The non-asset-based freight brokerage is undergoing a revolution as the impacts of nearshoring not only affect supply chains but also the workforces that cater to them. Abby Hafenbredl, Account Development Manager at Lean Solutions Group, spoke with FreightWaves about these trends, opportunities and the future of freight brokerage workforces.
For freight brokerages, one of the largest costs is people, and managing the right staffing levels based on market conditions is crucial. Historically freight brokerages, while adept at gaining new business, frequently mistime and misjudge staffing levels when market conditions change. With the rise of staffing solutions that specialize in nearshore and offshore services, greater attention is now being paid to the type of staff a brokerage should focus on in-house.
Post-pandemic world still reeling from workforce changes
One of the trends exacerbated by COVID and remaining after it is the growing struggle to find talent. Hafenbredl said, “It’s been getting harder and harder to hire and retain good talent in our industry, especially when you’re looking at entry-level positions. Those are really difficult positions to keep people motivated [and] keep people on a career path, especially right now in this market, when it’s been really tough and the margins have been really thin.
Another trend Hafenbredl observed involves larger corporations keeping their core talent and main business goals in the United States while seeking ways to reduce overhead costs. Inflation and higher wage costs for talent in the U.S. are some of the additional reasons behind examining third-party solutions.
“If you’re not using third-party solutions like outsourcing or investing in your technology, it won’t be profitable anymore. The old way brokerages were set up … the strategy was ‘Open more offices – we can land more customers and we can get more employees.’”
More offices create more overhead and other challenges like hiring, training and retaining workers. A common strategy for freight brokerages is to hire entry-level sales and operations staff right out of school, and this staff often requires additional training time to become familiar with the industry. With the expanded capabilities of third-party staffing solutions, this approach puts brokerages at greater risk during a down market. Inexperienced staff have higher rates of attrition, which requires more costs to hire and train replacements.
In the past, one pathway for brokerage growth often involved outside funding to grow and scale, with the goal to either acquire more brokerages or be acquired. Hafenbredl adds, “There are so many other aspects that really don’t make as much sense anymore like they did in the old days when you’re just trying to make yourself look good for venture capital or private equity to buy you out.”
Given the challenges of finding, training and keeping U.S.-based talent, more brokerages and freight companies are turning to outsourcing as a long-term strategy.
Outsourcing opportunities and challenges
The debate over the return to the office versus hybrid work has left brokerages in a tricky position, assessing the productivity of remote office workers versus a centralized workforce in the office. Hafenbredl explained that many companies now want employees not to be fully remote and instead opt for a hybrid setup, in a step back from pandemic mandates that required a rapid pivot to fully remote work where applicable.
An added challenge is finding U.S. workers who were once fully remote but are willing to return to the office. “I think finding people is even harder than it was right after COVID, so companies that are utilizing third-party providers and can collaborate with other providers and solutions are gonna have a major competitive advantage – and they’re able to leverage talent to increase productivity and reduce attrition and work cycles,” said Hafenbredl.
Hafenbredl notes that for outsourcing, back-office operations like order entry, invoicing, accounting, and track-and-trace are the most common tasks, but companies must take extra care to ensure these workers feel valued. “The main differentiator I’ve seen with my customers, the ones that are successful using third-party providers are the ones that treat these employees like their own.”
For example, when a company signs up a satellite office in Colombia, there still need to be people based in the U.S. to support, train and integrate those employees into the company culture. These employees must feel like they have a purpose and they’re a part of the company.
Managed correctly, those outsourced teams become some of the most successful and profitable divisions within a company. “A lot of my customer teams in Colombia are the bread and butter of why their division of the company has been successful and profitable. People will look at that part of the company and figure out, ‘OK, how can we do the same thing with our division?’”
Equally important is promoting the triumphs to the broader organization. “Some of my great customers have bonus programs and they have CEO shoutouts. That goes so far with our reps in Colombia because they feel like they’re part of something bigger than just sitting in a call center in an office. That’s why with Lean Solutions, we’re not like a traditional [business process outsourcing] provider where they give you people and you figure it out; we handle everything to help keep all of the revenue-based operations in-house in the States.”
Thin margins and market volatility can spell trouble for companies that are holding back on adopting outsourcing. “You need to have some flexible solutions to be able to ramp up and down and provide that level of customer service that the shippers are requiring right now.”
Scalability when you need it, regardless of the business cycle
Greater brokerage competition is creating a situation in which nimble brokerages with the resources to quickly scale up can win the business, compared to the traditional model of slowly training and developing a workforce to handle eventual new business.
Hafenbredl highlighted how the ability to quickly ramp up for a special project or new business award is one area Lean Solutions specializes in. The ability to quickly scale up and bring on added staff for a special project or customer volume surge can quickly overwhelm an unprepared brokerage’s operational staff. The short-term nature of special projects creates an added roadblock in the traditional brokerage model, where staffing is static and inelastic. Once the project concludes, the added workforce may be underutilized and drag down company earnings through higher overhead costs.
The current downcycle is placing additional pressure on operational efficiency in the form of higher customer service expectations. To Hafenbredl, being flexible and scalable is the difference maker. “In this market, if you’re not on point with on-time pickup, on-time delivery and great communication, you’re gonna be left in the dust.”
The bonus from growing nearshore and offshore services is the growth and development of talent with existing experience in the freight and transportation space. Lean Solutions Group’s yearslong investment efforts paid off with an over 10,000-person talent pool that continues to grow as they work with more clients.
Looking ahead
The recent expansion in nearshoring in Mexico is creating a corresponding increase in demand for Mexico-based staffing solutions. Brokerages attempting to take advantage of the cross-border boom will need to partner with providers that already have structures in place to have boots on the ground and understand the unique cultural and operational considerations in that market.
“Building those relationships is super-crucial, and that’s another reason why we set up some operations in Mexico City to be closer to the action so that if our customers need to go visit their Laredo facilities or Monterrey, they can also come by the Mexico City office and see their team and start to build those relationships there to have competitive advantages in the market,” Hafenbredl said.
For Lean Solutions, investments in technology and multiple offices provide an added benefit: fewer costs compared to the traditional model of a brokerage opening its own offices when expanding.
Having a third party manage these aspects is especially important with higher interest rates and office space costs. For Hafenbredl, with freight markets remaining depressed paired with lingering infrastructure and inflation, the smart solution for companies is to focus internally on things they can control such as staffing. Partnering with a third-party solutions provider with the expertise to manage and expand their existing operations is a surefire strategy for success regardless of market and economic conditions.
To learn more, visit www.leangroup.com.
