Year in Review: Freight Brokerage 2020
Aaron Schmidt, Regional Vice President
What have you seen in the freight brokerage market in 2020?
2020 was a rollercoaster. Coming out of 2019, things were pretty even keel, then as COVID started you saw this pre-buying that caused the tight capacity market in March. Once businesses closed down you really saw the bottom fall out of the market and things were pretty soft for several months. As the economy started to reopen capacity got really tight. I think during that time when the market was soft you saw a lot of carriers leave the market, and a number of drivers took their stimulus check and weren’t driving, which impacted the market and has carried on through the remainder of the year.
What are some of the triggers that led to the capacity shift?
No doubt COVID has been the biggest curveball of all. In the beginning we didn’t know what businesses would be essential. If you were tied to customers that were non-essential businesses, you were really in a spot where you didn’t have freight to move. Luckily for us, most of our customers fell into that essential category.
Our business was busy, but at the same time, we went from an extremely soft 2019 with competitive bid cycles, and then saw a spike in demand with COVID. It squeezed margins for a lot of brokerages in the market with tight capacity and a tight rate environment. As we moved through late spring into summer, and the market got soft with businesses closed, we saw a lot of carriers leave the market. It was a really tough time for people that weren’t tied to essential businesses. Then, when the economy started to reopen, people had depleted inventories. With the loss of inventory, it caused an increase in demand and led to tight capacity where shippers were competing with each other for equipment.
What was the most challenging part of 2020 for shippers?
I think the hardest part for shippers was managing the volatility: the unknown of whether or not they would be considered an essential business, the unknown of what the market was going to be, and how to adapt. Depending on the provider, some shippers learned to rely on their close carrier partners in order to navigate the uncertainty and volatility of the marketplace because it became paramount that they got their goods to market once the economy reopened. That volatility and unpredictability was hard for shippers to navigate.
How has NFI helped customers navigate through 2020?
No doubt, our people are the backbone of our business, and they are what our customers rely on all the time. Our people were able to adapt to the changes that took place in the market and show real resilience. As a service provider, we were in a different environment as well, where we were pushed to work from home. Not being in our office and working virtually in our homes made doing the job more difficult. I think our people rose to the occasion when it came to providing customer value and did a really great job of navigating the volatility and uncertainty of the market.
When we talk about our strategy, people are at the top of the pyramid. Most importantly, we talk about building meaningful relationships with our customers and our carrier partners. I think that managing through the volatility and fighting for that capacity, the relationships that our people have been able to develop with our carrier partners is what made a big difference for our customers.
In what ways has NFI gone above and beyond for customers this year?
We’ve done business with a specific retailer for several years on the dedicated transportation and distribution side, but prior to this year, we had never been able to service them on the brokerage side of the business. In August, I got a call from an NFI leader who told me that this retailer needed help with capacity off of the West coast on a Saturday. It was long haul freight, something we don’t typically service, but they needed help and it needed to be moved that day. Our team member joined a conference call with the customer and rallied our team in order to get the customer the capacity they needed to move the freight that day. He did a great job executing and the whole team rallied together and did what it took in order to service the customer. That customer has become a priority customer for us today and has continued to develop opportunities with us moving forward.
Do you think the carriers that were driven out will come back, or was it a more permanent decision?
A lot of that depends on demand and what the market looks like getting into next year, which is still somewhat of an unknown. In a tight capacity market, we’ll see carriers go out and buy more equipment and continue to add tractors and trailers. The difference that we’ve seen over the past few months knowing that it’s a tight capacity market, is that carriers have been investing in more trailers than anything, so they’re looking at getting better productivity with the same capacity that they have. The carriers that are running today are working to run more efficiently and get better yield on their equipment. The carriers that left the marketplace were either poorly run or didn’t have the customer base to survive the downturn of available freight, so I think that coming back is more difficult right now and remains to be seen.
How has the past year shaped the freight brokerage market?
We may not be in the office every day like we once were, but we’ve learned to be more flexible as a team and company. When it comes to the shipper community, I think they’re considering shortening their supply chain so that they can get product sooner. They don’t want to be in a situation again where they can’t get product or replenish their stock, whether it’s coming from China or the West coast. Shorter supply chains and having more inventory on hand are strategies that have changed radically as a result of the pandemic. Thinking about how they manage their supply chain in the future is definitely going to have an impact on how we do our job as a provider in the future.
The pandemic has also increased the amount of e-commerce that moves today as compared to pre-COVID. The amount of freight that moves through the e-commerce channels has accelerated and shippers, if they weren’t already, have started thinking about fulfillment on an e-commerce platform.
Aaron is a senior leader within NFI Brokerage, which is made up of 250 employees spanning across 10 locations in North America. With more than 40,000 carrier partners, NFI’s brokerage capabilities span committed capacity, refrigerated, consolidation, flatbed, over-dimensional, intermodal, car hauling, final mile, and more, moving more than 300,000 shipments annually for its customers