Load Volumes Decline for Logistics Firms but Gross Margins Rise, Voltmann Says
By Jonathan S. Reiskin, Associate News Editor
This story appears in the April 20 print edition of Transport Topics. Click here to subscribe today.
Freight brokers and logistics providers, who met earlier this month in San Antonio, provided more evidence of the bleak condition of the freight transportation business and also moved to gather data on the size of their segment of the industry.
Load volumes and revenues have been on the decline, but gross margin improved, said Robert Voltmann, president of the Transportation Intermediaries Association, summarizing the ex-periences of his membership at the group’s annual meeting. The results were similar to those published by a major load board and a transportation stock analyst.
In terms of research, Voltmann said TIA has hired an Auburn University business professor to publish a quarterly market report on the scope of work by brokerage firms and third-party logistics providers. Voltmann said the report will be used both for benchmarking comparisons and to generate information about the transportation intermediary business.
“Volume and revenue were down in the third quarter of 2008 and got worse in the fourth quarter, but gross margin was up,” Voltmann said of the findings by Auburn’s Joe Hanna in TIA’s 3PL Market Report. Gross margin refers to the proportion of gross revenue a broker keeps after paying trucking companies and other freight carriers.
Voltmann said the margin improvement arises from two factors.
“Freight rates [for carriers] are not terrific,” he said and added that cash-strapped trucking companies are increasing their use of quick-pay discount programs. He said brokers have long offered expedited payment programs where a carrier or driver gets money more quickly — but less of it.
“This has always been done, but more carriers are looking for money faster now,” Voltmann said.
Load board TransCore 3sixty Freight Match noted a sharp decline in activity, according to its annual broker survey published earlier this month. In June 2008, the company saw about 6.4 loads posted for each truck looking for work. By January, the ratio was down less than 1, with four loads being pursued by five trucks, on average.
Voltmann said the TransCore statistics are indicative of a very thin freight environment but that they overstate the problem.
“In this market, brokers don’t have to pay to post loads, so they don’t,” he said.
Stock analyst Justin Yagerman attended the TIA meeting and told clients of Wachovia Securities that freight demand remains weak despite “modest sequential improvement” in March, relative to January and February. Yagerman also said the brokers anticipate more trucking companies and owner-operators will go out of business this year, to the extent that “shippers are concerned about long-term trucking supply.”
Voltmann said another purpose of the market report is to figure out the size of the U.S. brokerage and logistics industry.
Noel Perry, a trucking economist with FTR Associates, estimated the brokerage market at $37 billion a year in an early-April presentation for analyst John Larkin of Stifel, Nicolaus & Co.
Voltmann dismissed that estimate as far too low, and offered a gross revenue figure of $161 billion a year for brokers and 3PLs. But he admitted he cannot prove that, and said it is a major part of the reason TIA has commissioned the Auburn professor to compile a quarterly report.
In terms of federal policy issues, Voltmann said there has been little action in recent months. At TIA’s fall meeting, there was concern about a proposal to mandate the posting of pricing information (11-24, p. 2), but that has quieted, Voltmann said.
As for its internal organization, TIA members elected and installed Chip Smith, president of Twin Modal Inc., Roseville, Minn., as the group’s new chairman. Smith succeeds Doug Clark, president of Cargo-Master Inc., Mesquite, Texas.
Alec Gizzi, president of JBS Logistics, Glendale Heights, Ill., is TIA’s new vice chairman.
