Spot market freight availability increased by 65% in November, compared to last year, according to the TransCore Freight Index, a measure of truckload freight volume found on load boards supported by the DAT Network, including 3sixty Freight Match and TruckersEdge.net.

November’s results also continue a four-month trend of better-than-seasonal improvement. Although November 2009 freight volume was down 4.4% from October’s, a typical year would show 10% to 15% decline between those two months. In 2008, freight availability on the spot market declined 37% over the same two-month period, due to upheaval in the financial market.

Load-to-truck ratios on the spot market have been trending upward since February, as indicated by the dark blue line in the Spot Market Index graph below. By November, the ratio of 2.5 loads posted per available truck was 120% higher than the load-to-truck ratio for November 2008. This was due in part to the increasing freight volume in 2009, and also to comparisons with the low volume in Q4 2008 that led carriers to post their available equipment more aggressively than would be typical for this season.

Figure 1: TransCore Spot Market Index, 2009, U.S only. (Year 2000 = 100)

Intermediaries and carriers across North America list more than 50 million loads and trucks per year across a variety of services feeding TransCore’s DAT Network.  As a result of this high volume, TransCore’s Freight Index is representative of the ups and downs in U.S. spot market freight movement.  For weekly updates of the latest industry data and trends, go to TransCore Trendlines.

Starting in January 2010, load search results will display P3 and “TIA Performance Certified” logos for load providers who qualify. This will help top brokers and 3PLs to improve their visibility with carriers who search for loads on 3sixty Freight Match load boards.

The new “TIA Performance Certified” logo is awarded to brokers and 3PLs who adhere to professional standards of best practice, as set by the Transportation Intermediaries Association. In addition, those companies post surety bonds with TIA, guaranteeing payment of their freight bills. The amount of each surety bond, which ranges between $10,000 and $100,000, is indicated on the TIA Assured logo.

P3 logos are displayed for those load providers who adopted TIA’s best-practice standards under the Platinum Performance Program.

Got questions? Ask our award-winning support team: customer.support@transcore.com or call 800-547-5417.

What happens when the shipper delays payment until after your carrier settlement is due? Brokers are getting stuck with a gap between receivables and payables and facing some unpleasant choices, according to Winston Aston, CEO of TransCredit.

During this year’s recession, shippers across the U.S. have been extending payment by 3 to 7 days, on average, said Aston. That means that freight brokers, who handle $162 billion in freight bills per year, are carrying $2.5 billion in extra debt, collectively. Assuming an average interest rate of 7 percent, the industry’s 20,000 brokers are burdened with $155 million, or $7,000 to $8,000 per broker, in debt service costs.

Some brokers have seen key customers go bankrupt, taking unpaid freight bills with them. Others have been forced to delay carrier settlements, despite the damage to their own credit scores and to their future chances of finding good trucks on the spot market.

What are the remedies? At TransCore’s recent webinar, titled “Brokers as Bankers,” Aston proposed that brokers should focus on four key actions to reduce receivable loss:

1. Communicate with customers and carriers. Nobody likes surprises. Monitor your Days Sales Outstanding (DSO) report, using a transportation management software (TMS) or accounting package, and call customers immediately when you notice a change in payment patterns. Continue to follow up and escalate, as needed. If the customer is habitually late, you may want to negotiate a rate increase or institute a late payment charge to control your receivables cost. 
   
2. Negotiate with carriers, if you are having trouble maintaining your normal payment schedule. “Be proactive,” Aston cautioned. “Call the executives at the carrier company, with a specific plan and a limited time frame, before making any changes. Then keep your commitments,” he said. Put the agreement in writing, and notify TransCredit in advance, to prevent damage to your credit score, Aston advised. “If you have an agreement and the carrier agrees that you abide by those terms, your score won’t be affected,” he said.
   
3. Evaluate shippers’ payment history, as it pertains to other companies in addition to your own. According to Aston, bad debt comprises less than 1% of revenue for brokers, on average, but 78% of those unrecoverable freight bills originated with customers who had ongoing relationships with the payee for two or more years. “If your customers are still paying you on time, but they aren’t paying anyone else, that could be a red flag,” Aston warned. “The other brokers may have cut off that customer already, and he is shifting his remaining business to you.” Monitor payment history in your TMS, and pull the customer’s credit report every six months – or more often, if you have concerns.
   
4. Delegate collections to outside agencies, especially when it is clear that your customer is not responding to overtures. Some collection agencies, including TransCredit, offer a range of services from “pre-collection” to debt recovery and hard-line collection, based on your goals for the customer relationship. Meanwhile, don’t allow your staff or agents to accept new loads from a non-paying customer. A good TMS can help you to enforce credit holds company-wide. (Note: TransCore's Logistics Software integrates these account management features with operations and finance functions.)

