Convoy Logistics, based in Seattle, business failure a few weeks ago, can be used as an historic marker in the supply chain/logistics field. It means, to be successful, just having a super software model no longer guarantees success. It is a challenge to all the medium size and small 3PL freight brokers in the United States. That does not mean that there will be a bloodbath of freight brokers. Rather it means that the successful ones will need to have updated their business model.
I live in Chicago. Crane’s Chicago Business listed in 2022 fastest growing Chicago area-based companies in the last five years in the Chicago area. Three of them are freight brokers were listed. They are Transportation One, Edge Logistics and Redwood Logistics. Clearly there is a way to be a successful business.
In the early 2000’s, it seems all a freight broker needed to be successful was to have a basic super software which moved the ball forward, giving shippers opportunity to be more efficient in the supply chain and for many firms providing the first reliable data on their supply chain/logistics process.
In my nearly 50 year career in supply chain management, I probably received thousands of sales pitches from brokers. It was amazing to me, how few of those sales calls, the sales person, knew what made their organization successful. They will just tell me the broker they represented was wonderful. I attribute that lack of information, to failure of the CEO to look beyond the transaction basis of business and figure out how the organization can bring value to a particular group of customers.
There are larger freight brokers out there, such as C H Robinson which will be able to provide value to the largest firms with all its many physical and software technologies. Nobody can do it all, and brokers who can find their niche in a market, such as food, hazardous materials, etc., can be successful.
The freight broker industry in 2023, is expected to be down 20% than in 2023. A dip like that will clear firms which do not have understanding of a market in can be successful in. Yes, the business market drop was a major contributing factor in Convoy Logistics failure. I will speculate that there were deeper issues in the firm than just poor business environment.
It also says what made you successful in the beginning of the 2000’s will no longer be enough. For the majority of freight brokers, 3PL’s, finding a market niche they can be successful in will be crucial to sustaining the business.