A Brief History of the Freight Brokerage Industry

If you step into a freight broker’s office today, the busy chatter, continuously buzzing fax machine, and incessant ringing of the telephone could give the impression that freight brokering has been around for ages. In freight training school though, you’ll know that it is a fairly recent addition to the logistics world. But tracing the history of the freight brokerage industry won’t be complete without a discussion of the history of the trucking industry in the U.S.

Before the arrival of trucks and tractor trailers, moving freight was done by train or a horse-drawn carriage for smaller local shipments. Trains could only ply the major cities where there were railroad tracks so any cargo that needed to go outside the cities was delivered by horse-drawn vehicles.

This was the early 1900s and trucks were, for the most part, just novelties—new machines that ran without horses but couldn’t go very far. Their engines were powered by electricity so they were only confined to short routes. Additionally, there were no paved roads in the countryside to speak of so driving was difficult and took hours. Thus trucks were limited to carrying small loads and short trips within urban routes.

Around 1910, technological innovations opened new opportunities for trucks, not least of which is the gasoline-powered engine and the invention of the tractor and semi-trailer combination designed for hauling relatively larger loads. Moving freight by truck increased in popularity. Still, the bad condition of rural roads, solid tires and a speed limit of 15 mph continued to restrict trucks to the cities.

With the congestion in trains and railways during the Second World War however, trucks started to get an extensive exposure to hauling freight. At this time, government and shippers alike began exploring with long-distance truck shipments. Faster speeds became possible with the advent of pneumatic tires, too.

The addition of a network of paved roads in the 1930s made a farther reach for trucks possible. Then in the 1960s the US started building an interstate highway system that connected major cities and towns across the continental United States—something that was heretofore improbable.

Trucking gained a foothold in the transportation industry this time, steadily wresting dominance in the freight industry from rail freight because of its flexibility and agility. Trucks could deliver any load whenever and wherever.

Still, the industry was hampered by the Motor Carrier Act passed by Congress in 1935. The restrictive regulations imposed by the Interstate Commerce Commission (ICC) meant small players can’t enter the market with ease. Lobbying and work done by industry stakeholders culminated in the deregulation of the trucking industry in 1980, opening the sector to new players and new configurations.

For example, warehousing companies started getting involved in freight shipment, and trucking companies began offering warehousing services. A happy consequence to the new law was the entry of small businesses into the logistics world, giving larger, more established companies new competition.

The sudden influx of service providers naturally decreased shipping costs. Shippers can now shop around for cost-effective, more reliable carriers. That was not the only thing that was changing the complexion of the transportation and logistics industry. Increasing globalization and lower trade barriers have allowed manufacturers the opportunity to ship their products farther and wider. In this environment, freight brokers began to thrive and flourish.

Manufacturers and small shippers without their own traffic departments turned to freight brokers who took over the responsibility of getting shipments delivered to their customers on time.

Large shippers who maintained an in-house logistics and supply department found valuable support from freight brokers when their own traffic department had spillover loads that they couldn’t handle anymore. Freight brokers simplified the complex work of making sure shipments found their way to the consignees by liaising between shipper and carrier.

If there’s one thing you’ll learn from freight broker training, it’s that the transportation and logistics world is a symbiotic world. Although there are inherent frictions among the players, one cannot do without the other.

Shippers—whether large or small—need the deep database of reliable carriers that freight brokers have to get their loads shipped on time. Carriers also need the leads and business that freight brokers bring on the journey back from a delivery and during lean times. In the middle of this, the freight broker directs the traffic.

 

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