SHOULD YOU BE USING A FREIGHT BROKER?
Transportation and logistics are both complicated and critical parts of running a business. Many companies opt to outsource shipping to a third-party such as a 3PL or a freight broker, but using a freight broker has its pros and cons. Here, we’ll talk about the upsides and the downsides of using a freight broker, plus how to avoid the downsides and what carriers get out of working with freight brokers.
THE PROS OF USING A FREIGHT BROKER
There are plenty of upsides to hiring a freight broker for some of or all your trucking needs.
- They’re Experts in the Industry
Freight brokers just handle freight. They’re experts at what they do, and they oftentimes have the skills and tools to do it exceptionally well. They know the industry, stay up to date on the freight market, and are constantly aware of changing regulations. By using a freight broker, you get to take advantage of all that knowledge.
- It Saves Time
Booking your own loads takes time, and it likely takes you more time than it would a freight broker. By outsourcing loads to a freight broker, you can save time that can be spent doing things that are more central to your core business functions. You can also get loads booked quicker so you don’t have to worry about them anymore.
- Freight Brokers Have Great Carrier Networks
One of the most important things a freight broker brings to the table is a network of carriers that they know and trust. A broker’s core carrier network can oftentimes provide both better rates thanks to repeat business and a great relationship and a better level of service since the broker and carrier are familiar with how the other operates.
The good news is that most freight brokers work with factoring companies like Express Freight Finance to help their carrier partners save time and money. Everyone wins. It’s easy to pay invoices and carriers get paid faster, all while having the assurance that they’re working with a creditworthy customer.
- They Offer Scalability
Freight brokers offer scalability on two separate levels. First, they allow you to scale your business without hiring new staff to handle the additional loads. Second, they allow you to scale the number of loads you need to run up or down seasonally or as sales increase and decrease.
- A Freight Broker May Be Able to Save You Money
Here are the brass tacks: all the tools and experience at a freight broker’s disposal may be able to save you money. Despite that a freight broker gets paid for their services, their ability to cover loads at lower costs, mitigate risk through visibility, and provide a better level of service may mean that you still come out ahead.
- Technology Benefits
Freight brokers commonly use cutting-edge technology to help improve efficiency, visibility, and communication between all parties. This technology can help ensure a better level of service to the end customer as well as better cost control through the load cycle.
THE CONS OF USING A FREIGHT BROKER
- You Don’t Have Complete Control Over the Shipment
One of the biggest downsides to using a freight broker is not having total control over the shipment. Once the load is given over to the broker, the shipper’s ability to manage that load may be hindered.
- You’ll Pay Middleman Fees
Freight brokers must make money somehow. They do that by charging more for a load than they’re paying the carrier. These margins are what make being a freight broker an attractive career choice. The markup is simply part of doing business with a broker. Some brokers may also charge fees related to various tasks in the freight cycle.
- There’s the Potential for a Lack of Transparency
Most brokers work hard to ensure shippers stay updated on where their load is, when it will get where it’s going, and any potential problems that may arise, but there’s always the potential for a loss of transparency if a broker doesn’t communicate well.
- Not All Brokers Have Experience
Since one of the main upsides to using a freight broker surrounds their industry experience and all it brings to the table, a broker without experience can nullify that pro. The last few years and the post-Covid freight boom brought lots of new faces to the industry, so not all freight brokers bring equal knowledge to the table.
Inexperienced brokers may encourage carriers to use quick pay which could cost them. Carriers working with factoring companies are likely better off choosing to invoice through a factoring company like Express Freight Finance.
AVOIDING THE DOWNSIDES OF USING A FREIGHT BROKER
While you can’t subvert all the cons of using a freight broker, there are ways to avoid many of the potential pitfalls.
Start by working with a broker with a solid reputation and plenty of experience in the industry. You can see how long a freight broker has been in business by checking out their FMCSA license. If they’re not FMCSA licensed, they may not be the right option.
Reputable brokers aim to make sure the shippers and carriers they work with both get a fair rate for loads, so choosing a solid broker can help you avoid overpaying for loads. Another way to avoid overpaying brokerage fees is to use a broker specifically for lanes that you can’t cover easily on your own and be sure you use a broker with a strong carrier network in that lane.
To avoid a loss of visibility, choose a broker that utilizes technology to track loads and keep you updated. With modern technology, you can get real-time updates on demand.
A shipper can set specific parameters for the carriers that take their load or even ask that the load be taken by a specific carrier to help mitigate risk.
HOW CAN CARRIERS BENEFIT FROM WORKING WITH A FREIGHT BROKER?
You may be wondering what a carrier has to gain from working with a freight broker since the broker’s goal is to pay the carrier less than they are charging the shipper. Here are some of the benefits carriers get from working with brokers:
- Consistent business
- Work with top shippers
- The broker handles a lot of the administrative work involved in running a load
- Minimize deadhead miles
- Potential to build relationships with desirable shippers
- Payment processing is handled by the broker
IN CONCLUSION
Whether it’s a smart move for your business to work for a freight brokerage or not depends entirely on your business. The information here can help you weigh whether you should consider working with a broker, whether you’re a shipper or a carrier.
