TransCore report cites annual gains in spot market volumes and revenues

At a time when trucking capacity remains fairly tight and is expected to remain that way, freight brokerages appear to be reaping the benefits. That was a central theme in a recent report issued by TransCore, a provider of transportation software, broker logistics software, fleet compliance, and distribution and intermodal services.

The report, entitled, “5th Annual Broker Benchmark Survey,” found that brokers in business for at least two years saw an average 18.9 percent increase in loads per month, from 645 in 2010 to 766 in 2011, with non-asset based brokers reporting gross margins of 15 percent per truckload, which was essentially flat compared to 2010.

The firm also reported that brokers took in average revenues of $1,847 per load, which was 9.5 percent better than 2010’s $1,687. And it said that the combination of increased loads and higher rates paved the way for a 31 percent improvement in total revenue per company, increasing from $9.0 million in 2010 to $11.7 million in 2011.

And the spot market grew by 36 percent in 2012, according to TransCore, while the average length of haul of 899 miles in 2011 was 1.4 percent better than 2010’s 887 miles.

“These numbers are primarily driven by a capacity shortage” said David Schrader, SVP/Operations for TransCore. “More freight tends to flow into the spot market…to brokerages and 3PLs as the economy tightens. That is what happened in 2011, and it is what we expect to happen in 2012, too. We would expect the same sorts of increases in the spot market going forward. It is a very good time to be in the brokerage space, and what you are seeing is brokerages that are capitalizing on the opportunity.”

And while the growth rate for total revenue and revenue per load were viewed by Schrader as somewhat surprising, he explained that brokers are successfully leveraging the current tight capacity situation and being opportunistic in the market.

Carriers are also benefitting from the spot market, too, according to Schrader, in the form of rate increases and utilization.

Roughly 80 percent of the carrier base which TransCore bases its data on have fleets of ten trucks or less. This serves as a major reason as to why the spot market is so efficient at connecting supply and demand together, he explained.

On a year-to-date basis for 2012, Schrader said things are trending pretty closely to 2011 overall, with an earlier start to the typical spring shipping season in 2011 compared to 2012. This year seems more “typical,” he said, but there continue to be very high spot market volumes for brokerages, loads, and capacity.

Even though brokerages are typically most present in truckload, Schrader said that based on anecdotal evidence there is a healthy amount of interest among brokerages looking to expand into the less-than-truckload (LTL) sector.

An LTL sales executive told LM that there is a significant influx of truck brokerage players that are active in the LTL market, which is reducing margins for carriers that are “struggling for pennies.” What’s more, the LTL executive said it is fair to estimate that brokers are selling 25 percent of total LTL loads today and that figure is rising.

The proliferation of brokerages on the LTL side, according to the executive, has more to do with a slow economy and overcapacity.

“The poor economy drives customers to seek cheaper rates,” he said, “and overcapacity drives carriers to offer lower rates to fill capacity. Those two things together put the third party in the middle, and third parties are doing an effective job of making our money their money. We are allowing them to do that as a collective carrier group.”