Freight Brokers

Written by Kathleen Gagne
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Freight brokers are those persons or companies that bring those who need to ship goods and those who have the carriers to ship those goods together. Brokers work to negotiate the terms of each individual transaction so that both parties are happy with the arrangements. The goal is to insure that the cargo is shipped safely and that it arrives on time.

In addition, if there are any special requirements pertaining to the cargo, such as refrigeration, the broker is the party that often finds the best carrier for the job. Brokers must be trained and licensed before they can conduct business. They have to know about rates, distances, insurance coverage, and more. They can, and should, be able to assist customers with land, air, and water transportation transactions.

Freight Broker Value

There are four primary reasons why freight brokers are doing so well in today's economy. First of all, they are replacing shipping and transportation department employees that were let go about five years ago when the United States experienced an economic slowdown. While many companies employ transportation and logistics professionals, brokers are often able to "buy" better than traffic managers.

Because of this factor, brokers create value for carriers. They also tend to be more knowledgeable than many of the professionals because of focused training. They tend to negotiate firmer contracts based on their specific expertise and connections. By, in essence, becoming logistic companies, they have legitimized their role in the freight industry.

The Better Deal in Shipping

In most businesses, the buyer who buys in large quantities gets the best rate. The same is true in the freight industry. Since brokers negotiate deals much more frequently and in larger lots than most individual companies, carriers may offer lower rates. Such factors as payment terms, technology interfaces, and the actual cost of sales are often better for both the shipper and the carrier when a freight broker is involved in the transaction.

In the past, carriers usually tried to sell their services in-house. The belief was that if their sales force was good enough, their trucks would be full. The problem today is that operating costs are much higher, and maintaining a sufficient sales force is impractical. As a result, the carriers relinquish a portion of their margin in lieu of supporting an expensive sales team. A lot of the activity is now conducted via the Internet with small carriers providing brokers with their information and obtaining loads through the brokers.

Broker Responsibilities

In a transaction, the broker takes on the responsibility of making sure the carrier is appropriately licensed and has the required insurance. The broker will also have to have information about the carrier's safety record and on-time delivery record. Because there are so many small carriers around today, brokers take the administrative functions away from the shipper and act, as well, as a sort of clearinghouse for carriers.

Brokers are more sophisticated today. Most now call themselves "logistics companies" or "logistics providers." It is not unusual to find a broker handling all of a major corporation's shipping by placing one of the broker's employees on-site to act in a logistics capacity. This allows the customer to have the luxury of a single contact and a single bill while providing the company with access to thousands of carriers.

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