The demand for freight brokerages has never been greater as shippers face increasing pressure to lower costs while offering faster delivery.
A recent report by Allied Market Research supports this claim, valuing the global freight brokerage market at $48.1 billion in 2021 and estimating revenues will reach $90.7 billion by 2031 at a compound annual growth rate of 6.3% from 2022 to 2031. The report attributes this significant growth to a variety of factors, including a rise in demand for cost-effective ways to ship goods faster and safer and an increased demand for tech-driven logistics services. However, rather than making the necessary investments themselves, shippers are looking for partners that can meet their needs.
Freight brokers today must invest in technology moving forward to remain competitive in a growing but tight market. Technology adoption and the data that comes with it has the opportunity to completely change the way freight brokers operate. As a result, more and more companies are implementing technology to transform their businesses. A Deloitte and MHI study of 1,000 manufacturing and supply-chain industry leaders found that in the next five years, 82% of supply-chain companies plan to adopt predictive and prescriptive analytics, while 22% are already using the technology.
It has become clear for many in the industry that the path to success means investment in better business management tools. But, regardless of what those tools look like, how brokers collect and use the data associated will be key to maintaining a competitive edge. However, with so much freight data coming in, it can be challenging to decipher what is of actual value.
In this article, we will explore why you should care about business analytics as a freight broker, what metrics you should consider, and how to use those data points to improve your business operations.
Why Business Analytics Matter for Freight Brokers
Measuring the right key performance indicators (KPIs) based on your business analytics is an important practice across all industries. As a freight broker, choosing the most valuable metrics and applying that information to optimize your business can provide a major competitive advantage. However, this process can be challenging since the list of KPIs is often long and varies from broker to broker.
A report by Mordor Intelligence found that any delays or issues with a shipment are hard to analyze with a traditional brokerage. For example, while you might know there’s a problem, if you’re not tracking and measuring your business operations, you may be unable to find out what’s causing it and how to prevent it from happening again. However, with insight into the right metrics and tracking tools, you can better plan future moves and increase visibility and control across your supply chain.
Selecting the right platform with sophisticated analytics and data streams allows you to optimize shippers’ routes, save time and money, and more efficiently make use of your assets.
What Metrics Should You Measure as a Freight Broker?
While you may understand the value of business analytics, identifying the metrics you want to focus on can be overwhelming. It’s important to remember that you don’t have to use every transportation metric available. Instead, focus on the KPIs that will help you grow your freight brokerage.
Here are three key areas freight brokers should consider measuring.
1. Load Metrics
Keeping a close eye on load metrics should be an important step in your load-planning process. The following KPIs can help you become a more reliable partner and ensure shipments arrive quickly, on time, and for a reasonable cost:
Rates can fluctuate throughout the year based on various factors, including the time of year, the economy, the weather, and even location. It is important to monitor these changes to ensure your rates reflect the industry and current market trends.
DAT Rate Analytics
DAT shows the most current truckload rates paid by freight brokers and shippers on 68,000 lanes. These analytics use a real-time database of historical trends to stay on top of market conditions. DAT also provides:
- Freight forecasting tools to help manage both short- and long-term planning and more favorable shipping contracts.
- Weekly recaps and updates on capacity and demand (load-to-truck ratios) and national averages for spot market rates.
- Trendlines that integrate with DAT’s load boards so you can more easily find the best rates available.
DAT Hot Market Index
This tool is an easy way to check load-to-truck ratios at a glance. Hot Market Maps provide:
- Load-to-truck ratios — the number of loads posted on DAT load boards vs. the number of trucks available — for 155 distinct freight markets across North America
- Three separate maps for van, reefer and flatbed
- The ability to zoom in for a closer look at any region or market
- Current conditions, showing data from the previous business day
Cass Freight Index
The Cass shipments index is a measure of the number of intracontinental freight shipments across North America. The expenditures index measures total dollars spent on freight transportation, including both contract and spot market rates. The index is typically released within two weeks of month-end and, using January 1990 as its base month, is updated with monthly freight expenditures and shipment volumes from the entire Cass client base.
This metric helps brokers identify which markets to target and can make competitive bids based on sound historical data.
2. TMS Metrics
Measuring KPIs around transportation management systems (TMS) helps freight brokers make better, more informed decisions about their business. Here are a few you should consider taking a closer look at:
This KPI measures the performance of the carriers worked with by tracking the number of orders delivered at the time they were scheduled. It is a great indication of an operation’s overall performance and helps quickly identify problems. It is also key to customer retention as a customer-centric metric in which many shippers measure the success of their supply chain.
This metric helps brokers keep track of carriers that have proved unreliable and should not be used. By tracking this information, brokers can ensure every carrier they partner with is dependable and can keep their operation moving smoothly.
This number identifies how often a carrier backs out on a shipment, leaving the broker with a hot load. Monitoring the fall-out load percentage can help brokers create better and more reliable shipper and carrier relationships.
3. Business Metrics
At the end of the day, the goal is to grow your freight brokerage. Measuring the right business metrics gives you insights into your financials to ensure your business is on track and where it needs to be.
With a platform like Denim, the following metrics are at your fingertips whenever you need them:
Jobs Over Time
This metric shows payables, receivables, and profit for all jobs and indicates the success and health of the business over time by plotting historical trends. It estimates a month-end target based on current performance and offers an adjustable timeframe (MTD, YTD, rolling 30 days, or rolling 90 days).
Average Days Sales Outstanding (DSO)
Average DSO shows the average amount of time it takes your customers to pay invoices. The total DSO for a customer can be averaged over the last four or six months.
Total Factored Amount
This metric provides the lifetime or total amount factored in the platform over the past six months. The breakdown by month helps you create a profit-and-loss statement.
Fastest- and Slowest-Paying Customers
This list ranks customers by how long it takes them to pay and the number of invoices they’ve paid in the past 30 days, 60 days, MTD or YTD. This metric helps identify which customers to prioritize and which to avoid working with in the future based on their payment performance.
Most Frequently Used Contractors
Knowing the total number of loads hauled by your go-to contractors makes it easy to find a carrier to pick up a load based on whom they work with frequently.
Most Profitable Customers
By ranking customers based on the total amount of their paid invoices, it’s much simpler to prioritize or avoid customers for future jobs based on how much money they bring in.
How to Put Your Freight Broker Business Analytics Into Action
Metrics alone won’t solve all of your problems. Once you have nailed down the metrics you need to track, you’ll want to determine how to use those data points to grow your freight brokerage.
Here are four best practices to get you started:
- Define your metrics. Just looking at numbers without actually understanding what they mean won’t get you anywhere. Your entire team should use the same definition for each metric and have a good understanding of what the metric is, why you’re collecting it and how it will be used.
- Identify weak spots. Use your metrics to find areas of your business that need improvement.
- Set goals. Use your weaknesses to set realistic goals for improvement and make a plan of action for changes.
- Monitor your results. Don’t just put a plan into action and forget it. Make sure you are seeing consistently positive changes over time. Identify what’s working and what still needs improvements if necessary.
Partner With Denim Today
Finding value in data is not always the top priority for freight brokers whose main objective is to keep operations moving. The good news is you don’t have to do it alone. The right set of tools should not only help brokers collect the right data but also help them to analyze and put it to good use.
Denim’s new Business Performance Dashboard speeds up the process of making requests, providing more visibility into top carriers and customers, total factored amounts and overall business health projections.
Ready to learn more about Denim’s new Business Performance Dashboard? Schedule a demo today!