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Carriers shying away from using broker services, TCP survey says

The recent First Quarter Business Expectations Survey completed by Transport Capital Partners, LLC (TCP) found 87% of carriers reporting said they have used less broker services during the past three months.

“This is a dramatic turnaround since May of 2009 when two-thirds reported using more brokers. Obviously the freight supply demand balance has shifted dramatically to the carriers, and they are using their capacity to serve the needs of their long-term customers,” said Richard Mikes, TCP partner.

“The smaller carriers who have historically relied more on broker freight reported less usage of the same magnitude as over $25 million revenue carriers,” said Lana Batts, TCP partner.

Mikes and Batts noted that publicly traded brokers carriers achieve gross margins of 15% to 20%, and this typically reduces what the carriers get for loads hauled for brokers. Most carriers will service their longstanding shippers first because of not only higher paying freight, but also steadier volumes and the desire to assist these shippers as a priority. A leading load board reported that on some high-volume lanes, broker spot load rates are exceeding contract rates as brokers respond to urgent shipper needs to move freight.

The TCP survey found that 40% of the carriers report that broker freight services account for less than 5% of their revenues and that 35% report 6%-15% of their revenues from brokers. Only a quarter of carriers rely on brokers for more than 16% of their revenues.

“This reflects the traditional reliance on brokers by smaller carriers for return hauls as their outbound length of haul increases and improved technology such as electronic load boards on cell phones, and laptops are available,” said Batts, noting that the survey shows that carriers under $25 million in revenue size use more brokers.

Both Mikes and Batts envision a potential shift over time to even a more direct connection between carriers, shippers, and brokers with the advent of real-time electronic bidding on loads by prequalified carriers.

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