What are Dispatchers?
In simple terms, a Dispatcher is a representative of a Carrier who assists the driver(s) to route their truck, find loads, communicate with customers, and more. They allow the truck driver to focus on driving rather than dealing with distractions like phone calls from customers looking for location updates, signing rate confirmations, or even negotiating rates with a Freight Broker or Shipper. They take the administrative duties off the truck driver’s shoulders!
What are the different types of Dispatchers?
It’s important to define the different types of Dispatchers in the industry. It is common for a Carrier to hire a Dispatcher internally (W-2). That Dispatcher will be an employee of that Carrier and will represent only that Carrier, but they may support and represent several drivers employed by the Carrier.
There are also external Dispatchers, also known as independent contractors (1099), who work with one or multiple Carriers. External Dispatchers are more commonly hired by owner-operators or smaller trucking companies who may not have a need nor the means to hire an employee in a permanent dispatcher position. External Dispatchers are 3PLs (third-party logistics service providers) that offer dispatch services to Carriers who hire them as independent contractors and will perform basically the same duties as an internal Dispatcher. The most significant difference is that an external Dispatcher may work with multiple Carriers (DOTs and MCs) while an internal Dispatcher will only work for their Carrier employer.
What do Dispatchers do day-to-day?
Dispatchers perform many tasks on the Carrier’s or driver’s behalf. Let’s look at some of the responsibilities a Dispatcher (both internal and external) will perform on a daily basis listed below:
Communicate with customers (shippers or brokers) and consignees to update driver’s location, book pickup or delivery appointments, negotiate rates, sign shipper-carrier agreements, sign broker-carrier agreements, sign rate confirmations, and share pertinent company information
Communicate information to the truck driver
Plan the driver’s route for the trip when applicable
Send the carrier invoice and Proof of Delivery and/or Bill of Lading (BOL) to the customer
Track and monitor driver progress and location
Help resolve problems that arise during transit such as breakdowns, weather related delays, detours, cancelled appointments, back hauls, etc.
Review documents for instructions, accuracy, and completion such as the rate confirmation
Address customer inquiries and provide customer service as the main point of contact
Schedule routine maintenance or emergency repair appointments
Manage carrier and driver data and records
How are Dispatchers different from Freight Brokers?
The main distinction between a Dispatcher and a Freight Broker has to do with licensing or legal operating authority and which parties they represent. A Freight Broker has an operating authority (an MC#), along with a surety bond and insurance mandated by FMCSA, and represents a Shipper (the party that owns the freight). A Dispatcher represents the Carrier (the party that will physically move the freight). A Dispatcher is focused on the management of transportation operations such as communicating location updates, signing documents on the Carrier’s behalf, or even finding available loads for the Carrier(s). External Dispatchers (aka Independent Dispatch Service Providers) do not have their own operating authority, nor are they required by the FMCSA to hold a $75,000 surety bond and insurance, like Freight Brokers have to have in order to operate and conduct business legally.
There have been recent discussions in government and industry on whether there needs to be a more formal distinction between the two or even a requirement for Dispatchers to have Freight Broker authority. This particularly applies to a rise in independent contractor (1099) Dispatchers (we have also referred to them as external dispatchers and independent dispatch service providers), who typically represent multiple Carriers at once in providing dispatch services. Some argue that a lack of regulation, insurance requirements, and licensing for external dispatchers is dangerous to the trucking industry. Currently, external Dispatchers are NOT Freight Brokers and should not act as such. Below is a table provided by the FMCSA that offers guidance in determining when a Dispatcher is acting as a Freight Broker and needs to obtain the appropriate operating authority:
The following factors indicate the dispatch service should obtain broker authority. This list is not exclusive, and a dispatch service does not necessarily have to meet every listed factor, depending on its specific activities.
(1) The dispatch service interacts with or negotiates any shipment of freight directly with the shipper, or a representative of the shipper.
(2) The dispatch service accepts or takes compensation for a load from the broker or factoring company or is involved in any part of the monetary transaction between any of those entities.
(3) The dispatch service arranges for a shipment of freight for a motor carrier and there is no written legal contract with the motor carrier that meets Section IV.E.1 of the Guidance above.
(4) The dispatch service accepts a shipment without a truck/carrier, then attempts to find a truck/carrier to move the shipment.
(5) The dispatch service engages in allocation of traffic by accepting a shipment that could be transported by more than one carrier with which it has agreements and assigns it to one of those carriers.
(6) The dispatch service is a named party on the shipping contract.
(7) The dispatch service is soliciting to the open market of carriers for the purposes of transporting a freight shipment.
A distinguishing factor between Freight Brokers and Dispatchers is that the Freight Broker is paid by the Shipper. A Dispatcher is never supposed to be a billing party in the transaction between a Freight Broker and Carrier or Freight Broker and Shipper. The Carrier will invoice the Freight Broker or Shipper (if they did not work with a Freight Broker) directly and the Freight Broker or Shipper will pay the Carrier directly. It should be noted that a Dispatcher may send the invoice on the Carrier’s behalf, but never listing themselves as a billing party. A Dispatcher should never be listed as a party on the shipping contract or Bill of Lading either.
Why would a truck driver or trucking business use a Dispatcher(s)?
Dispatchers allow truck drivers to focus on what matters the most – keep their wheels turning with the shiny side up! They allow drivers to focus on operating their truck safely. A good Dispatcher will also add value to the Carrier by finding loads that pair with the driver’s revenue and location goals and limiting empty miles. A good Freight Broker can offer similar benefits. By reducing the administrative burden, Dispatcher’s can make a driver’s life a whole lot easier!
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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 does not assume responsibility for any omissions, errors, or ambiguity contained herein. Contents may not be relied upon as a substitute for the FMCSA's published regulations. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.