Why Freight Brokers Undercut Carriers On Contract Freight

Why Freight Brokers Undercut Carriers On Contract FreightIndependent owner operators had a banner year in 2018. A hot economy, talks of import tariffs and the E-log mandate formed a trifecta for rate increases across the board. Weather also played a toll in more than one capacity crunch. But what about 2019? If you listen to the big players in the freight brokering companies, the sky is falling and rates are dropping.

Are the best days really behind us? According to the CH Robinson exec quoted in this Freightwaves.com article, “the market feels pretty loose and freight is flying off the board.” Note the date of the article, Jaunary 11, 2019.

I’ve found several articles on the subject of freight brokers undercutting carriers on contract freight. This brings the obvious question, why? I’m also curious about just how “under” they’re bidding. Are they bidding to get the contracts, to drive the market down or both?

I’m also curious about why they think lower rates are to their benefit. After all, they take a percentage of that rate for their profit. Any idiot knows that 15 percent of 3 bucks is better than 15 percent of 2.

In the background of this conversation are two related articles that come into play, both from Freightwaves.

Being a writer, I also know the power of a good headline. Even if an article is pure speculation, a good headline can go a long way in creating the perception of reality to an educated guess.

To gain a little insight on the topic, I reached out to a pro, Wes Kornowske. Wes is the Vice President of Operations at Paper Transport, Inc. PTI is also my employer. Like many other conversations on the podcast, we went down more than one rabbit hole.

Try as they may, freight brokers don’t set rates. They may do their best to book cheap, but it’s all about capacity. We all know January and February aren’t the best of months. It takes 12 months to make a year.

More Show Notes

Fox Body Mustang Turns 40. Hemmings.com. Part of the reason it was a big deal was because of the crappy Mustang II it replaced.

Ford’s New 441 V8 Pushrod Engine. RoadandTrack.com

Passenger Jet Hits 801 mph land speed. BangShift.com

Is This Really Bullying? CBC.ca