The pandemic led to one of the tightest freight markets in recent history. Skyrocketing consumer demand created major freight capacity restrictions, with brokerage and spot market rates only softening in recent months. But shippers still found a way to move goods within tight carrier networks — even when the cost was high.
To explore how shippers balanced securing reliable capacity and managing exorbitant freight costs, we created the 2022 Truckload Capacity Report. This report summarizes the creative freight strategies that shippers used in 2021 to weather an extremely challenging supply chain, and analyzes data-driven trends in shippers’ sourcing solutions.
In this tight capacity market, brokerage and spot market sourcing became prevalent foundational freight strategies. Although appropriate in instances of unplanned or elevated freight volume, heavy reliance on these solutions created a disconnect between shippers and carriers. Without steady carrier relationships, shippers experienced hits to their bottom lines and unreliable carrier service.
In particular, our report documents two major trends as shippers navigated a highly restricted carrier network: (1) shippers’ reliance on brokerage solutions beyond best-use scenarios and (2) significant cost premiums in spot market- and brokerage-dependent freight strategies.
Brokerage and spot market solutions provide short-term relief in shipper networks
Brokerage and spot market solutions are best used in instances of unexpected or elevated freight volume. But many shippers use brokerage solutions beyond volume surge events — significantly hurting their freight network performance.
We analyzed 141,040 shipper and lane combinations in 2021 to understand the extent that shippers relied on brokerage solutions. Instead of returning to prior freight strategies after surge volumes subsided, we found that shippers largely continued using brokerage options even after they regained regular carrier capacity.
When shippers increased the percentage of shipments moved by brokerage during a surge event, 73.4% of shipper and lane combinations continued using brokerage after freight volume subsided.
When shippers didn’t increase the percentage of shipments moved by brokerage during a surge event, only 24.5% of shipper and lane combinations continued leveraging brokerage after the surge volume period.
Once brokerage sourcing enters shippers’ networks, they have a lot of staying power — and a heavy reliance on brokerage and spot market solutions led to long-term cost challenges in 2021.
Brokerage and spot market solutions come with significant cost premiums
To explore the cost challenges of using brokerage and spot market solutions beyond best-use cases, we analyzed 1,253,440 shipments across 53 shippers that contained only intra-U.S. truckload movements in 2021.
Our analysis found that cost premiums of brokerage- and spot market-dependent freight strategies were exorbitant last year — confirming that these sourcing options are best used for surge events, not as primary sourcing strategies. Specifically, we analyzed rate data and quantified cost premiums associated with three sourcing approaches.
Spot Market-Only Strategy. Regardless of the type of capacity shippers leveraged, we found that shipments using a spot market-exclusive strategy experienced a 10.9% price premium compared to contracted loads. Further, when a 1% market surge occurred at a shipment’s origin, the spot rate premium increased 8.2%. For contracted rates, the premium only increased 2.4%.
Brokerage-Only Strategy. Shippers that used brokers exclusively to move freight experienced a 9.5% price premium compared to asset-based carriers, regardless of whether the load was a spot or contract shipment. When focusing strictly on volatile spot rates, we found that shippers’ brokerage price premiums increased 12.7%. Conversely, brokerage price premiums for contracted rates were only 8.8% higher than asset-based linehaul rates.
Digital Freight Matching Strategy. Digital freight brokers or digital freight matching companies work to make sourcing capacity more time and cost efficient for carriers, brokers, and shippers. But we found that digital freight brokerage only had an estimated linehaul cost reduction of 0.63%, indicating that it doesn’t provide reduced costs to shippers.
Download the 2022 Truckload Capacity Report
For a detailed dive into shipping trends and agile freight strategies in 2022, download the 2022 Truckload Capacity Report. This report combines data-driven trend analysis with transportation expertise to help you optimize your approach to carrier sourcing.
Breakthrough provides innovative transportation technology solutions and market insights to the world’s most reputable brands. With our cutting-edge Network Intelligence solution and FELIX platform, we create transportation strategies that improve transportation network efficiency, reduce cost, and establish stable networks.
Contact us to learn more about how we can help you execute a freight network strategy to meet your goals.