DFB Tech Stack: Capacity Management
Updated: Jan 22, 2021
In this post, we explore Capacity Management as one core piece of every digital freight brokerage’s operations. This post is part of a series of posts that aims to shed light on the many new and innovative freight tech solutions that empower freight brokers to transform digitally.
Capacity Management is a data-driven workflow that enables you to automate the finding and booking of the best carriers for your loads at the right moment -- which gives your team the ability to expand capacity, scale bandwidth, and grow business.
We recently hosted a webinar walking through the topics below.
Why “Capacity Management”?
Natively-digital freight brokers like Uber Freight and Convoy have become prominent names over the last five years, given their fast growth and the way they’ve changed how freight is moved. However, many have asked -- what exactly about freight is different?
The answer is a major paradigm shift that natively-digital freight brokers have embraced: a digital-first approach towards managing capacity.
At the core of any freight brokerage is its ability to source and secure capacity. And the success of any freight broker is their ability to leverage that capacity to serve their customers and win new business.
However, the stark reality is that many brokers don’t know much about their available capacity, and they lack the digital infrastructure to drive operational efficiencies. Carrier re-usability is driven by top-of-mind tribal knowledge, and loads are posted onto load boards more than most brokers are willing to admit.
These resource shortcomings result in underutilized and fragmented carrier networks that limit a brokerage’s ability to optimize and scale.
Several factors contribute to a broker’s limited capabilities around sourcing and securing capacity:
Siloed carrier data.
Capacity data inputs come from multiple sources, including your TMS, carrier onboarding system, available truck-list emails, and calls from load boards. But when that capacity knowledge is segmented by platform or stored as tribal knowledge by individual brokers (i.e. plugged into individually-owned spreadsheets by your A-players), it’s much more difficult to find carriers who have the capacity and availability to haul scheduled freight.
Manual outreach and booking.
After running a carrier lookup query in historical TMS data, most brokerages have to book freight manually, either by discussing loads over the phone or chatting via email. This costs valuable time that can slash margins (as last-minute loads are more expensive than standard loads), and hampers your ability to book additional lanes with other trusted carriers.
One and done carriers.
When you only work with each carrier once, you can wind up dealing with a lot of added expenses due to unnecessary onboarding costs, lower margins, and untested quality. At the same time, lack of repeatability restricts your team’s ability to scale capacity, as you’re constantly onboarding and offboarding new carriers for lanes. Given that both impact the bottom line, this one-and-done mentality can ultimately halt your business growth.
All brokers on your team have different relationships with your carriers. But if this information isn’t centralized, your team can seem more like 10 separate companies rather than one cohesive unit. At the same time, these hyper-personalized relationships can be irrecoverably lost when existing representatives move on. This can make it near impossible to retain top carriers and build strong company relationships within your network.
While these problems are universal across all freight brokerages, the largest incumbents have taken notice and started to resolve core bottlenecks to scaling their capacity. In fact, numerous brokers like JB Hunt and CH Robinson have invested billions to rein in these problems with capacity management.
Benefits to Capacity Management
When you bring all your capacity data and workflows into a unified digital pipeline, you gain an unparalleled advantage in finding the best carriers for your loads. Let’s dig into a few of these benefits.
Drive carrier re-use and better carrier relationships.
Repeatedly using carriers can reduce onboarding costs and help your team book more loads with confidence. And as you work with trusted carriers consistently, you can increase your margins a few hundred basis points higher than they were previously with one-and-done carriers.
% of monthly volume moved with recurring carriers
Average margin on loads moved with recurring carriers
% of monthly volume moved with one-and-done carriers
Make the most of your broker team.
Capacity tools and automation unlock every team members’ potential to perform like a veteran carrier sales rep. Capacity application tools help reps identify the best carriers for loads faster while enabling carriers to book lanes themselves without any calls or emails.
# of loads moved per month per rep
% of monthly volumed moved digitally with no rep interaction
# of recurring carrier relationships per rep
Higher and more profitable customer win rates.
The more capacity data you have, the better you can select and fulfill shipping lanes with confidence. And since you can compare prices with the latest DAT and Truckstop rates, you can increase the likelihood of profitability on every shipping lane.
% profitable win rate on spot freight
volume of profitable spot freight
Reduction in tender rejects
New lanes added per account per quarter
It makes your team scalable.
Since automated booking and carrier matching allows your team to hand-off previously manual processes, the digital-first capacity methodology unlocks more available bandwidth from your team and changes your unit economics of freight.
Reduction in time spent on-boarding new carriers
More revenue moved per person employed at your brokerage
Using Capacity Management to Scale Your Business
Capacity Management drives efficiency into the entire life cycle of finding and securing carriers for your loads.
Making Capacity Management More Effective
Once your team has mastered the digital life cycle of booking a load with capacity management, your team can then build upon this foundation to tackle more challenging problems that revolve around the life cycle of your business: planning capacity strategies, managing carrier relationships, and winning new business.
Track your digitization progress
Once you’ve fully managed your capacity digitally, you can track all major load and carrier KPIs associated with the digital freight adoption to see its impact on your gross margins. At the same time, you can analyze your load boards to see which are sourcing the best carriers for repeated use. Not only does this provide you with greater peace of mind, but it also delivers valuable information that you can use to further improve your processes.
Carrier Relationship Management
As more of your capacity is fulfilled digitally and within the confines of how you manage capacity, your team shifts their responsibilities into managing carrier relationships and understanding capacity commitments on key lanes.
Connect with your existing rating tools, carrier onboarding solutions, and load boards to streamline the digital load life cycle into an efficient workflow. This improves your results in moving more freight on a single screen.
You should be able to extract every ounce of value from your capacity data. With it, your team can map out strategies for winning more business, and score more RFPs and mini-bids with carriers who can back those lanes.
While capacity management is only one of several tools that freight brokerages need to thrive, capacity management is arguably the most impactful as it fundamentally expands the margins your brokerage produces and unlocks scale for your team. By allowing your team to connect to greater capacity, book loads faster, and scale their bandwidth, capacity management is the key to true digital transformation and business growth.
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