Brokers who follow those four guidelines: communicate, negotiate, evaluate and delegate, can improve cash flow, minimize bad debt and preserve relationships with good customers and carriers, Aston said.

“Freight broker failures have skyrocketed at least 74% in the past 12 months,” according to a front-page story in the September 21, 2009 edition of Transport Topics. The article quotes credit monitoring agency executives, who report that 66 brokers have gone bankrupt since September of last year, compared to 38 in the previous 12 months, and hundreds more have closed their doors without formal liquidation.

Many brokers encounter difficulties due to changes in their customers’ business levels, but payment patterns also play a big role. Shippers have been extending payment terms by an average of 3 to 7 days, industrywide. At TransCore’s recent webinar, titled “Brokers as Bankers,” Greg Roush, president of Smart Lines, and John Miller, VP of Hybrid Transit Systems, joined Winston Aston of TransCredit to answer audience questions and offer their advice on best practices for surviving the recession and preparing a brokerage for future growth.

Question: How do you feel about the broker’s role as a banker?

Greg Roush, Smart Lines: We pay our carriers on time, even if we do not get paid, because carriers are so important to our business.  Meanwhile, we keep our receivables under control by doing four things:

1. Establish a solid credit policy. We set standards to accrue and assign a credit line to each account. 
2. Use a disciplined collections process.  We call each of our accounts weekly to check on our receivables.  It’s the old adage – the squeaky wheel gets the grease.   Also, with new accounts, we call prior to the first billing to make sure we bill them correctly so that there are no problems. 
   
3. Review current accounts regularly. As an example, we pull credit reports every 6 months.
   
4. Have a back-up plan. We have invested in accounts receivable insurance and secured a line of credit with our bank.

Question:  What tools can brokers use to avoid cash flow problems?

Greg Roush, Smart Lines: We’ve switched accounts from check to electronic payment, which makes payments more timely.  When the accounts are truly questionable, we tend to get cash ahead of time. We get a deposit, and then move their shipment after that.  Ultimately, we will ask for better terms.  Our current terms are 15 days, and you’d be surprised at how many accounts accept those terms.

John Miller, Hybrid Transit:  Payment tools are a necessity for us. We’ll do everything possible to shorten that invoice cycle.  We might pre-bill orders, before the bill of lading is received. We also focus on any electronic processing, with ACH, scans attached to emails, or PayPal. There is a fee for PayPal, but you are getting your money securely and quickly. We also routinely ask for wire transfers from new shippers. 

Question:   One of my customers said they are going to pay me in 45 days instead of 30. How do I figure out how much that will cost me?

Winston Aston, TransCredit:  I think it is important that you translate a payment deferral into real dollars, just as if you had to go to the bank to secure funding. In round numbers, it costs $2.00 per day for each $1,000 deferred. So, if the account is deferring $10,000 for 15 days beyond terms, your cost would be $300 per month.

John Miller, Hybrid Transit:  I would certainly consider a rate adjustment if we are going to try to accommodate those additional days to pay.  I’d also institute electronic invoicing if I can, and do anything I can from my side to shorten that cycle.  Then I think you need to stand back and look at the overall value of the account.  Where does the customer fit into your strategy?   Is it an account you can outgrow?  You have to be honest with yourself and make some tough decisions.

Question:   If 78% of collection issues are likely to come from customers who have had a longstanding relationship with me, how do I ensure that these bad debts don’t creep up unexpectedly?

Winston Aston, TransCredit:   Prevention is definitely the best choice. You need to see credit scores on all your load providers.  Make sure you get a source that can provide daily updates, perhaps even a system to email you alerts if scores drop substantially.

Greg Roush, Smart Lines: We look for patterns and changes in payment.  Listening, of course, is very important.  If they “have checks in the drawer” it is a red flag.  We also use our system to watch days to pay, DSO, and if we see someone going from 30 to 40 days, that’s a red flag.

Question:  What are the industry averages for days to pay and credit scores? 

Winston Aston, TransCredit:   TransCore does survey work with their customers and TransCredit publishes a monthly Freight Payment Index for the TIA. We have found that credit scores are declining slightly among TIA members as a whole, a bit more among brokers in general, and substantially among shippers. (Note: Brokers on the DAT Network maintained an average credit score of 94.7 out of 100, and paid carriers in an average of 28.3 days, as of September 30, 2009.)

Question:  How do you know if other carriers are being paid faster than you are?

