When the amount of orders you’re shipping out is big enough, a freight broker is your first point of contact because they primarily facilitate the freight shipment process. In turn, you can focus more on other areas of your business because you will have a partner on the logistics side of the business working for you.
But how do you determine who is the right freight broker for you?
For this article, you’ll learn about what a broker is, how they help your business, and what to look for when looking for one. You’ll also learn about key differences between a broker and other online freight service providers like a freight forwarder and a 3PL.
With that said, let’s get started.
What is a Freight Broker?
A freight broker is a person or company that helps a shipper find a carrier, facilitate their shipment’s delivery, and also update them about its status. They arrange for transportation based on their client’s needs and also help handle cargo insurance claims (although not being responsible for it) on their behalf.
And as the liaison between the shipper and the carrier, they negotiate for both of them in order to come up with a working agreement.
A freight broker possesses an extensive knowledge about the industry and relevant laws and can handle most of the shipment related paperwork for you.
Benefits of working with a freight broker
As someone who knows the needs of both shippers and carriers, as well as being updated in the continually-shifting freight industry, a freight broker offers you certain benefits for your business.
Lower shipping costs
Because of their extensive knowledge about the industry as well as their pre-existing relationships with carriers, they negotiate cheaper rates for you and even minimize certain fees.
Save time
They help you save time by reviewing your shipping requirements and point you towards a more efficient way of doing things. They find faster shipping routes that cost less and even give you alternative options in case of unfortunate events.
Help deal with claims
They help you make a claim for lost or damaged goods so you reduce the frustration out of a time-consuming process. They help you with the paperwork and also give guidance through the steps of the process.
How their service works
When you enlist the services of a freight broker, here’s what happens to get your freight delivered safely and on time.
Arrange for the pick-up of freight
The freight broker could work with the shipper directly, the receiver, vendors, other 3PLs or a freight forwarder, depending on the shipment details to receive your freight. He also collects the needed shipping information, which includes the destination, contact details, special handling and packing requirements, compliance standards, and consignee preferences.
Schedule delivery
He then input the order into their freight management system, book the pick-up time and location, and confirm the delivery time for you. Some freight brokers offer automation tools that allow their customers to input data for quick quote requests and to set-up their shipments directly into the freight brokers’ system, which would allow their customer to specify delivery details.
Communicate with the carrier during transit
As the freight is in transit, the broker communicates with the carrier and updates the customer of their shipment’s status. He ensures that everything is on track and informs the customer about any delays or stoppages.
Collect important documents for billing
The broker gathers documents from the carrier (like the invoice and proof of delivery) and other important paperwork (like receipts and the bill of lading) to consolidate for the billing process.. They streamline the payments to the carriers directly so their client only has to pay one person or company for all the services used.
When do you need a freight broker?
Here are important situations you should consider as the pros of hiring a freight broker can heavily outweigh the cons.
You spend more time in shipping out orders
There comes at a point where the amount of orders takes up a huge chunk of your time just to fulfill them. After packing the orders, getting quotes, and creating shipments and shipping documentation consumes valuable time and money.
Meanwhile, other parts of your business like marketing and product development may suffer.
A broker lightens the load in the order fulfillment stage because they facilitate the delivery process. Now, you have more time and other resources to focus on revenue-generating tasks.
Your store undergoes seasonal demand
If you’re selling products that waiver in demand during certain times of the year, a broker can help you scale up or down because they can quickly find better rates for a specific amount of freight. They help you be more flexible while also minimizing shipping costs when necessary.
You need more storage capacity
When you need more storage for your inventory, that likely means that your business is growing. And that’s definitely good to hear!
When you partner with a freight broker, you can smoothly transition to the next stage of growth. They find the warehouse space you need because it’s common for them to be connected to or are part of third-party logistics (3PL) companies.
How to choose the best freight broker
It’s important to have these eight guidelines when choosing a broker because the one with the lowest price may not always suit your needs best.
1. FMCSA license
This is the first thing you should be looking for because federal law states that anyone arranging transportation for compensation must have a federal property broker license from the Federal Motor Carrier Safety Administration (FMCSA). This license proves that a broker complies with the strict criteria for sound business practices and ultimately protects you from fraudulent actions that your broker might do to you.
