every single week on Thursdays. There's some great folks to follow on LinkedIn as well.

Speaker 1: 6:26

So Craig Fuller from Freight Waves, jason Miller is he a professor, supply chain professor? Right, he's got a lot of stuff. Freight Caviar puts some comical news out there, but they'll keep you up to speed on what's going on. That's what I would say is use a mix of news, social media and some of the actual tools that are out there to track what's going on and look at it from a big picture. Right, I saw a really cool graphic this week I think it was from Tim from Ascent TMS that showed like the growth and contraction and freight brokerage. It might have been in rates even traction in freight brokerage, it might have been in rates even, and it showed basically every freight dip that we've had and you know a projected future one, and it's pretty, you know. It's good to understand that. Hey, just because we're coming into what we assume to be a great time for brokers and carriers to make some money in the next year or two, there's a tail end to every market cycle. I want to go right back to where it was previously.

Speaker 2: 7:29

It's a cycle. It's a circle. It keeps spinning right.

Speaker 1: 7:34

Yep, 100%, all right. Great question. Next one how do I run a background check for a new hire? Background check for a new hire? So we actually just did a episode with Matt Perkins on agents and so we didn't talk too much about background checks on there and we could have. But I run background checks and I tell me we bring on a new agent and we run background checks whenever we hire a W-2. There's a ton of services out there. I use one called century link right now.

Speaker 1: 8:06

Um, in the past, I believe one of the one of the companies that we use for like payroll or something hr related had a background check system in there where you could you pay and you get a record. Um, the company that you use doesn't really matter as long as the data you're pulling is what is good, right, because like a lot of the times we're pulling criminal records, sex offender records and you're getting like state, federal and county level stuff, so you'll be able to see hey, did this person go to? We had like a guy that like lied and said he had a clean background. We had like a guy that like lied and said he had a clean background. Like you were in jail for a year for some like terrible white collar crime, that clearly you wouldn't want to have somebody representing your company and have access to financial things if they went to jail for doing her fraud. You know being fraud in that similar regard elsewhere.

Speaker 1: 9:04

But I guess the other side of this question is should you run a background check on everybody? Do you what? What's your thought on it? Ben, when it comes to because I've had people that I know from the past that I just didn't run a background check on because I I don't feel the need to start. You know, if I already trust them like I don't feel the need to run their record, I don't know. Do you have a take on that one?

Speaker 2: 9:28

Yeah, not really. I mean, I think it's a good procedure to just do as an SOP with everybody you're going to hire agent or W2. Again, it's just a good practice and to have it on file and the HR file are not that expensive, pretty easy to get, they come back fairly quickly and it's just one more piece of information again. And I have, and I the thing I want to point out is I do not necessarily hold anything against somebody that comes back on that. What I do is use it to just ask more questions. Hey, can you give me some context here? Like what happened? There's two sides to every story, right, and it gives you also, like, a better understanding about the person you're going to be working with. Like they need to be able to talk to you, explain the things, good and bad.

Speaker 2: 10:18

One of the reasons why this always sticks with me is when in a previous life, when I was a lender for a bank, like we do this all the time, but the other thing that we would always look at is like bankruptcy, and I used to remember fighting with the asset committee at the bank when they didn't want to give a loan to somebody that had worked out of bankruptcy, like they had it on their record and say it was like, you know, six or seven years and now they've got a stable business Right. And I remember, like the older folks and again this is many years ago and the people that I was arguing with were literally guys that had been in banking since the 60s and like they had this policy of like no, basically one strike. You do this like. This is not something we want to lend money, to want to bet on somebody that has been through the worst thing, learned from it and come out of it. That guy is far less likely to make the same mistakes as somebody that hasn't done this and like to me in some ways, like it's, it almost makes me feel better when I understand that somebody went through something difficult, has turned their life around.

Speaker 2: 11:22

Maybe that's a little bit of an exaggeration in some of these, but some of them they are right. Right when they've come out the other end and they've learned from it. Right, like we all learn from our mistakes. Right, same thing we were talking about in that episode like of agent vetting, right, like. I don't hold anything against anybody. There are definitely things in my past that people could argue with over and say things right, but it's. Can that person articulate to you what happened then? What has happened after and what they've learned from it to me is far more valuable than a line item on a background check or just something that shows that something occurred at some point.

