What Every Freight Broker Needs to Know About the Transportation Industry

Freight brokers live under the enormous umbrella that is the transportation industry. Everything that carries people and goods from one port to another is part of this sector – buses, trucks, boats, airplanes, rails, cars and everything else in between.

The industry is so huge that in 2011 alone, it was worth about $1.82 trillion, roughly representing about 10% of the US’ economic activity. In the same year, close to 4.3 million people accounted for truck transport services that amounted to $200 billion and exports that reached $1.48 trillion.

Practically everything around you – the clothes on your back, the books you’re reading, the computer on your work desk, the supplies in your office, to name a few – came from somewhere. And all these stuff came to you in one of several ways: by land, sea, or air transport, delivered not just by the truck driver or the mailman but also by the dispatchers, pilots, train engineers, and a host of other back-of-the-house logistics personnel who planned, coordinated and tracked the routes that these packages travelled to get to you.

Freight Brokers and Other Industry Players

Freight brokers belong to the broad logistics sector which ensures that people and goods leave on time from a point of origin and arrive on time to a point of destination. Work could range anywhere from scheduling pick-ups and deliveries, mapping cost-efficient routes, tracking movements, through to troubleshooting problems en route. The end goal is to limit the amount of time products and people stay in one place that’s not yet journey’s end.

The trucking industry, which is the biggest concern of freight brokers, carries 80% of all consumer goods from shippers to consignees in America. Within this sector, there are several players that the freight broker must be aware of:

  • Shippers are your customers – they’re the ones who have products that need moving.
  • Consignees are the receivers of the loads, the final destinations so to speak of these products being moved.
  • Motor carriers are the companies that supply the trucking to move these products. They can either be private – they move their own cargo; or for hire – they get paid to move cargo belonging to other companies.
  • Freight forwarders. As we have discussed in a previous post, freight forwarders are similar to freight brokers. Only, they handle loads bound for international shipment, not domestic destinations. Sometimes, freight brokers need to work with them when a load that moved from point A to point B locally needs to be shipped internationally.
  • Dispatchers are employed by trucking companies to manage drivers and their loads. They decide which load goes to which driver, arrange and coordinate drivers’ schedules, and help drivers toe DOT regulations. Often, dispatchers link up with freight brokers to see if there are available loads that match their drivers’ routes.
  • 3PL (third party logistics) can be likened to a one-stop shop. 3PLs are companies that can provide a host of services all at once to their customers: warehousing, order fulfillment, customs, inbound and outbound freight, and distribution.

The Freight Broker’s Regular Routine

At the heart of the freight broker’s job is the freight – the load, shipment or cargo that needs to go somewhere domestically. These are goods produced in the US or abroad that are delivered to a domestic address. Whatever it is, a load will always have a shipper and a consignee.

Your work as a freight broker starts by soliciting business from shippers. Ideally, you should already have a solid database of shippers to call for loads. If they’ve already worked with you in the past and found your service punctual and reliable, they’ll likely offer their cargo. Rates vary depending on the kind of freight to be handled so you’ll be negotiating terms with the shipper.

Once you agree on the figures and accept responsibility for the load, your next order of business is to find a truck that wants the cargo. Again, you’ll negotiate freight rates with the carrier. This time though, you’ll be selling the load to the trucker at a much lower rate – enough to cover your expenses and provide you a fair profit, but also factoring into the equation a fair return for the carrier.

As soon as you and the carrier concur on the terms, you’ll exchange setup packets – information containing each others’ operating authority (MC number), surety bond, W9s (request for taxpayer identification and certification) and references. At this point, you’ll need to draw up a contract between you and the carrier. The contract, among other things, will help to protect your business. If you’re not careful, the carrier could go directly to the customer and offer their services, cutting you out in the process. The best way to avoid this is by exercising prudence: don’t give away too many details about your customer.

Once they have signed and returned this contract to you, you have to fax the carrier a rate confirmation for their signature. When they send it back, your load is now officially covered and off for delivery. The next phase of your job is to ensure that the load gets to the consignee promptly. Your reputation as a reliable freight broker, and the future of your business, depends on it.

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