2. Modes of transportation and related services
Check if the broker offers more than truckload motor carriers, which is the most popular mode of transport here in the United States. Having more options like less than truckload (LTL), air freight, rail intermodal, international ocean freight, and even having several carriers of the same mode allows you to back up faster in case one mode is unavailable.
3. Experience in your industry
Also check if the broker has experience in working in your particular industry because some specialize in certain industries and markets. If they are experienced in working in your industry, they can help you get around common challenges when shipping your freight.
4. Insurance and claims assistance
Find out what are the insurance options they offer for your freight and ask if they’ll help you process the paperwork in case you have to make a claim. This service would help you save time when fixing damaged or lost shipments.
5. Financial stability
Find out if a broker pays their carrier/s on time because the carrier could legally charge the shipper for full payment if the broker goes out of business. The license requires a broker to establish either a bond or a trust fund with the FMCSA and the money can be used to pay out the carrier or shipper in case of a claim made against the broker.
6. Vetting process for carriers
A reputable broker knows that how the carrier performs directly influences their client’s satisfaction. That is why they only choose to work with reputable carriers.
Here are some guidelines to take note of to see if a broker can get the right carrier for your freight:
- Amount of carrier liability for the required amount of cargo
- Proper and up-to-date equipment
- Ability to accommodate special handling requirements (e.g. temperature-controlled trailers, team transit, etc.)
- Ability to comply with the desired schedule of the client
Related: Best Freight Companies [List]
7. Freight tracking
Look at how a broker can track your freight during transit. Tracking systems help you immediately address problems like cargo theft and delays caused by external factors (e.g. weather, traffic, port closures)
8. Industry certifications and recognition
There are third-party recognitions that indicate if a broker is holding itself to high ethical standards. Check if the broker is a member or certified by one or a couple of the following programs:
- TIA Certified Transport Broker Program. The Transportation Intermediaries Association (TIA), which is the premier organization for third-party logistics professionals in the United States, gives this recognition to its members.
- NASTC Best Broker Program. The National Association of Small Trucking Companies is composed of more than 3,500 trucking companies and established this certification in 1991 for brokers who want to work with its members.
- Truckstop.com Diamond Broker Program. Truckstop.com, which is the first and largest online freight matching service established in 1995, gives this recognition to brokers with good credit, performance history, and bond quality.
Freight brokers vs. Freight forwarders
A forwarder is primarily responsible for handling and actually delivering the freight while the broker is only up to facilitating and overseeing the shipment process for its client. A forwarder offers services that a broker usually doesn’t, which include storing cargo, consolidating and breaking down freight, and packaging and labeling cargo.
They are also distinct in the following areas.
Possession of freight
A broker doesn’t own the freight and therefore can’t be held liable for any damaged or lost freight. But since a forwarder actually handles the freight, they possess the freight while it is in their hands. Forwarders are legally required to have cargo and liability insurance policies to operate as such.
Issuance of bill of lading (BOL)
Since a broker doesn’t actually handle or store the cargo, they can’t issue a BOL with them listed as the carrier. Forwarders, on the other hand, can ship freight with their own BOL
Freight brokers vs. 3PL
A freight broker and a 3PL company also offer a couple of similar services, which include negotiating freight rates, arranging transport according to the client’s needs, and finding alternative shipping options.
But to clearly distinguish the two, a freight broker doesn’t own assets (like the warehouse and other moving equipment) and is usually a smaller operation compared to a 3PL.
However, freight brokerage is also usually one of the services that a 3PL company offers. A freight broker can be part of a 3PL company, who also offers other services like inventory warehousing and packaging and labeling shipments.
Get started with FreightPros
Voted as the Best Freight Broker For Small Businesses by FitSmallBusiness.com in 2019, FreightPros focuses on meeting the freight needs of small businesses. We offer LTL shipping, truckload shipping, expedited shipping, temperature-controlled freight, intermodal rail, and customized freight solutions for your business.
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