When your company needs to get its product from point A to point B, there is nothing more important than finding the right carrier for the right price. High transportation costs can keep a company in the red, while bundled deliveries and mishandling can damage products and earn you an unwarranted bad reputation. To effectively outsell and outperform the competition, shippers and carriers must be on the same page, working together in a constructive symbiotic relationship. However, it doesn’t always work this way. Miscommunication is rife within the freight industry and mistakes are all too common. This is why freight brokers exist: to bridge the gap between carriers and shippers. But what is a freight broker? And what does a freight broker do that you can’t do on your own? Keep reading to find out more.
The Middlemen of the Shipping Industry
Attempting to cut out the middleman is a tale as old as time. Why use an intermediary when you can go direct? Why trust someone else when you can learn their job and do it better? This sort of thinking has landed quite a few companies in hot water when it comes to shipping freight. The fact is: the labyrinth world of shipping can be outrageously punishing to those who are unfamiliar with its pay structures, timetables, and legal requirements. Enter the freight broker: your guide to the world that keeps our world running. Freight brokers are the liaison between shippers and carriers, negotiating on behalf of both parties to find the best way to keep things moving. They are third-party experts in the logistics of shipping, establishing and reworking freight deals between shippers and carriers while also optimizing routes and handling claims for lost or damaged products.
What Does a Freight Broker Do for You?
Once you have entered the world of high volume shipping you will doubtlessly find a plethora of choices in carriers that—at face value—seem like the cheapest and safest options. A lot of promises will be made. A lot of “too good to be true” deals thrown your way. This is not because carriers are necessarily trying to take advantage of your newfound success, but because they, like you, are confident in their business’ ability to fulfill their promises. However, as your company scales, as the market ebbs and flows, you will doubtlessly find that the cheapest option today is not so tomorrow. If this is the case, it is often difficult to adapt or to extricate yourself from the dependent relationship you have with your carrier. But a freight broker is not beholden to any specific freight carrier company. A freight broker is free and able to navigate the carrier market space, exploring a wide variety of options with an experienced eye. It must always be remembered that a broker does not work just in your interest. They are duty bound, unlike agents, to serve the best interest of both parties. This means they will search for compromise, rather than confrontation. They are not bullies for either side, but dealmakers whose bread and butter is the commission they make from every successful deal.
Responsibilities of a Freight Broker
The responsibilities of a freight broker are many and wide-reaching but are all geared towards one specific goal: the satisfactory delivery of your freight. These responsibilities include:
- Bringing together both shippers and carriers into mutually beneficial and, potentially, long-term contracts. A freight broker will actively search out the best carrier for your freight, finding the fairest deals possible based off of extensive working relationships and industry experience.
- Exploring out of the box freight options designed specifically for your company’s needs, such as LTL (less than load) shipping. Such services can mean a huge amount of savings for small and medium-sized businesses that do not require a full trailer’s worth of space for their load. Such innovation and adaptability can give shippers and haulers alike an edge over more traditional forms of shipping.
- Overseeing freight logistics: searching for the best rates and most efficient routes available in order to get your products speedily to their destination, whether by road, rail, sea or air. Their mission will always be to reduce costs while optimizing delivery time.
- Fielding all freight related questions and concerns; a good freight broker will give you a voice and ear into the shipping industry due to a vast history of experience and a wide breadth of knowledge.
- Ensuring International, Federal and State regulations are met, saving you trouble down the road with government agencies, foreign and domestic.
- Overseeing complaints and claims for products that are damaged or lost along the shipping route. Considering such conflicts would usually occur directly between the hauler and shipper, it is often beneficial to have an unbiased and disinterested body to settle these claims. Having a freight broker as the middleman in such disputes will inevitably alleviate time and stress on both sides and keep the trucks moving without damaging relationships.
Selecting Your Freight Broker
Determining whether or not to engage a specific broker to assist you in your shipping endeavors should be a decision you make having done your research. Like anyone you would trust with a large percentage of your company’s duties, you will want someone experienced, prepared, honest and well-respected in their field. Considering this, there are some questions you should ask of your freight broker:
Would you trust a rookie barber? Do you want a first-year med student performing a quadruple bypass? Probably not. The same goes for your freight broker. Having experience in the field of shipping is exceedingly important in any potential freight broker you are considering engaging. Without experience your broker will most likely not be able to deliver on many of their promises; not least of which is an expansive network of trusted and capable haulers to get your product where it needs to go. If your freight brokerage company has little to no experience in the field they will inevitably resign themselves to finding your shipping service needs on third party internet haul boards (discussed below) and will not be able to weed out haulers with bad track records. You want a freight broker who can make you the best deal, for the best price, but you also want one who can connect you with the perfect service and perfect hauler. When searching for a freight broker do not compromise on experience. Look for the number of companies they have serviced, look for out of the box thinking that years of innovation and adaptation will have ingrained in them.