Winston Aston, TransCredit:   This information is available from TransCredit.

Greg Roush, Smart Lines:  Ask your customer’s Accounts Payable personnel if you are being paid the same, faster, slower than other carriers. You should also look at their credit report. If it shows 65 days-to-pay, and they are paying you in 15 days, this may be a good indicator. (Note: An earlier discussion in the webinar revealed that earlier-than-normal payment may indicate that the shipper is preserving his relationship with you because other brokers or carriers will no longer accept his business. In such cases, early payment may be a warning sign of future business failure.)

Question:  What is the proportion of invoices that go to collection?

Winston Aston, TransCredit:  Typically, 15% of invoices are paid beyond terms, with about 4% going to collection and 1% or less ending up as uncollectible, i.e., “bad debt.”

“Our top 10 brokers experienced an 8 percent increase in the number of loads they covered with Connexion, compared to the same period last year,” said Keith Burns, president of Online Freight Services.

Connexion, a direct interface between Online’s operations software and their 3sixty™ Freight Match loadboard, helped the Mendota Heights, Minn. brokerage to improve revenues in an economic downturn. “We see a direct link between Connexion and the increase in our brokers’ productivity,” Burns said.

On the spot market, the broker who is the first to post a load, find a carrier to cover it, and lock in the rate is often the one who gets the shipper’s business. Connexion enables brokers to post a load and receive matches in seconds, and cover the load in only a few minutes – often before it appears on other loadboard services. The immediate response increases the volume brokers can cover.

The Connexion interface delivers data directly into a broker’s software environment, without having to switch programs, use batch processes, or enter data twice. Connexion’s access to  CarrierWatch® also allows brokers to qualify carriers using TransCore’s comprehensive database of DOT-reported safety, authority and insurance data.

“As a progressive company, we strongly believe technology is the best tool to achieve efficiencies in our business,” Burns said. “Connexion provided the perfect platform for us to integrate load posting and truck searches seamlessly into our transportation management system,” he continued. The TMS, along with Connexion, handles it all instantly. Our users no longer spend time posting and removing loads manually,” he said.

One June 29, two California residents, both Russian citizens, were sentenced on charges related to a double-brokering scheme that yielded $2.9 million over three years.

Beginning in 2005, Nicholas Lakes and Viacheslav Berkovich of Los Angeles hacked into the FMCSA SAFER database and substituted their own contact information for the records of real trucking companies. Posing as carriers, they found loads on internet load boards. (They did not use TransCore's 3sixty Freight Match!) Then they posed as brokers and subcontracted the loads to legitimate carriers.

When the original brokers paid Lakes and Berkovich, the criminals did not pay the actual carriers. Then the two men would go back to SAFER, falsify another carrier’s contact information, and double-broker more loads. Defrauded carriers complained to the Department of Transportation (DOT), who investigated and eventually indicted the two men in October 2008 for computer fraud, mail fraud, and wire fraud.

On June 29, Lakes and Berkovich were sentenced to 70 months in prison and $4.3 million in restitution.  (For details, see the original article from Wired Magazine or the sentencing summary from DOT.)

Sadly, fraud is a serious problem in the transportation industry. And in today’s difficult economic climate, even law-abiding companies have been known to renege on payment terms or file bankruptcy without meeting their commitments. Here are five ways to keep from becoming a victim:

1. Monitor credit changes, for your company and your carriers. Use TransCore’s new Credit Patrol service to monitor changes in carriers’ credit and your own, so you’ll know if your favorite carrier is having problems. Equally important, you’ll be alerted immediately of any changes to your profile, which could be a warning sign that someone is using your company ID fraudulently.
 
2. Choose a secure load board. Search for loads on TransCore’s freight matching systems, where our employees check the credentials of all participants to be sure they are real companies. We also follow up on complaints, mediate payment disputes and offer a payment guarantee to carriers. Companies that are guilty of non-payment or double brokering are barred from posting.

3. Qualify carriers thoroughly, every time you load them. Don’t assume that your favorite carriers still have full insurance coverage and current authority. CarrierWatch® insurance certificate service enables you to check the carrier’s records in the integrated DOT files against an image of the actual insurance certificate, provided by the insurance agent. Verify that names, addresses and phone numbers match, in case the DOT and FMCSA records have been altered.

4. Use a good transportation management system (TMS) to control credit and monitor payments. With the right TMS, you can determine how much credit to extend to customers, and compel all your employees and agents to play by your rules. Plus, a good TMS enables you to review a customer's rate history, payment record and credit profile, so you can respond quickly if anything changes. One excellent option: TransCore's Logistics Software.

