In recent years, the logistics landscape has undergone a strategic transformation, with large freight carriers increasingly establishing their own logistics divisions, also known as their Strategic Brokerage.

This move is not just about operational efficiency; it's a comprehensive strategy aimed at business growth by adapting to evolving customer demands, expanding lane offerings, and handling more capacity. 

As these divisions become significant revenue drivers, more carriers are obtaining their broker authority to remain competitive. Having their own fleet is what helped carriers build their customer base, but developing their Strategic Brokerage is how they will sustain and accelerate their growth in the future.

Top Reasons Behind the Rise of the Strategic Brokerage 

1. Managing Excess Loads While Meeting Customer Demand

The primary driver for establishing logistics divisions within large freight carriers is to maximize operational efficiency. These divisions allow carriers to handle excess loads that their asset-based fleets cannot accommodate, ensuring they meet customer demand without overextending their resources. This capability makes them even more attractive to shippers who need reliable and flexible logistics partners.

One example is Maersk, who has significantly expanded its logistics capabilities, investing in end-to-end supply chain services, including last-mile delivery, to better control capacity and service reliability​ (FreightWaves)​.‍

2. Diversifying Revenue to Mitigate Risk

By integrating logistics services, carriers can diversify their revenue streams. This strategic move helps mitigate risks associated with the cyclical nature of asset-based operations. Investments in logistics create alternate revenue streams that can sustain carriers during market fluctuations. This trend was notably accelerated by the record profits carriers made during the pandemic​.

According to data from the Truckload Carriers Association (TCA) and FreightWaves, brokerage revenue as a percentage of total revenue hit an all-time high of 22.01% in June 2021. This surge occurred alongside near-record revenue efficiency on the asset side, indicating that both brokerage and asset operations were flourishing simultaneously during this period (Gemini Shippers, FreightWaves).

Additionally, during times of high demand, such as the pandemic, carriers reported substantial increases in brokerage revenues. For example, the revenue from brokerage operations helped sustain carriers when traditional asset-based revenues were under pressure due to fluctuating market conditions (FreightWaves).

3. Offering a Comprehensive Customer Experience

Logistics divisions enable carriers to offer comprehensive, integrated solutions to their clients. This approach enhances customer satisfaction by providing a seamless service experience from origin to destination. It also allows them to service customers in different geographic regions and with varied commodity requirements.

Carriers like Maersk and MSC have focused on building robust logistics networks to support growing e-commerce demands, which require sophisticated logistics capabilities beyond traditional shipping​ (Marine Insight)​.

‍

Strategic Brokerage vs. Independent Brokerages: What’s the Difference?

The Strategic Brokerage - Logistics divisions within large freight carriers - and independent small brokerages operate under distinctly different business models and objectives. These differences shape their operational strategies and integration needs.

Strategic Brokerages aim to maximize contracts with existing customers and drive more revenue for the parent company as a whole. This division can also support new customers and their movement of goods using the company's own assets, offering end-to-end logistics solutions. They benefit from centralized resources, budget allocations, and can leverage the carrier company’s brand and reputation in the industry to secure business. 

In contrast, independent small brokerages focus primarily on finding and then growing their own customer base and finding reliable shipping partners to meet their customers' needs. Since these companies own no assets, many players can enter the market and they often face tough competition. 

Both the strategic and independent brokerage look for technology to optimize their business. However, they differ in their experience with technology and also in terms of what problem they’re trying to solve. The strategic brokerage’s asset side has an established TMS, and the logistics division often tries to adapt its workflow to fit this carrier system, which is not designed for brokerage activities. Alternatively, they resort to using spreadsheets, which are neither scalable nor efficient. Independent brokers also face the latter challenge but, as previously mentioned, they have fundamentally different goals and operations. 

The software requirements for strategic brokerages differ significantly from those of independent small brokerages as well. These differences stem from the operational complexities and integration needs of large carriers and shippers.

Strategic Brokerage Software Needs Vs. Independent Small Brokerages

1. Integration with other Systems: 

Strategic Brokerages require seamless integration with their parent/asset company’s ERP, BI tools, and other existing systems to ensure streamlined operations and real-time visibility. This complex integration supports centralized operations and better control over resources.

