There are several factors in play for the freight and carrier industry in transportation, with the current market experiencing significant changes consistently. Freight brokers and carriers play an integral role in moving goods from one point to the next, but without concrete knowledge of what’s moving and shaking in the industry, they cannot run a successful operation. The trends impacting licensed freight brokers, both new and old, along with carriers are far-reaching, but here is what transportation businesses need to be aware of for 2018 and beyond.
Challenges in the Industry
Although many positive changes are taking place in the freight and carrier industry at large, there are as many challenges in the current environment. Freight brokers are facing steep competition given the low barriers to entry in starting a freight brokerage business, and that requires adaptation. For those who fail to keep up with these shifts, an exit is imminent. However, freight brokers and the carriers they connect with suppliers can take advantage of the increased level of competition through a variety of updated business practices. Maintaining strong relationships with customers and vendors, creating a sustainable marketing strategy, and managing business financials with a high level of accuracy are all necessary to remain profitable in a highly saturated business environment.
One of the most substantial shifts in the freight and carrier sectors is the entrance of high-power, high-capital technology firms. The advancements in the digital world have forced businesses in other industries to adapt at a rapid pace, upgrading legacy systems and processes to new, technology-focused solutions. Freight and carrier businesses are no longer left out of this necessary disruption. The addition of initiatives like Uber Freight, autonomous trucks, and advanced business software has created some fear among established brokers and carriers in recent months. However, many predict that these technology enhancements in the marketplace will prove beneficial to the entire industry, so long as those currently in business make necessary changes to adapt and update business models as needed.
Regulatory Mandates and Tax Reform
The transportation industry has always been highly regulated, but over the last few decades, changes to the compliance framework for freight brokers and carriers have remained relatively minimal. Keeping up with licensing and bonding requirements, as well as business record and log maintenance is now undergoing a substantial shift. The introduction of the ELD mandate has created some turbulence among brokers in the last several months, as the change requires a large capital expenditure even for small companies.
Fortunately, the change in tax laws late in 2017 offered some hope for brokers and carriers in recouping some of these costs. The combination of an increase in regulatory costs and reduction in taxes owed may be a wash for many businesses in the industry, but it remains essential to keep a pulse on these shifts for the upcoming years.
Total Industry Growth
A more promising trend in the freight and carrier environment currently is the increase in growth among nearly all players. According to a recent report, analysts predict growth in freight of 4.33% between now and 2022. The increase in freight brokerage business is correlated to the tightened capacity in the market, with a greater number of suppliers in need of fast, efficient shipping. As freight brokers work as intermediaries between these suppliers and carriers who deliver goods, an uptick in demand lays the groundwork for increased business operations. However, freight brokers also face higher costs in doing business, as fuel prices increase and spot rates are on the rise. Successful brokers and carriers must recognize these shifts in order to take advantage of increased demand.
The transportation industry is positioned well for profitable years looking forward, with freight brokers and carriers at the lead. The most successful businesses, small or large, will be those embrace the rapid-fire changes coming to the marketplace this year and in years to come while maintaining a watchful eye on other trends that may impact in the industry in the future.
Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.