This has been a perpetual argument since before Winton Motor Carriage Company of Cleveland pioneered the trucking industry in 1898. The four cornerstone participants in the transportation of any sum of goods includes the Shipper, the Receiver, the carrier and the freight broker.

As someone who has participated in transportation markets over the years, as each of these market members at one point or another, I can confidently say, a valid case in either direction can be made by EACH, Shipper, Receiver, Carrier or broker.  A shipper does not need a carrier, OR a broker, if they finance their own trucks and employ their own drivers.  A receiver has no need for a carrier or broker either, as long as they negotiate their transport needs to be supplied by the shipper.  HOWEVER- there are 2 big problems with those two scenarios. Ever increasingly, with rising equipment expense, regulation and their unique product seasonality – shippers understand the transportation function is best left to companies specializing only in transportation; enter Carrier/ Freight Company/ Trucking Company.

Receivers have also found comfort in acquiring their product inputs by not relying on straight line shipping expense provided only by the shipper. With a variety of carrier options available, receiver is able to better negotiate contracts with carriers to transport products from the shipper to the receiver, leading to better arbitrage opportunities for the products they need, while utilizing more competitive shipping rates.

The above is pretty straight forward. In a perfect world, there is still no need for a freight broker. HOWEVER, when shipper’s carrier choice cannot provide enough equipment for the need, or the shipper doesn’t have enough freight to fill the available trucks, everyone is looking in another direction for trucks, or for freight to fill the empty trucks. MOST ALL suppliers and transportation companies in that situation do NOT have the time or resources to develop and maintain a full time SALES DIVISION to run down freight or trucks. NOR do they wish to, as often times such a function would involve doing business with competition and risking proprietary information; ENTER FREIGHT BROKER.

The function of a (GOOD) freight broker brings balance to both sides of the industry. A freight broker’s primary function is SALES- acquire and aggregate available freight, acquire and congregate available truck space, matching the two on the fly. The function of the freight broker who does the job properly brings efficiency to the transportation process by assisting transportation companies in filling trucks and help shippers acquire truck space on demand when needed. The shipper can reliably move their product without regulation and financial burden of owning equipment and the transport company can fill their trucks with a phone call, reducing profit ciphering deadhead/ empty miles to the next load.

Shippers often don’t own trucks and can produce their products as hard and fast as they want; they have buyers to satisfy. Trucking companies don’t produce anything and can keep the trucks rolling without spending time banging on shippers all over the country for loads they may need only once. Receivers don’t have to be in transport or production; they have final products to market. Brokers do not own equipment or products but have the time to run down freight and manage the process of transportation anywhere in the Country. When all 4 of these entities are doing their respective jobs properly – the transportation industry runs at its highest point of market efficiency.

The conclusion is, that freight brokers are absolutely needed. Then why the argument? I believe there are BAD brokers out there who do not do their job correctly. I also believe there are brokers out there who do not properly understand or respect the amount of capital that is involved in both the production and transportation function. Many of these brokers believe they are more important than they really are as evidenced by the amount of commissions they charge, or the margin they feel they are entitled to.

Everyone needs to make profit, no doubt. It has long been said “I hope you make a bunch of money, as long as you don’t make it ALL ON ME”. I agree with that sentiment. To many freight brokers come into this business believing they can make and keep more money than they should. How much should they keep? Is that an opinion value or is that amount representative of negotiation skill? Is that number a function of knowledge and information?  Is it a value relative to the strength of the relationship?  The quality of communication?  I would submit the amount a broker is entitled to will be a value represented by each of these qualities combined.

The broker’s primary function is to acquire freight and price it fairly on BOTH ENDS, to the shipper and to the carrier. AFTER THAT IS DONE – it is the broker’s responsibility to THEN further add value to the deal, that represents THEIR portion of the rate. No one is expected to work for free, but with an improper respect for shipper and carrier, a freight broker will lose trust from the shipper, respect from the carrier and that phone will stop ringing.  More should be expected of your broker.  I can teach my grandchildren to take orders and enter data.

SO – the old adage: “We don’t need freight brokers” is really not true. “We don’t need incompetent, greedy, or overvalued freight brokers” – now THAT ONE, I can get behind. Even if slow, a free market tends to find and weed out these types of brokers. It is sometimes unfortunate that the industry is constantly swimming through shark infested waters to identify bad brokers.

Thank you to all my clients for your trust in Liberty Road Logistics. We take our fiducial responsibility to our shippers and carriers very seriously. We understand our suppliers require capable, reputable carriers. We have owned equipment and we DO understand and respect carriers deserve and the financial burden they bare in keeping every truck running down the road while paying the bills to do the job and navigating the regulatory environment on behalf of all of us – Shippers, Brokers and Receivers.

Thad Kaylor
Owner
Liberty Road Logistics LLC