The freight recession has officially dragged on longer than the COVID boom, and brokers are feeling the pinch of chronically suppressed margins. While it is tempting to forgo tech upgrades during a downturn in an attempt to save money, this approach will leave brokers at an even greater disadvantage when the market inevitably turns.
High-frequency data housed inside FreightWaves SONAR indicates that the freight market has hit bottom, pointing to an imminent recovery. While this is an optimistic sign, Tai Software Chief Revenue Officer Sean McGillicuddy believes that any market shift seen in 2024 will pale in comparison to the boom of the early 2020s.
“I think the second and third quarters will bring a lift in the market that gives us all some hope for the future, but don’t think it will feel like the market has turned compared to good years in freight,” McGillicuddy said. “Unfortunately, I think we will have to wait until the second quarter of 2025 for that.”
A slow market climb may feel somewhat tedious or underwhelming at first, but it actually presents brokers with an invaluable opportunity to upgrade their operations during the climb. With brighter days on the horizon, it is easier to justify overdue upgrades. But if brokers want to be ready to take advantage of the improved market, those upgrades should start now.
“In a bull market, it is hard to slow down. When the market slows up, the more seasoned brokers who have seen the ups and downs know how to utilize the downturn,” McGillicuddy said. “They don’t panic because they know it is just another cycle. Instead, they use the time to evaluate tools that could help their business be more efficient. The companies that spend the time wisely end up pulling ahead when the market turns.”
Brokers aiming to utilize current market conditions as a preparation zone should focus on identifying current inefficient in their operations. McGillicuddy recommends categorizing each segment and setting up investigations into individual stages of the shipment lifestyle to uncover potential areas of improvement.
“The goal is for management to have a clear picture of the process, so they can ask the hard questions,” McGillicuddy said.
Those “hard questions” may include inquiries like: How long does each stage take? Could our processes be faster? Are we winning all the freight we can possibly win? Is our margin the strongest it can be?
Once those questions are answered, brokers can create a roadmap to solving inefficiencies while they still have the time and bandwidth to devote to making improvements. Depending on each individual brokerage’s needs, the roadmap could include embracing automation, growing new partnerships or removing current redundancies.
“Logistics is a fast-paced industry, and there is a tendency to try to keep grinding in all markets. Make sure you aren’t spinning your wheels and staying busy for the sake of being busy,” McGillicuddy said. “Take a step back and dig into the areas you can improve. The brokers who have taken this approach are thriving through a down market.”