5 Misconceptions Shippers Have About Freight Brokers
If you often need to move goods with your shipping company, working with freight brokerages is likely a typical part of the process. As common as this collaboration is, it happens that shippers might have some misconceptions about the role and trustworthiness of freight brokers
Brokers make a living by acting as the intermediary between shippers and carriers. Believe it or not, being the middleman often means both sides might project wrong concepts about that person. Some of the most common misinterpretations of the broker’s job include doubting the value of the service and its price, as well as considering that the intermediary might not act in a responsible way.
In fact, the brokerage profession is a highly regulated one, and problems with brokers are less and less. The majority of people in the industry are actively working to improve its image.
Let’s look at the five most common misconceptions about freight brokers - and bust them with facts.
1. Using a freight broker’s services is more expensive
It is true that freight brokers earn money by finding the most suitable match between a shipper and a carrier. While you as a shipper need to pay a fee to use their services, the end price for moving your loads often is lower than if you had arranged the transportation yourself.
The reason why brokers can find the best price for moving your goods is the big database of carriers that they have at their disposal. Of course, it’s not only about the contacts they have, but the partnerships they have established with select carriers.
Having developed relations in the industry gives them a competitive edge because they can arrange for a much faster shipment - and often at a better price. Let’s not forget that they know the market inside and out, so negotiating top rates is a lot more intuitive for them. Brokers’ knowledge, skills and network will surely save you money.
2. Freight brokers have a reputation for being unreliable
While back in the day there might have been some bad apples that gave a bad name to the freight brokerage industry, legislators found a way to tackle the problem. In 2013, one of the major requirement for getting a freight broker license, the freight broker bond, was increased from $10,000 to $75,000.
The move was a painful one for the industry, but the goal and results ended up positive. Freight broker bonds are designed to protect brokers’ customers, i.e. shippers and carriers. The bonds act as a safety net that acts in favor of their interests. They guarantee that brokers will stick to the rules and to their contractual agreements.
In case a broker fails to do so, an affected party can make a claim of up to $75,000. The higher reimbursement itself means a higher level of safety for shippers. But besides this direct consequence, the ethical standards as a whole have risen in the brokerage field. Brokers who stayed in business after the bond rise are trustworthy and committed to their trade. Shippers can check if the broker with whom they are working is bonded in the FMCSA’s searchable database.
3. There is no added value to brokers’ services
Underestimating the value of brokers’ services is a common misconception. As discussed above, brokers do a lot more than, well, simply brokering between shippers and carriers. Let’s expand on the reasons why.
If you need to make regular shipments to one destination, your broker can contact a private fleet whose drivers are regularly covering that route. This makes the delivery faster and safer. In fact, if you work with for-hire drivers, there is much less certainty in the process.
Another benefit is the possibility to request drop trailers. This means that you can leave the shipment and not have to wait for the loading and unloading to finish. This saves you time that you could be using for other business tasks. And it shouldn’t be forgotten that freight brokers often use multiple modes of transportationon top of motor carrier services, such as air, rail intermodal, vans, and LTL, among others. With so many possibilities, they can guarantee the fastest shipping and the best price, shopped around from the different modes.
4. Freight brokers are not selective about their carriers
One of the common worries of shippers is how their load will be handled. A typical misconception is that freight brokers do not choose carefully the drivers with whom they work. However, this is one of the biggest myths about brokers.
The fact is, freight brokers are not only obliged to care, but also have a financial incentive to make sure the shipment is delivered safely. Most brokers select with great care their partnerships with carriers and check them over time. They always inquire about their safety records because if there is trouble with a shipment, this is a problem for the broker too.
If you are worried about the safety of your shipment, the best way to go about it is to speak openly with your freight broker about their carriers. In this way, you will get clarity on the topic, and the broker will be aware about your worries. In some cases, brokers even have cargo insurance such as contingent cargo insuranceto provide more peace of mind to their clients.
5. Non-asset freight brokers are not cost-effective
Freight brokers who don’t own trucks are usually the ones about whom shippers have the biggest misconceptions. The common notion goes that non-asset brokers don’t have immediate access to trucksbecause they don’t have a fleet. This is not true because, in fact, they have various carrier partnerships and thus many options for transportation.
Non-asset freight brokers can even be more cost-effective than the ones owning trucks, since they have a larger network of contacts at their disposal. This makes them more flexible and able to find the best option for transporting your goods. Being a successful freight broker does not depend on ownership of trucks.
Last but not least, because freight brokers operate with a large volume of shipments and a wide range of carriers, they can use the power of the great volume to get better pricing. This means a lower cost for shippers in the end.
Hopefully busting these five common myths about freight brokers will make your shipping processes smoother and filled with less worry. The industry is ever-evolving, so there are good reasons to see freight brokerage as a trustworthy business.
What are the most common misconceptions that you have met about freight brokers? Please share them in the comments below!
Vic Lance is the founder and president ofLance Surety Bond Associates. He is a surety bond expert who helps freight brokers get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.