Speaker 1: 11:53

Yeah, so, like, the most common thing I find on a background check that I overlook is like a DWI. You get someone that they were young and they got a DWI and you know, does that mean I shouldn't do business with you? Probably not. You know, that's not really. It doesn't really have much of an impact on your ability to be a good communicator and a good freight broker. If somebody has a history of like, writing bad checks and fraudulent scam things like, probably don't bring them on as an agent, right, correct? If someone has a repetition of like drug charges and it's like for the last 20 years and it never stopped, probably not gonna be the most reliable person in your office. Um, but you can decide how you want to handle that. So, um, last question how old should a carrier mcb to be able to work with most brokers Interesting? You're going to get a variety of answers depending on who you ask this question to.

Speaker 1: 12:53

I'll try to explain my perspective and why and then I'll throw it to you, ben. So for me I would throw a blanket out there of like If they've been in business for I'm usually more lenient on it like 90 days or 180 days, right, three months, six months, something like that. They've been around long enough that they probably have an inspection. They've probably got some kind of credibility from other folks that have worked with them. The caveat to that if they're brand new and they used to be a company driver, they might be a way better carrier than someone that's been around for 10 years. Usually, the longer the carrier has been around the better. Obviously they've shown a track record of of being able to sustain through different markets and they haven't shut down their shop because of a bad reputation, things like that. I know some companies will say like if you're been around less than a year, we're not using you.

Speaker 2: 13:51

A lot of them have a hard line of a year, like you cannot. A lot of carriers cannot work with the larger brokers if you've not been in business a year. It's just the line they draw on the sand, and it used to be because of fraud. And also what you just said, like experience experience running a company, maintaining your vehicles, a lot of the things that come with starting a business and the risks inherent to it. I think For sure.

Speaker 1: 14:15

Yeah. So to give you context, like at Pierce 12 months. That is part of our rule set. We'll override that. But we're going to take extra steps, right, If someone is a newer carrier and they don't meet that rule, we're going to say, okay, well, to make sure that you're legitimate, we're going to use some extra steps. Right, we're going to use tools like quick scope to make sure that it's actually you showing up at the right place with the right equipment type. We're going to, um, you know, we're going to ask you to connect your elds. Or, if you're, maybe your inspection history is is a little bit less than it should be for that amount of time, cause you're so new. Or, yeah, connect your ELDs, show us digital footprint, things like that. We're not saying no, but that is our benchmark of like, hey, it raises a flag If you're under a year.

Speaker 2: 15:07

I mean, I got a question for you though, like even though, when you attach your ELD, for you, though, like, even though, when you attach your eld, the carrier can shut that off at any given time, correct, like it doesn't stay indefinitely, like it works like macro point right or trucker tools on on highway.

Speaker 1: 15:20

Um, if a carrier connects their eld, you can see in live, like live time, where those device, where the devices that are connected, where they are on a map. So like, if you're going to, you know I got a load picking up in, we'll say, atlanta, and that's a single owner operator, been around for four months, just got their own authority this year Connect. They don't have an inspection yet. Well, connect your ELD, I'll be able to see right on the map, boom yeah.

Speaker 2: 15:47

Can you do that with anybody outside highway? What's that? Can you do that? Can you do that with trucker tools? Because I know it has an ELD spot to do that. I haven't utilized it yet and I've wanted to this week and I've been spending time on the back end of tracking for both macro point and trucker tools.

Speaker 1: 16:06

Yeah, trucker tools, when you do a trucker tools request they can choose to use their ELD instead of a mobile device. That is, to my knowledge I've never seen one track beyond the load, the length of the load. So it should. I mean it really, if you're just using it for tracking a load live, you really shouldn't be tracking them beyond that load. So I would imagine it wouldn't do it forever. But yeah, I mean there's all kinds of ways to mitigate that. But yeah, so I guess your big question how old a year? I worked at a company, a larger company in the past that went from a year down to 180 days and then down to 90 days Again. That was before COVID, before fraud went rampant. So a lot of companies are being kind of strict on the authority length now because of the risks associated with a newer authority. But good questions, keep sending them our way, we'll keep answering them. Any final thoughts, ben?

Speaker 2: 17:01

Whether you believe you can or believe you can't, you're right.

Speaker 1: 17:06

And until next time go Bills.