Transparency - what does that mean?
What does the term “transparent” mean to you? What does it mean to your business? There has been a lot of discussion around this concept lately in the transportation world. It seems like there are many differing opinions depending on where you are in the supply chain or freight process.
Carriers have raised their voice and demanded more transparency from their broker partnerships. They want to compare what the broker got paid with what they were paid, and they are asking for changes to the rules that allow them to do so. Drivers have recently held protests in Washington, D.C. and have met at the White House to discuss Title 49 CFR 371.3 with the administration.
This rule essentially states that a record of what the shipper paid the broker, to also include any accessorial payments, needs to be kept on file and available to all parties involved for review. Unfortunately, many carriers have waived their recourse under 49 CFR 371.3 as part of their contract with brokers. They claim that without doing so, they would not have access to freight via brokers. It has become a pain point for carriers as they ask for transparency – drivers feel like they are being price-gouged on loads and that brokers are keeping too much of the transaction, so they have requested federal intervention.
The rally cry for carriers has been for either a cap on broker margins or for more transactional transparency so the carrier can either reject the load on the front end or decide that the revenue split is fair and work with the broker. Brokers, naturally, are not enthused about a cap, and some have said they’ll comply with the requirement by making the information available to any carrier willing to stop by their offices during business hours to see the information in person. Currently, there is not a requirement as to how they provide that information.
Brokers have said that by putting out their margins for public consumption, they are being “open and transparent.” The average industry margin is 16%, which they have stated is appropriate as an average; considering they are the ones operating as the sales and freight generation department for carriers and procuring that capacity for shippers. Brokers have also stated that when it comes to being transparent to shippers, all they need to do is provide a rate quickly with high confidence in coverage.
Is that really transparency, though? To some of us, that isn’t really what we think of when we hear “transparency” – you know what you are paying and get a quote quickly, but there is no discussion about the quality of coverage or what the spot freight market is actually doing to create that price for a shipper. Typically, whenever there is information that needs to be passed from one end of the chain to the other, those in the middle will impart their spin as they advocate for their own best interests.
In the old ways of doing business, discussions did not happen without the broker acting as a filter for either the carrier or the shipper. Everyone has a right to earn a living and a margin – no one can dispute that. But there is also no requirement to do things the way they have always been done, either.
We feel there is a different way of looking at transparency, one where the shipper tells the carrier, “This is what I want to spend,” the carrier tells the shipper, “This is what I need to move the load,” and they come to an agreement. The carrier must be competitive within the marketplace, as must the shipper. When they come together to move freight, there is no margin concern for someone in the middle.
The problem has always been, how do these two collaborate? How do carriers get in front of shippers? How do shippers utilize one of the 260,000-plus carriers in the marketplace? Can they on-board carriers each time they want to use one? Typically, this has been that hurdle for shippers that keeps them from utilizing more carriers for their freight, especially spot freight. As a shipper, you can only manage so many relationships.
We believe the answer lies in the utilization of tools that allow for transparent value creation for both carriers and shippers … in a digital freight marketplace like Loadshop™. A place where carriers and shippers can come together on a price that’s market- and business-driven for both parties, with no middle influence. Where shippers know which carriers are pulling their freight because they’ve personally selected them. Loadshop™ gets freight directly in front of the right carrier, with shipper-posted rates, and takes care of vetting and on-boarding carriers, so everyone can easily come together and connect right on the platform.
That is what we call real transparency. This is Loadshop™