The trucking industry is an essential part of the American economy. The shipping industry depends heavily on trucking as a means to transport freight. Freight brokers play a crucial role in the shipping process. Working with a freight broker is a very common concept in the trucking industry and can be very profitable when done right.
But what if you have never worked with a freight broker? How will you know what to look for in a freight broker? Here are 5 things to know if you never worked with a freight broker.
What Is a Freight Broker?
A freight broker is an individual or company that serves as an intermediary between a shipper and truck driver/trucking company seeking freight to haul. Freight brokers negotiate appropriate shipping rates between the two parties concerned and also find work for truckers/carriers. In return, the broker receives a commission for aiding the transaction. However, it is important to note not all freight brokers are the same.
What Are the Benefits of Working with a Freight Broker?
Think of a freight broker as a match.com for the trucking industry—they are matchmakers for truckers that need runs to make and companies/individuals that have freight they need to be moved. Who doesn’t love a perfect match? Freight brokers have insight into the supply chain that you don’t.
Time is money. Brokers take care of the time-consuming work that carriers and shippers would otherwise be burdened with. They help carriers find the best loads and help shippers/manufacturers find reliable carriers to haul their loads. They also may have access to load boards in the market you don’t. Because brokers provide carriers with a large volume of business – they typically get better pricing than what you would most likely get on your own. Brokers also have more carrier options than a shipper would be able to manage on their own. Getting both parties better service, handling options and pricing.
Let’s take a quick look at the freight brokering process, in a nutshell:
- A shipper, otherwise called a consignor, contacts a broker with a load that needs to be transported.
- The freight broker checks their connections in the trucking industry and finds a carrier that is willing to transport the load.
- The broker then issues a contract to the carrier—note that if the broker has never before worked with the carrier, a carrier/broker agreement will have to be drawn up.
- The carrier assigns a driver and a truck.
- The driver confirms to the broker that the load has been picked up.
- The driver delivers the load and alerts the broker that the job is finished.
- The carrier sends the broker an invoice for the service.
- The broker pays the carrier’s invoice.
- The broker issues an invoice to the shipper and collects payments.
- The process repeats.
Now that we’ve covered the background of the freight brokerage industry, let’s get into what you should know if you never partnered with one.
5 Things to Know About Working with Freight Brokers
- Ensure the Freight Broker is Legit
Rule number 1 is always making sure you’re working with a legit freight broker. All freight brokers are required to obtain a Motor Carrier Authority (MC) through the Federal Motor Carrier Safety Administration. Upon working with a freight broker, you will want to make sure they are running a legal operation under the FMCA’s regulations. If you want to check the legitimacy of a freight broker, click here.
When checking the legitimacy of a broker, you’ll also want to make sure the broker has a surety bond or trust. This protects you (the customer) if they don’t fulfill their obligations as a freight broker. The bond or trust must total $75,000. Ask how long they’ve been in business. The more established the freight broker is, the more likely they are to having the connections you need to succeed on a high level.
- Ensure the Freight Broker’s Expertise Aligns with Your Business
Experience is the best teacher. Before working with a freight broker, ask what kind of experience they have. If you are on the manufacturing side, try to find a broker who has experience with shipping the kind of cargo you supply. Working with a broker who has been around the block a few times could save you the hassles you make have faced before.
Not all freight brokers are the same. Some brokerages are larger than others and some brokers are operating on a smaller scale. Not all brokers work with all business sizes. If you’re a start-up, you may want to work with a smaller sized broker. The more connections a freight broker has, the better it may be for you. Make sure whatever your business needs are, they can be met. You may even want to ask for a few references.
- Ask What Their Vetting Process Is
This ties into #2 on the list. The vetting process for a freight broker means what are their requirements when taking on carriers. If you have never worked with a freight broker, you’ll want to ensure they are working with reputable carriers. The more reputable the carrier, the better of course.
Ask if they check for all the necessary carrier requirements like their Operating Authority and what kind of carriers they turn down. The status of a motor carrier’s MC or DOT can change daily so ask how often they are checking.
- The Freight Broker Should Handle the Legal Stuff
This takes a lot of trust. One of the main roles of a freight broker is to handle the behind-the-scene legal requirements. Shippers and carriers often work with freight brokers because they have the knowledge into all the legal requirements needed to haul loads like handling bonds and records. Finding the right broker can take a lot of weight off your shoulders and save you time and money.
- Cultivate a Relationship
Like in any relationship, communication between the freight broker, carrier and shipper is key. Having a strong relationship with your freight broker can determine success. Building that trust means being upfront about what is needed for the shipment like shipping deadlines but also being flexible. The industry is ever-changing and sometimes you have to change with it. When trust is built between two parties, better outcomes are produced.
Brokers understand the language both shippers and carriers speak. Freight brokers can get the best shipping rates and resolve logistical problems because of their knowledge of the industry.
Are you a freight broker?
Even healthy freight brokers struggle to maintain consistent cash flow. Freight broker factoring allows freight brokers to pay carriers & cover business costs right away – instead of waiting 30-90 days for payment. If your freight brokerage falls short on working capital to continue paying its carriers, get in touch. We have connections that can help secure debt-free financing that will help you match more carriers with more shippers.