5. Check customers’ credit records regularly, and collect receivables promptly.  According to TransCredit, 78% of bad debt for both brokers and carriers is generated by customers who have been on the books for two or more years. So it may be time to update credit reports on your repeat customers. TransCredit has stepped forward to offer collection advice to all TIA members. TransCredit provides transportation industry-specific credit scores and days-to-pay information for 31,000 corporate customers, including 97% of the freight factoring companies in the U.S. and Canada. TransCredit can be reached at 800-215-8448, or customerservice@transcredit.com.

When you’re ready to post a load, five minutes can be a long time.

That’s why Dennis Brown focuses on saving time when it counts the most: posting loads fast, to lock in carriers and get the shippers’ business. As president of Logistic Dynamics, Inc. (LDI) a Buffalo, New York-based freight brokerage, Brown has pioneered the use of technology-based tools to establish and grow the business from zero to $6 million in its first three years of operation. LDI’s second act: tripling revenues in the two following years, to achieve $18 million in 2008.

Logistic Dynamics handles about 1,200 loads in an average month, with as many as 1,500 loads per month in peak seasons. Truckload freight comprises more than 90% of the business, according to Brown. The company works almost exclusively in the spot market, with very few ongoing contracts.

“It’s a very competitive marketplace. There are a lot of brokers out there,” Brown explained. “In many cases, different brokers are working on the exact same freight. So the guy who gets the truck first is the guy who gets paid,” he continued.

TransCore Connexion “Makes the Phone Ring “
Logistic Dynamics honed its competitive edge in June 2007, when the company installed Connexion, TransCore’s application interface. Connexion enables brokers to post loads to 3sixty™ Freight Match and view matches from within the company’s proprietary transportation management system (TMS.) Posting and searching are automated, which speeds up the process and “makes the phone ring,” Brown said.

“If we can post our loads in five seconds instead of five minutes, we can already have it covered and get a rate confirmation sent before it even hits the load board on some of the other services,” said Brown. “That really comes down to dollars and cents,” he continued.

Logistic Dynamics categorizes freight loads in two ways: “Available” loads are those that the company has committed to move for the customer. “Open” loads are taken on a speculative basis. “If we can do a favor for the customer, and we can find a truck, we’ll take it, but we aren’t making a commitment,” Brown explained. The open loads are typically posted quickly, without much detail about the destination and timing of the shipment. LDI secures open loads only when it is the first brokerage to notify the customer that a suitable truck has been found.

According to Brown, his staff finds matches for 65% of the open loads through Connexion and 3sixty Freight Match, along with 51% of the available loads. All told, Brown said, “62% of the loads we post through Connexion receive a match before we cover that load. That’s significant, because we post to other boards, but we can’t view our searches automatically on the others,” he continued. “We have to log in and manually do those searches.”

Loads Post in Seconds
Logistic Dynamics has been using an automatic posting feature for more than four years. Until they implemented Connexion, the export and upload aspects of the auto-posting process caused a time lag, according to Brown.

“We could tell there was a lag two ways,” he said. “First, we’d log into the board and see that the load wasn’t posted; and second, the phones wouldn’t start ringing,” he explained.

With 3sixty Freight Match and Connexion, “the load posts within seconds,” Brown continued. “The phones start ringing within a few minutes,” he said. “We always know it’s the 3sixty product that’s doing it, because the other boards don’t even have it posted yet.”

“That’s what our brokers and agents will say: ‘You push the button and the phone starts ringing,’” Brown chuckled. “If they’re going to post a load, they want the phones to ring,” he concluded.

Connexion provides a competitive advantage for Logistic Dynamics, even when freight volume is down or carrier capacity exceeds marketplace demand, according to Brown. “It’s probably most valuable when trucks are tight, but even when capacity’s loose, you’re still competing with other brokers,” Brown explained. “Ultimately, it’s about being able to identify the trucks, negotiate the rate with them and lock them down,” he said.

Technology Attracts Talent
The new system has also helped LDI to recruit and retain agents, a key to the company’s growth strategy. “Agents are very impressed with our technology,” Brown said. “They post loads quickly, and they get calls faster,” he continued. “It’s a differentiator for us, and it helps them to be more productive.”

“Posting loads used to be a full-time job, but Connexion makes it easy for us to find trucks on 3sixty,” Brown explained. “It’s so fast. It has made a huge change in our company,” he said.

LDI’s technical staff integrated Connexion seamlessly with the company’s home-grown TMS. “The software development kit (SDK) was comprehensive, and implementation was very straightforward,” he said. The new program “paid for itself immediately,” according to Brown. “It just made too much sense.”