The following article discusses the role of a freight broker and a freight agent, the benefits of working with a freight broker, the freight brokerage process, and the freight broker selection criteria.
What is a Freight Broker? What does a Freight Broker or Freight Agent do?
By definition, a broker is someone who coordinates transactions between a buyer and a seller for a commission or fee.
A freight broker is a person who maintains a license or operating authority that authorizes them to serve as an intermediary or middleman between shippers and carriers. Brokers are licensed, bonded, and insured.
Brokers use their resources to build relationships with shippers and carriers that provide value for all parties. Brokering is very much about connections. Brokers onboard carriers that they can work with on various routes and lanes for hauling a variety of freight. Vetting carriers for equipment, insurance, and qualifications takes a tremendous amount of effort and resources. Brokers negotiate prices and rates with shippers and motor carriers, respectfully. A freight broker develops the truck and trailer capacity that shippers need to get their freight from point A to point B, that is, from origin to destination. Brokers wear many hats, including sales associate, customer service rep, carrier procurement, data analyst, and logistics consultant. Brokers earn a commission for their services in the shipping process. It’s worth noting that freight brokers do not take possession of the freight. They coordinate with the shipper and carrier to make sure everything goes as smoothly as possible from pick up to delivery. Non-asset-based freight brokers do not own assets, such as trucks and trailers. They develop relationships with carriers and independent owners and operators to build freight capacity. This saves shippers time and money. Brokers are there to arrange transportation of freight and oversee things from start to finish.
What is a Freight Agent? What is the difference between a Freight Broker and a Freight Agent? Is a Freight Broker the same thing as a Freight Agent?
A freight agent works as an independent contractor under a freight broker’s operating license to facilitate sales of logistics services for clients (shippers). For example, someone who does not want to get their own operating authority, surety bond, insurances, technology, etc., can work for an existing freight brokerage as an independent agent under the existing brokerage’s operating authority.
A freight agent model may appeal to an individual who aims to avoid risk and significant investment in an operating authority, bond, insurance, technology, etc.
What is the difference between a 3PL vs Freight Brokerages? Are Freight Brokerages a (3PL) third-party logistics provider?
Freight brokers and agents typically focus on arranging transportation for shippers and coordinating with carrier partners to move the goods from point A to point B. A 3PL or third-party logistics provider offers a broader spectrum of services than just managing transportation of goods or freight. A large 3PL can help with transportation, intermodal services, warehousing and inventory management, importing or exporting goods, customs and freight forwarding, packaging, returns, and often a variety of other logistics activities. Freight brokers are 3PLs. They’re a third party that provides a logistics service, focusing primarily on transportation and delivery services.
Why Do Companies Use Freight Brokers? Why work with a Freight Broker? What are the benefits of working with a Freight Broker?
There are several benefits to working with freight brokers and 3PLs. The most common benefit is they help satisfy the transportation needs of shippers. However, the benefits of using a broker are many, including cost savings, capacity, communication, and technology.
For one, freight brokers have more leverage when working with carriers or trucking companies than what individual shippers may have. Freight brokers work with multiple shippers which means more load opportunities for carriers. Freight brokers can negotiate pricing and rates based on volume and order frequency. Shippers can avoid the risk and costs associated with owning their own assets, excessive maintenance, fluctuating labor costs, tracking and tracing, dealing with shifting demand and disruptions, and more.
Brokerages have the skill and resources to analyze and improve operations to create greater efficiencies and higher service levels. Brokers can help with communications and problem solving. They have a close understanding of shipper needs and requirements, such as pricing, appointment scheduling, understanding delivery windows, dock arrangements, hours of operations, point of contacts, that are communicated to carriers to ensure top performance. Communication includes negotiations as well as preparing and managing documentation and reporting that can save shippers and carriers a tremendous amount of time. Brokers also handle communications when issues occur, such as breakdowns, bad weather, hours of service, overages, shortages, and damage. The broker can assist with managing any freight claims.
Another benefit from working with a broker is gaining access to more capacity than what shippers would not ordinarily have. Brokers provide options. Additionally, the best brokers out there go to great lengths in vetting carriers and expanding access to capacity. Vetting carriers involves evaluating insurance, equipment, safety, service, and more. These efforts by brokers provide shippers access to large pools of the most qualified and reliable carriers on the road. Brokers are able to locate preferred loads for carriers so carriers can keep their wheels turning.
Brokers offer various benefits from using advanced technologies, such as transportation management systems, mileage and routing software, track and trace applications, and data analytics packages, such as Excel, Power BI, and Tableau. (Soshaul offers customized training in these areas!) As a result, brokers can provide insights into a variety of freight markets and industry best practices that can improve operations.
How does the brokerage process work?
Below is a graphic that shows the basics of the brokerage process. Check it out!
How do I select the right Freight Broker to work with?
When it comes to selecting a freight broker, it’s essential that they are registered with the FMCSA with the appropriate operating authority as a licensed broker. This requires that they maintain a surety bond (BMC-84) with minimum coverage of $75,000. The broker should have unified carrier registration (UCR) with its base jurisdiction in their primary home state. Most freight brokers carry additional insurances such as contingent cargo insurance and errors and omissions insurance.
You might find it helpful to investigate the broker’s reputation. Other important selection criteria might include the size of the broker, areas of expertise, average days to pay, primary service offerings, current capacity, major lanes and regions served, industry insights, technology, and reliability, which includes hours of operation (not all brokers are 24/7). The right broker will make sure your freight reaches its destination using a reliable carrier at a competitive price.
What are some examples of different Freight Brokers? Are all Freight Brokers the same?
Smaller brokers, like Soshaul, have limited resources so they tend to focus their operations on specialized areas and niche markets. Smaller brokers tend to provide exceptional service to a smaller number of shippers. They will entertain most business opportunities and offer assistance with things such as spot market quotes for shippers and back-office assistance to small businesses. Medium to large brokers can meet a variety of needs. FWF, for example, is a top 100 freight broker that provides their clients with various logistics services but have a specialty in domestic flatbed services. The largest brokers and 3PLs out there, such as Ryder and CH Robinson, offer end-to-end, international supply chain services.
What skills do I need to become a Freight Broker or Freight Agent? What are some different jobs or roles at a freight brokerage?
Becoming a freight broker requires several skills, namely people skills and a customer service orientation. Working in a brokerage environment requires teamwork, negotiations, time management, scheduling, problem solving, and computer skills. Brokerages have several roles where different skillsets and talents can thrive such as Agent, Carrier Ops, Carrier Procurement, Sales, Account Rep, Drayage Specialist, Pricing Analyst, Data Analyst, Forwarder, Import/Export Associate, Recruiter, Training Specialist, HR Generalist, Marketer, and Accounting Associate.
If you’re looking to upskill and standout on the job, or perhaps you’re switching into logistics with either a brokerage, shipper, or carrier, we can help.
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Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC - Copyright 2023 - does not assume responsibility for any omissions, errors, or ambiguity contained herein. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.