Brokering Power Only: Pandemic Band-Aid or Long- Term Trend?

Over the last few years, brokering power only loads has increased in popularity and been a huge driver of growth for some freight brokerages. When you broker a power only load, your company, or your customer, supplies the freight and the trailer and all you need from the carrier is the driver and the tractor. There are many benefits to shippers, brokers, and carriers in this model, and it helped the industry overcome a lot of the problems that the pandemic created. I would like to discuss how this offering got to where it is today and where it is going.

New trends normally come from a need. When I think of power only’s accelerated growth, two main needs come to mind. Shippers need to be able to get their freight out efficiently and carriers need drivers. Both problems were exacerbated by the pandemic labor crisis. Power only helps solve both problems and is a win-win for the shipper or broker and the carrier. To me, it was no surprise to see the growth in this segment of the industry through these challenging times.

One of the many things I have learned in my time in the transportation industry is that shippers sure love their spot/drop trailers. Spotted trailers can make up for a lack of storage space by giving the warehouse another place to keep product so they don’t have to stop or slow production when the warehouse is full. It also allows the shipper to load at their convenience instead of adhering to a stricter schedule with live loads. This also allows them to save on detention costs and make up for loading inefficiencies, which got worse with understaffed warehouses through the pandemic. Many customers won’t even let you bid on their freight unless you can agree to meet their trailer pool demands. This creates an additional barrier to entry for non-asset-based brokerages and for carriers who are not able to supply a trailer pool. However, even if you have the resources to spot these trailers, there is still a driver shortage. To provide the capacity needed to service these accounts, brokerages look to smaller carriers to provide the driver and the truck.

And the carriers love it! These types of accounts normally revolve around high volume freight or are dedicated accounts and consistency is important in developing a good driver job. Drivers also love the efficiency of drop and hook freight, they would much rather be rolling than sitting at a warehouse for hours. Most carriers are not large enough to be able to win or service these types of accounts in their entirety. So, they will partner with brokers to be able to participate in this type of business. If they have a good enough relationship with the broker, it even allows them to hire more drivers and scale their business without the additional costs of purchasing more trailers. Knowing where their revenue is coming from and having it be consistent allows the carriers to manage their business easier, not to mention not having to worry about monthly trailer payments and maintenance.

The success of this has led to wider usage of power, only no matter the length of haul. Big brokerages have spent millions developing apps to give carriers visibility to dedicated, short-haul, regional haul, and long-haul power-only freight. Carriers used to not want to go long distances on power only moves because it just led to more deadhead miles since they did not know if or when they would be able to get a return load. Now, through these apps and increased visibility to the large brokerages power only networks, they can book their backhaul at the same time they book their head haul. More and more brokerages have jumped on board which has given the carriers the ability to run a power only business. Asset based brokerages can also use this as a tool to rebalance their asset’s trailer pools to an area where they can be better utilized without having to send a driver far from home, or racking up bobtail miles.

That is a lot of benefits! However, before you go buying a truck and downloading some apps, or buying some trailers and bidding on dedicated or drop trailer accounts, there are many things brokerages and carriers need to think about. For the brokerages, they need to make sure they have a bulletproof broker-carrier contract and trailer interchange agreement. They need to make sure their due diligence is sound for carrier vetting. They need to have their insurance in order and understand the risks they are taking with having another carrier hauling their trailer in today’s nuclear verdict era. There must be a plan on how to maintain the trailers and the costs associated with that. They need to have a plan for regular trailer inspections to know which driver did the damage. The list goes on and on. Getting into this business is not a decision that should be taken lightly.

“To Provide The Capacity Needed To Service These Accounts, Brokerages Look To Smaller Carriers To Provide The Driver And The Truck”

For the carriers, it is a little easier, but they also have things to plan for. The carriers need to know how long that broker is going to have the account and need to think about the sustainability before hiring more drivers or buying more trucks. They too need to make sure their insurance is in order and that they have enough coverage on their trailer interchange insurance. They need to make sure their drivers do pre-trips and document any damage before taking any trailer. They need to know all the driver’s responsibilities for the account. If they are working with an asset-based broker, what is going to happen to them if the asset side of the carrier hires more and fills the fleet? These and many more questions should be asked before getting into power only.

Once you think about all those things and have a plan, you will probably decide power only trucking is a pretty good way to get into the industry or to grow your business if you are a carrier. For the brokerages, if you are not already asset based and do not have a lot in the bank, it is a big leap of faith. However, if you have the customer base and volumes to keep those trailers loaded in lanes that carriers want, you could be setting yourself up for lots of future growth. Although the pandemic added fuel to the fire, the driver shortage and supply chain inefficiencies will always be there. Carriers will always choose efficient freight over poor utilization. Shippers will continue to use carriers, and their trailers, to make up for their shortfalls. Young people are not saying they want to be truck drivers. Most drivers will not give up a work-life balance and revert to life on the open road. The things driving the need for brokering power only are still here. I am sure it will have ups and downs, and I think the growth in this area will be harder to come by for brokerages this year, but for those reasons, I see brokering power only growth to continue long term.

Do you think brokerages will continue to grow their power only business in 2023? Or, will big carriers grow their fleets and assets will take back market share because the shippers are driving rates down?