What is a Freight Broker ?
They are someone who arranges transportation for another company (Shippers) using someone else’s transportation assets (Carriers). The Broker can be thought of as a “matchmaker” between Carriers with transportation assets and Shippers with freight. Typically, Shipper’s contract with Brokers to handle the shipment of all or a portion of their freight. Some Brokers act as a backstop for Shippers. When Shippers can’t get enough capacity from their regular carriers, they utilize Brokers for the excess moves. Brokers find carriers, arrange the details of the loads, pay the carriers, and invoice the Shippers. Although there is a lot more to it than just that, you probably get the idea. Brokers are middlemen. They don’t own anything, either freight or carrier assets, they just marry the two and charge a fee for doing so.
Why do Shippers use Brokers?
There are a couple of reasons:
The Brokers usually have access to a more extensive network of carriers than the Shipper. This network is a single point of access for multiple freight options and modes. It also allows the Broker to negotiate lower rates due to the overall volume of business they provide the carriers and shippers they do business with.
Brokers have technology, like a Transportation Management System, that allows them to save a lot of time (and trouble) in finding the right carrier, at the right time, with the right equipment, at the right price, and then executing the loads efficiently.
The Brokerage can improve your Supply Chain’s performance and avoid potential execution problems by utilizing their superior relationships and expertise in dealing with carriers’ operations.
Flexibility is another key advantage. They can help you expand as needed without tying up as much capital while minimizing your risk to changing market conditions. The depth of their bench can help you improve your supply chain and cost regardless of market conditions.
If utilizing a Broker makes sense for your company, how do you make sure that you get a good one and not a bad one?
Ensure they have the necessary licenses and accreditations. Brokers are licensed by the Federal Motor Carrier Safety Administration (FMCSA) and must carry a (minimum) freight broker bond. This stifles fraud in the trucking industry and guarantees carriers get their invoices paid. Also see if the Broker is a member of TIA (Transportation Intermediaries Association), which works to improve the industry and its education and standards. TIA tests and provides certification to Brokers. See if your prospective Broker is TIA certified.
Make sure they meet your communication needs. You want Brokers to be responsive at all times. They should provide regular updates on your shipments. Any issues should be made transparent and dealt with effectively.
The contracts and costs should be easy to understand. Services must be clearly defined. All add-ons associated with the load must be disclosed upfront. This includes fees such as fuel, detention, and demurrage.
Some “red flags” to watch for with Freight Brokers
Is the broker difficult to reach or unresponsive to your calls or emails? This may indicate that they’re unreliable and don’t have the capacity to take on new work.
Is the broker vague about their charges. If so, you may get hit with hidden costs on your invoice. Make sure you understand all the costs involved with moving your goods.
Does the broker work with only a few carriers. If so, you may not get good rates. The smaller the carrier pool, the less the competition.
Is the broker financially stable? Do they have adequate insurance coverage. If not, this could be a significant risk to your load. Check their D-U-N-S Number. Also request to see a Certificate of Insurance (COI), which provides details about their insurance policy.
Make sure that the broker doesn’t have a “conditional safety rating”. This would mean the broker/carrier, or their truck driver, has had multiple violations and is not following regulations. Make sure the broker complies with all relevant regulations and standards and that the carriers they use have an excellent safety rating before booking your shipment.
Here are the key traits to look for in your Freight Brokerage:
Here are some key questions to ask a prospective Broker:
- How long have you been in business?
- How do you source your carriers?
- How does your carrier on-boarding work?
- Once you find a good carrier, how do you keep them?
- What is the average tenure of your team members?
Hopefully, you are now better prepared to successfully hire a Freight Broker if you need one. Good Brokers can be extremely helpful in managing your Supply Chain. Riverside Logistics Services has been helping Shippers manage their Supply Chains for over 25 years. We are a member of the TIA (Transportation Intermediaries Association) and actively participate to improve the quality of the Brokerage community.
We have a very thorough carrier on-boarding process and go to great lengths to make sure that our carrier community is extensive enough to meet all the needs of our clients. We welcome any opportunity to discuss your Supply Chain and can be reached at 804-474-7700 ext. Option 4.