When it comes to the world of freight brokerage, margins are thin on the best of days. Though working hard to achieve efficiency (and to keep operational costs down) is crucial to success, supply chain optimization (for freight brokers who are serious about growing their business, anyway) can help you clear some healthy profit margins and actually walk away with a little cash in your pocket at the end of the day.
Even if you’re just one little link in the supply chain.
And that’s something we all want, don’t we?
Of course we do. We want to be the lean, strong link that turns a profit again and again.
You see, clients and customers alike often look at freight brokers as a commodity—something like gasoline or electricity, something that should cost about the same no matter where they go, something that doesn’t really vary much in quality.
Now, you and I both know that this is far from the truth, but they don’t know that, and they’re the ones who matter—unless you figure out a way to set yourself apart from the competition through excellent service.
Being a commodity is not fun. Now, I suppose you could set up a cartel like OPEC and start controlling prices to combat this, but that’s not exactly a legitimate strategy for success (and, you know, it’s illegal).
So, for the new freight broker who’s just burst onto the scene, and for the experienced broker who is tired of living on razor-thin margins, there’s a solution to increasing profit:
It’s supply chain optimization.
For freight brokers, supply chain optimization is the single best way to increase your profit margins, aside from severely increasing efficiency, drastically reducing staffing costs, or conducting such a massive level of business that sheer volume overwhelms the tiny margins.
Supply chain optimization for freight brokers– you and I both know how crucial it is to increase margins as much as possible
One of the hardest parts of being a freight broker isn’t the thin margins—it’s the fact that those thin margins often come four to six weeks down the road (or more) when the client finally pays.
The pesky part about that is this: you probably paid the carrier at the beginning of the job. Which means you’ve been running on a bit of a deficit.
Sure, you can find ways to survive in the meantime. Factoring is one (not very fun and not very profitable) answer.
Living on small business loans is another (scary) answer.
Requiring your shipper to pay in advance is a (risky, potentially brand-damaging, potentially business-losing) answer (although, to be honest, I like the idea of them paying in advance as the rule, rather than the exception—this isn’t a restaurant we’re running here).
Perhaps there’s another way—we think so.
Optimizing your portion of the supply chain, increasing margins by carefully choosing the most efficient lanes and the lowest-cost carriers (who still maintain quality), is only one part of the puzzle.
By optimizing the supply chain, the savvy freight broker can build up a nice little lump of cash to live on while slow-paying shippers take their sweet time paying their invoices.
None of that factoring nonsense (honestly, who wants to pay a percentage of their profit just to get paid a few weeks earlier? That sounds like a payroll-check loan death-spiral waiting to happen).
And just generally, the overhead to run a freight brokerage can be quite substantial, especially if you’re doing things the old-school way—you know, rooms full of phones and employees, people constantly calling or emailing or faxing this carrier and that shipper, trying to find decent rates with reasonable transit times as quickly as possible (to make sure they don’t disappear while you’re busy contrasting and comparing) while keeping about a million variables in your head to make sure you get the most efficient shipping lane, that the price makes sense for the time of year, the weather, the capacity of the lane, fuel charges…
Sounds exhausting (it was exhausting just writing it).
So, you can deal with all of that, or you can attack your efficiency problems and your overhead problems while simultaneously optimizing your portion of the supply chain, all with one powerful freight brokerage tool:
Transportation management system (TMS) software helps you increase margins and efficiency while reducing staffing costs
The old school methods of freight brokerage involved a great deal of phone calls, emails, faxes, website checking, more phone calls, scans being put into emails and faxed simultaneously, quote finagling, paper shuffling, carrier-calling (some might say carrier-harassing)…
You get the picture. Maybe you’ve lived it.
A TMS cuts so much of that down it’s almost unbelievable, especially to those of us who have been in this business for decades and remember how it used to be.
A TMS can automate processes that used to be done, slowly, by staff whose only job was to handle those processes.
Call checks, quote management, load acceptance, rate checks, document generation—all these and more required a person doing the work (preferably a fast person). Mistakes could, and would, be made. The best rates were far from guaranteed. The most efficient lanes were similarly far from guaranteed.
A tool that could guarantee those things, that could not only check and compare rates, lanes, and transit times (and suggest the best combinations), that could generate and send emails and paperwork automatically… well, such a tool would be worth its weight in gold, wouldn’t it?
BrokerWare™ can do all of that and more.
Even better – we’ve got something new coming that’ll work for even the smaller freight brokers. Just starting your business, and frustrated that there’s nothing out there that fits in your budget – and does everything you need it to do?
We’ve heard you.