NFI Executive Addresses Change And Challenges In The Trucking Industry
With experience in both freight brokering and non-asset-based logistics, David Broering is a veteran of supply chain management. Broering, president of the North American Non-Asset division at NFI, discussed the competitive freight brokerage landscape as well as the difficulties facing trucking companies today with FreightWaves CEO Craig Fuller on the FreightWavesTV show, "Fuller Speed Ahead."
NFI is a third-party logistics (3PL) provider that specializes in domestic and international supply chain solutions.
The company attributes its $2 billion in annual revenue to its large-scale presence in warehousing, dedicated transportation, intermodal, brokerage, transportation management, global shipping and real estate services, according to its website.
With operations in warehousing, trucking and logistics, NFI is able to provide a wide range of approaches to logistical challenges.
"Different customers consume our multiple services for different reasons," Broering said. "Some of them are [reasons such as] connectivity, some are logic and execution. What I'd say, especially for the non-asset side, is we've built our business on execution and commitment because people expect a level of trust from the warehouse and from the truck where we possess their freight."
80% of NFI freight brokerage dealings are contracted business, according to Broering.
"We have a niche in that quasi-dedicated type of a service that we provide, but we also have a niche in being connected to a larger logistics company, a family-owned business that has this amazing entrepreneurial spirit that is promoted from within every day, and that culture won't die as we continue to evolve because we'll use that as a fulcrum to propel us forward," he said.
The freight brokerage industry has gained tremendous steam, which Broering attributes to the entrance of new digital brokerages, such as Uber Freight, as well as the aggressiveness of shippers. Broering also sees the abundance of data available to shippers and carriers alike as a key to empowering them to do more.
"I've been in the business for 20 years, and I've never seen a more competitive space," he said.
"For us, it's really about figuring out what that margin is supposed to be for us. How competitive do we have to be in order to retain clients or to land new business? Growth is a big challenge for us," Broering said.
He said high-single-digit brokerage margins could be the norm by 2025.
"I used to think of margins as being like a feather floating its way down, but now I think it's going to be more like an anvil. I think it's going to drop hard and it's happening right now," said Broering.
The logistics landscape of the 21st century has been ripe with innovation. New entrants to the industry — exemplified by the rise of digital brokers — are providing more efficient ways to move freight. What hasn't changed, and what some argue has increased, is the difficulty of operating in the trucking industry as a whole, especially for asset-based carriers.
"One thing I learned coming to NFI from C.H. Robinson was it's really hard to run trucks," Broering said.
Despite some stability in the past three years with contract rates, external factors are hitting trucking companies hard.
"Where we're at today, I don't think the baseline economic fundamentals allow for the average trucking company to survive," he said.
Recent headlines have caused headaches for asset-based carriers, as most stories convey threats to the industry. Talk of autonomous trucks and electric vehicles has caused excitement in some circles but trepidation in others. Meanwhile, the current realities of driver shortages, increases in insurance costs and the perils of potentially crippling lawsuits, have driven many out of business.
The rise in lawsuit payouts concerns Broering, as does the fact that only a handful of insurance carriers will ensure lawsuits whose damages exceed $10 million.
Running the North American Non-Asset division at NFI, Broering understands that it's easy to go through the motions of making transactions, all the while forgetting the human aspect of the process. Major issues like highway accidents can be mitigated if there's an emphasis on safety instead of pressure to cut delivery times, for example.
"I think you have to be careful and disciplined. The way I was brought up in this business was to think every load is important," Broering said. "Today, we teach our people that not every load matters and sometimes taking a risk that's unnecessary or outside of protocol of what we define isn't worth it."
He continued, "When we broker freight to a carrier and we've got a tight and legal window for delivery, our people need to understand that sometimes you can't rush. That doesn't come through when you're strictly a non-asset-based business."
Broering believes NFI's conversion from over-the-road (OTR) trucking to dedicated has greatly improved the well-being of its drivers. He stated that 95% of NFI's drivers enjoy modest regional hauls and are home three to five nights a week. Driver turnover is 35-40%.
"We honored 21 drivers last week that had more than 2 million miles of safe driving with our company. Some of these guys have been driving with us for 30 years," Broering said.
He continued, "You know what they all unanimously said about being safe? They said you can't be in a rush."
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