What the Heck is a Freight Broker?
Coyote Logistics (“Coyote”) is a freight brokerage company operating in the third-party logistics industry. As a freight broker, Coyote functions as a middleman pairing trucking companies (carriers) that own fleets of trucks with manufacturing and distribution companies (customers) that need to ship their products. Freight brokers provide carriers with routes that serve to increase their asset utilization (trucks) and decrease downtime (empty routes without being paid) while providing customers with consistent and timely shipping options. These brokers operate using a “non-asset based” business model where they do not own the trucks or inventory themselves but rather facilitate the transaction between the two parties. Just like the more familiar stock broker model, Coyote makes revenue off of the spread between the price a customer charges for a shipping route and what the carrier ultimately receives for that route. Yet Coyote is much more than just a middleman.
So Why is Coyote’s Operating Model Unique?
With little initial capital investment and operating assets needed in the freight brokerage business, companies must differentiate themselves in other ways, and Coyote is no exception. Coyote’s competitive advantages in its operating model stems from its (1) best-in-class service levels, (2) unique proprietary technology, and (3) strong, established network.
Before Coyote, brokers would often commit to move loads for a customer but wouldn’t always follow through, putting tremendous stress on the customer’s supply chains. Coyote entered the marketplace and instituted a “no excuses” policy, greatly decreasing the number of missed loads which lead to increased trust and loyalty from its customers and therefore new and consistent business for Coyote. The firm’s leading customer service levels are a direct result of the investment Coyote has made in its greatest assets: its employees. Coyote spends a great deal of time training its employees not only on its distinct operating model and proprietary technology, but also in its philosophy: “do the right thing every time”. This philosophy extends to Coyote’s network of shippers and customers, fellow employees, the community, and the environment. In a crowded, fragmented industry, this intense focus on quality and customer service sets Coyote apart.
“If we commit to it, we will get it done.” – Coyote website
After its employees, Coyote’s greatest asset is its technology. Coyote’s core responsibility as a broker is to provide a market where carriers and customers can meet at an agreed upon rate. Having built its entire operating system in-house, Coyote is able to have full control over each transaction, from sales to settlement. With thousands of transactions performed daily creating a wealth of data and years of historical transaction information, Coyote is able to provide fast, market efficient pricing quotes to its carriers and customers that outsourced technology could not allow. To stay ahead of the market, Coyote is continually innovating its technology and operating model with a full team of in-house developers.
“Coyote is best-in-class in customer-facing technology. They build to suit our needs instead of the other way around.” – Coyote customer
Not just anyone can start a freight brokerage business – relationships in this industry are critical. Thanks largely to the experience of its founder, Jeff Silver, Coyote has built a leading network of over 35,000 carriers and 12,000 customers across North America. This scale provides carriers with a critical mass of shipping opportunities, increasing asset utilization and decreasing lost revenue on empty routes back home. On the other side, if Coyote did not have a large network of carriers, the company would miss out on opportunities from customers who need the carriers’ trucks to move its products, potentially losing business for Coyote permanently. In an industry where scaling is crucial to a company’s profitability and survival, Coyote’s experience and reputation has allowed it to establish a leading network that differentiates itself from other brokers.
“We have become a network integrator for our customers. It gets us out of the role of just being a traditional broker.” – Jeff Silver, CEO
Does this Model Work? I’d Say So.
Starting from scratch, Coyote has grown to over $2 billion of annual revenue with 2,200 employees in under ten years. The company’s model earned the ultimate stamp of approval when it was acquired in the summer of 2015 for just under $2 billion by UPS, further strengthening a global leader in logistics. Coyote learned early on that the freight brokerage business model could thrive under a nimble operating model that focused on superior service levels and technology. Coyote has and will continue to reap the benefits of aligning its operations with the unique demands of the brokerage business.
“Our great people, leading technology and flexible organization will enable us to scale quickly to take full advantage of the added customers, lanes and capacity within UPS. It’s a great day for Coyote employees, our customers and our contracted carriers.” – Jeff Silver, CEO