Freight brokers must be licensed both within their specific state of operation and in order to operate across state lines within the U.S.A. If they are expected to deal with international shipping and receiving they may also require licenses from foreign transportation administrations and agencies.
If they wish to renew their license, freight brokers are required by Federal Law (MAP-21) to purchase a $75,000 freight broker bond. This bond is meant to protect both shippers and haulers from brokers breaking their contracts (either by non-payment or non-delivery). Being able to file a claim against the price of this bond ensures that the broker remains honest and upfront with both parties. This bond, once only required to be $10,000, was raised to $75,000 in 2012 to ensure brokers could suitably cover claims made against them. A freight broker’s bond is required by the FMCSA for a broker to operate legally within the United States.
- What is the FMCSA? The Federal Motor Carrier Safety Administration is the governmental body to whom your freight broker will most often be dealing with. They oversee the licensing and bonding of brokers and regulate the trucking industry. If your potential broker is not compliant with all FMCSA regulations or does not have good relationships within the Administration, you can bet that there will be trouble down the road. If you have any questions as to your broker’s status it may be a good idea to call your local FMCSA field office or Port Authority to make inquiries.
Do they make extensive use of third-party load boards?
A potential freight broker will attempt to wow you with an extensive list of haulers they have made deals with. This is meant to give the impression of a dealmaker with a wide array of contacts and relationships. However, it is sadly common practice for many inexperienced freight brokers to simply use third party internet load boards to find the cheapest, down on their luck haulers who are willing to make the quickest, easiest deal. On a surface level, this seems like an appealing option as it hits that all so important benchmark: affordability. But in the long run—and sometimes even immediately—this process can spell disaster for a shipper. Your uber cheap carrier may not be motivated to ensure safe, speedy and excellent delivery of your product as they may have just been fleeced on their deal. There is also a chance that such carriers may be disreputable, ill-equipped, understaffed or overextended, leading to mistakes, damaged goods, missed deliveries and even trouble with the law. It is important, therefore to engage a freight broker who will bring you, not only the best deals and strategies but also a proven track record of speed, low cost, safety, and efficiency.
Do they service small and medium-sized businesses?
In the business of freight it is often a maxim that “the more, the better”. Servicing large, multinational companies means big money and full trucks. But what about small to medium-sized businesses whose freight needs may not necessarily take up a full trailer? A good freight broker company will not balk at small loads and shifting needs. Companies scale. Markets ebb and flow. No matter which freight broker you use, they need to be able to be flexible with your growth and market requirements. This is why small to medium sized companies that utilize experienced brokers willing to adapt to changing circumstances will consistently outperform the competition in regards to shipping. It should also be remembered that the number of carriers a particular freight broker has employed is not necessarily the most important criteria for engaging their services. Options are nice and can lead to serious cost reduction, but a savvy business owner will look, rather, for the number of shippers a freight broker has serviced. If their customers’ number in the thousands than you can safely assume they’ve done something to earn those numbers. Reputation is everything, and small and mid-sized business cannot afford to engage brokers and haulers that cannot adapt to their needs.
When looking for a freight broker, you should be searching for those who have their own extensive network of carriers, who have prior, successful relationships with all of their well vetted, experienced carriers, have consistently performed for a variety and a large number of shippers, and who follow all laws, licensing and bonding regulations.
3PLs and Freight Brokers
This brings us to third-party logistics firms (3PLs or TPLs). Where third party logistics can oversee all your logistic needs, freight brokers are experts exclusively in their field: shipping. This is why many 3PLs engage their own freight brokers. Having a wealth of experience and shipping acumen is incredibly important to any successful 3PL and freight brokers provide this essential function. No 3PL worth its salt will engage a freight broker that is incapable or inexperienced, so if you’re looking for a broker it may be a safe option to find those who have been previously employed or work extensively with third-party logistics firms.
Freight brokers are your liaison to the shipping world. A good broker will make you the best deals, bring you the most dependable haulers and keep your products safe until delivery. Shipping freight can often be one of the most stressful experiences for a company. Entrusting your product to strangers is often anathema to hands-on professionals and proud business owners. Freight brokers can go a long way towards mitigating this worry, forging you lasting and profitable relationships with the men and women who get your goods to market. If you are interested in engaging a freight broker, make sure to do your research and ask the important questions. Innovation, experience, flexibility, and dependability are the qualities you’d look for in any other position at your company, do not settle for less in your freight broker.
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