Culhane Meadows’ Washington, D.C. partner David Hendel was recently featured in an article by Freight Waves about chasing freight brokers as the Postal Service scrambles to slash costs.
Here are a few excerpts from the article:
The phrase “freight broker” is rather boring, I will admit it. As snoozy as those words may make you feel, these brokers are key to making sure stuff gets on trucks and across the country.
Since deregulation wrested trucking from the control of the federal government in 1980, freight brokerages have become a trucking necessity. Every imaginable company — ranging from General Mills to Amazon to Starbucks — relies on freight brokers to place loads on trucks every day.
One major transporter has tried to eschew freight brokers for years: the U.S. Postal Service. The Postal Service spent nearly $10 billion moving letters and boxes in fiscal year 2021. Most of that expense is on trucks, but there are also FedEx and UPS planes, trains and even ships.
It’s not known when exactly the Postal Service started to use freight brokers, but attorney David P. Hendel only began including brokers like C.H. Robinson on his essential top 150 Postal Service contractor list in 2013.
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One reason that freight brokers have become so common is that there are way too many trucking companies for each retailer, manufacturer, farmer or whatever to form relationships with. So they turn to brokers to figure out who to work with.
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“The Postal Service is re-examining its network both long-haul and even local,” said Hendel, a partner at Culhane Meadows who specializes in government contracting work. “I think the Postal Service now views the carriage of mail as a commodity, rather than as a special service. It feels like it maybe should be taking advantage of the larger commercial marketplace.”
Implementing new contracts and other technologies could mean cost savings at the Postal Service, but it’s spooky for long-time carriers — especially because these new products aren’t always perfect. One trucking contractor told the Washington Post last year that the Postal Service’s new software has cost them $110 million and sparked hundreds of layoffs.
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However, perhaps 2021, famously the year that spot market rates shot to the moon, was a very bad year to turbocharge the usage of freight brokers. According to one analysis of public data, the Postal Service paid more than $50 million in extra trip dollars in January 2022, more than tenfold the spend from 2021 or 2020.
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But, Hendel said he believes it’s unlikely that the cost-conscious Postal Service would continue to pursue freight brokerage if it didn’t have the potential to slash costs.
Even amid the move to modernize the Postal Service, Hendel doubts the agency would ever want to ditch its old-fashioned contract carrier model — just as UPS or FedEx hasn’t opened itself entirely up to the spot market. The risk to the mail system would be too large.
“I think that could be a dangerous thing because you don’t have the dedicated reliable providers you have today and you open yourself up to spot market issues,” Hendel said. “I don’t think the Postal Service will ever be well-served by relying exclusively on brokers — that would be a recipe for disaster.”
The complete article can be found HERE.
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