What is a Freight Broker & The Value They Bring
A freight broker is a company or individual who is a liaison between shippers and asset carriers.
The broker tenders a shippers' freight to an asset carrier; manages the shipment from origin to destination; then invoices the shipper, with the necessary paperwork and pays the carrier.
The most reputable freight brokers are members of the Transportation Intermediaries Association (TIA), which is an education and policy organization for North American transportation intermediaries.
With the freight market consisting of ten's of thousands of carriers and shippers, a freight broker is the most efficient manner to match reputable carriers with a shipper's requirement for the best service and value, particularly when capacity is tight or a shipper has a project or season surge.
As an example, InTek Freight & Logistics has over 35,000 active and approved carriers at its disposal.
The below info graphic from the TIA is a great visual on the brokerage industry:
Even with all the pluses a freight broker provides the freight market, many shippers have a negative connotation of freight brokers. Just the sheer size of the freight brokerage industry is a testament to the value good brokers bring to shippers and carriers. Even so, we do understand where the negative reactions to freight brokers come from:
- Over promise and under deliver on service.
- A financially under capitalized individual broker files for bankruptcy leaving the shipper's freight and the shipper's customer out in the cold.
- An unknown fact to many shippers is the asset carrier can collect from the shipper, even if the shipper did pay the broker.
- Broker did not exercise reasonable care in diligence in their carrier selection and is unable to cover losses through its carrier's insurance or its contingent cargo insurance policy.
With the above in mind, we would highly recommend that before booking or accepting freight with a broker that due diligence falls under the saying an ounce of prevention is worth a pound of cure. Start with the broker's MC number and work all fronts to ensure you are dealing with a reputable broker.
Freight brokers are tremendous resources and experts in all modes of freight and topics in the shipping industry. The expertise comes from being in the market all day, every day on all things freight related. This expertise also includes technology, as high volume brokerages need the very best tools to efficiently tender, move, communicating to all stakeholders throughout a shipment, invoice, audit & pay carriers, negotiate freight RFP's, manage spot rate business, and optimize & analyze for the most efficient solution. The trend over the years has been for these high transaction oriented brokerages to extend their business model to include a full outsourced solution for shippers of all sizes for a quick implementation and return on investment by allowing shippers to tap into the technology and connections established.
Before closing, we do want to stress that freight brokers should not be confused with freight forwarders, which impacts many fronts with the cargo insurance each offers being the most impacted.
Unlike freight forwarders, freight brokers do not take possession of the freight. Freight brokers coordinate the shipment by matching the shipper up with a carrier where freight forwarders actually take possession of the freight and then arrange for the shipment. With that said, most freight brokers' insurance are not primary cargo coverage, but contingent cargo coverage. Now this is not always the case, as some freight brokers offer primary cargo coverage.
If you feel your business would benefit from a freight broker, we'd recommend reading 10 Tips How to Select Best Broker for Your Company.
All in, using a freight broker may be a good solution for your company. We'd love to be a part of the conversation as you work through your buying journey, so please do not hesitate to contact us and begin reading our blogs.