Independent brokerages look for straightforward integrations with load boards and SMB products like QBO, DAT, and TruckStop. They focus on enhancing their workflows and efficiency without the need for extensive system integrations, favoring solutions that are easy to implement and require minimal training.

2. Scalability and Customization: 

Strategic Brokerages tend to have complex and varied operational requirements, necessitating scalable TMS solutions that grow with the business. Customizable features to tailor workflows, document templates, and reporting capabilities are crucial for meeting these unique needs.

Independent brokerages on the other hand can benefit from a more prescriptive system that requires minimal customization and training.

3. Advanced Automation and Efficiency: 

Strategic Brokerages require sophisticated automations, such as setting triggers to automatically assign a CSR based on a customer order and automatically applying rates to specific commodities. These features streamline complex workflows and reduce manual effort.

Independent brokerages, however, benefit from simple automations like status changes, such as moving from "booked" to "delivered." Their focus is on enhancing everyday efficiency with easy-to-use tools that require minimal setup.

4. Support for Complex Customer Needs: 

Strategic Brokerages often deal with large, complex customers with specific requirements. Their TMS must support EDI and API capabilities to meet these demands, ensuring smooth data exchange and integration with customers' systems. 

Independent brokerages likely do not have as many contracted customers with the same type of connectivity or visibility requirements.

5. Ideal Future State:

‍While it’s essential for the Strategic Brokerage to have its own dedicated broker software, the ideal goal is for the entire company to manage everything under one platform. This would enable stakeholders to easily access all data, facilitate seamless data transfer between divisions, and allow users to switch between divisions effortlessly when necessary. The company is likely seeking a software partner who, in the future, can offer a comprehensive solution for both needs. A software with a linear solution solely for the brokerage is likely a short-term fix and not a viable long-term solution.

Rose Rocket’s Solution to the Strategic Brokerage

As Strategic Brokerages within large freight carriers become key revenue drivers, they face challenges that traditional TMS systems are ill-equipped to solve. The transportation industry is evolving rapidly, and with it, the needs of companies striving to remain competitive and efficient. At Rose Rocket, we understand that a one-size-fits-all approach no longer suffices. That's why we've focused on developing a transportation platform that is not only scalable and customizable but also highly adaptable to the unique demands of the strategic brokerage (or, any other new business process).

Scalability for Growth: Our platform is designed to support the strategic brokerage at every stage of its growth. Whether you're managing current operations or expanding your logistics division, our software scales with your business, enabling you to handle increasing volumes and diversify your offerings without compromising efficiency.

Tailored Customization: No two businesses are the same, which is why our platform offers extensive customization options. From tailoring workflows and document templates to controlling customer visibility and customizing user permissions, Rose Rocket allows you to fine-tune every aspect of your operations to meet your specific needs.

Seamless System Integration: Integration is crucial for logistics divisions operating within larger freight carriers. Our platform provides robust API capabilities to sync data seamlessly across all existing systems, whether it’s syncing loads from the asset division or integrating with parent-company ERPs or BI tools. This ensures that data flows smoothly and operations remain streamlined.

Advanced Automation: We’ve incorporated advanced automation capabilities that eliminate manual workflows, allowing your team to focus on more strategic tasks. From automating order entry to setting up triggers that streamline operations, Rose Rocket’s platform boosts efficiency and reduces operational overhead.

Supporting Complex Customer Needs: In today's logistics landscape, customer expectations are higher than ever. Our platform supports complex customer requirements, including track and trace visibility, custom fields, and EDI capabilities for seamless data exchange. This ensures that you can meet and exceed your customers' demands with ease.

A Vision for the Future: Looking ahead, the ideal state for any strategic brokerage is to operate seamlessly alongside the asset division under one unified platform. Rose Rocket’s vision is to make this a reality, providing accurate reporting, ease of use, and the ability to navigate between divisions effortlessly, all within a single, integrated solution.

‍

As the logistics landscape continues to evolve, Rose Rocket is committed to providing the tools and technology needed to keep pace. By choosing a platform built for the future, you can ensure that your strategic brokerage not only meets the demands of today but thrives in the challenges of tomorrow.

‍