TIA Set to Discuss Regulations, Consolidation as Acquisitions Reshape Brokerage Industry

This story appears in the March 31 print edition of Transport Topics.

When the Transportation Intermediaries Association meeting begins April 9, freight brokerage and logistics executives will face a blend of new developments such as accelerating industry consolidation and familiar legislative, regulatory and customer-related issues.

The four-day meeting in Tucson, Ariz., will come barely two weeks after the announced merger of Coyote Logistics and Access America Transport. That deal vaults the combined company into the top three brokerages, as measured by Transport Topics.

It comes on the heels of multiple acquisitions by other broker-focused companies such as XPO Logistics and Echo Global Logistics, whose deals over the past three years have changed the industry.

While C.H. Robinson Worldwide still is 3.5 times the size of its nearest competitor, that company was eight times larger than its nearest competitor in the 2011 Transport Topics list of the Top 25 brokerages.

Consolidation has been accompanied by “the increasing expectations from the perspective of the shipper in terms of what he/she would like to derive from 3PL relationships,” Stifel Nicolaus analyst John Larkin wrote in an investor note.

Also on the commercial side, some brokers in the truckload sector are confronting pressure to preserve profit margins that are shrinking, along with truck capacity, as rates paid to carriers and owner-operators increase.

A 3PL  market report compiled by TIA last year found that net revenue margins, or revenue less purchased transport costs, have fallen to 13.6% from 14.3%.

As the consolidation pace continues at the top end of the revenue pyramid, a second group, known as the Association of Independent Property Brokers & Agents continues its campaign against a $75,000 broker bond requirement backed by TIA.

While the group claims small brokers can’t afford a bond that large, TIA responds that the majority of its brokers are small companies that back the bond amount increased last year from $10,000.

TIA President Robert Voltmann told TT several regulation-related issues will be addressed at the meeting.

One is the need for what TIA calls a national hiring standard.

“Congress needs to establish a single, interstate standard for hiring safe motor carriers that all industry stakeholders can rely upon so that liability is not placed incorrectly on those who hire motor carriers,” TIA officials said in a document provided to TT.

TIA hopes to get that language inserted into the next federal transportation funding bill.

The issue has evolved as state courts take multiple approaches to liability in cases such as when a shipper in California hires a broker in Alabama to move freight from Texas to New York. When that truck has an accident en route, there could be legal exposure in multiple states.

Another issue is new Department of Agriculture food safety rules applying to transportation.

“The rules seem to ignore the third-party logistics providers,” Voltmann said. “Is this good, or will it lead to a loss of business?”

That issue matters to brokers who manage produce and frozen-food shipments.

Still other government-related issues are some clarification of matters relating to interlining of freight between carriers and what constitutes “coercion” of drivers by shippers.

TIA also is expected to hear recommendations at the meeting from a task force created to assess methods of combating fraud and identity theft.

Also on the agenda are general sessions focused on the economy and methods to increase a broker’s value to customers.

Sixteen seminars will be spread over several days on topics ranging from handling government freight to intermodal to cargo claims and cross-border freight.

Other seminars will address credit scores, improving employee productivity, insurance and using technology for analytical purposes.