The freight market is undergoing profound changes, with technology, geopolitical events, and evolving business strategies reshaping its very foundations. Recently, industry experts Ken Adamo, Chief of Analytics at DAT, and Dean Croke, a market analytics specialist focusing on the carrier side, joined a discussion to unpack these shifts. The conversation, sparked by the host's observation about fundamental changes, delved into the future of brokers, carriers, and shippers, offering a glimpse into what the next five years might hold.
The Evolving Movement of Freight
One of the most significant shifts highlighted is in the physical movement of freight itself. Dean pointed to a dramatic impact on the intermodal community out of Los Angeles, noting, "so much of our freight has been built around this infrastructure in the west in Los Angeles and the west coast." However, this reliance is rapidly changing. Massive congestion in California during the pandemic led shippers to reroute imports to Gulfport, Biloxi, Mobile, and Houston. This, coupled with the deepening of East Coast ports to accommodate mega vessels, has created a structural shift away from the West Coast that appears to be sticking. The Red Sea crisis and port strikes have only accelerated this diversification, with significant monetary commitments now in infrastructure development across various ports.
Rail is also stepping up its game. Dean mentioned a new Transcon railroad planned from Phoenix to Atlanta, a major truckload lane, which could take volume away from the truckload market. He also highlighted an expedited UP service from LA to Chicago, comparing it to full truckload service. "Rail's trying to figure out how to be more competitive with truckload," Dean observed, noting that shippers have been saving considerably by using intermodal for slower-moving commodities.
The Age of the Brokerage
Despite recent challenges, Ken firmly believes "we're kind of still firmly in the age of the brokerage." He doesn't foresee brokerage shares diminishing. Instead, as shippers increasingly adopt API and bid portal platforms, and utilize freight orchestration and RFP management tools, the proliferation of brokerages is set for continued growth. Ken noted a significant systemic increase in brokerage share since 2019 and doesn't expect the rise of a single "mega broker" dominating the market. Instead, he predicts an increase in the number of large-scale brokerages, with the $100 million brokerage potentially becoming "the new floor for what you'd consider like an enterprise broker."
Technology is a key enabler. Ken argued that "the tools to... help brokers of all size, but certainly brokers that are aspiring to scale do so in a more effortless and streamlined way" are more robust than ever. Automated appointment scheduling, digital freight matching, end-to-end visibility, and new bid tools mean that, as Ken put it, "I would much rather start a brokerage today than 10 years ago" if he were a scale-minded entrepreneur. He emphasized that even smaller, non-growth-minded brokers can thrive by specializing, citing examples of niche brokers successfully serving specific industries.
Impact on Carriers
The evolving brokerage landscape has direct implications for carriers. Dean observed that technology is enabling brokers to find "carriers that are better suited to the commodity and the brokerage," leading to "smart matching capability" that helps carriers improve utilization and predictability. This reduces downtime and deadhead miles, contributing to more content carriers and less volatility for them.
Ken touched on the shift in average carrier size seen during the pandemic, noting that the "toothpaste" hasn't gone back in the tube. Shippers are less likely to work with smaller carriers directly, cementing the broker's role in the middle. While the market has seen attrition, it's largely been among carriers of the same size profile that emerged post-COVID, keeping brokerages sticky.
Concerns about capacity loss were addressed by Dean. While acknowledging that some mid-size fleets are closing shop, he clarified that the market is at equilibrium. He revealed that in a recent month, the number of new carrier authorities was almost identical to revocations. "The capacity that's joining is what he calls smart capacity. It's moving to where the growth is," Dean explained, suggesting a shift towards local and final-mile services, evidenced by growth in part loads and demand for day cab and box trucks.
The Future of Market Cycles
The discussion also tackled the persistent question of market cycles. Dean referenced a comment, "Flat is a thing. Cycles are wishful thinking," wondering if technology is flattening rate movements as all parties gain access to similar data. Ken, however, maintains that "the cycle's gone. I mean, it's existed way before the most recent two. It goes all the way back to deregulation." He attributes cycles to the market's quasi-commodity nature, making it easily overbought and oversold, with demand having a much higher weight than supply.
Ken noted the current economic "mess," stating, "the freight markets are stuck because the economy is stuck." He anticipates a cycle return when interest rates come down, similar to the pre-ELD era.
What Remains Constant
Amidst all the changes, some fundamental truths are expected to endure. Ken emphatically stated, "I still don't think any level of technological proliferation is going to minimize the impact of relationships in this industry. It is the biggest small industry in the world." He stressed that success still hinges on building strong relationships, managing exceptions, and excelling at the "little things." Technology aids efficiency but cannot replace the human connection and track record, especially when competition is fierce.
Dean pointed to the continued high turnover among small carriers. He noted that many enter the industry "not joining to build a business. They're buying a job," which often means a lack of business acumen or commitment to acquire it. He also predicted that "carriers will continue to have selective memories," recalling past protests during downturns while forgetting times of high rates during the pandemic.
Conclusion
The freight market is undoubtedly in a transformative phase. While technology is streamlining operations and diversifying freight movement, the human element of relationships and the cyclical nature driven by economic forces will continue to shape its trajectory. As Ken and Dean's insights show, preparing for the future means embracing innovation while holding onto timeless principles.