Transport carriers use freight brokers, dispatchers, and load boards to find cargo to fill their trucks. Many people confuse the terms dispatcher and freight broker and, in some ways, they perform similar tasks. Yet, they are, in fact, very different.
A freight broker connects shippers with carriers while dispatchers work for the carrier. Dispatchers are unregulated but freight brokers must have insurance and a license to operate.
As one of the industry leaders, TAFS assists trucking companies to increase cash flow with factoring rates as low as 2.49%, business loans and 1-Hour Advance options.
What Is a Freight Broker?
A freight broker brings shippers and carriers together, easing communication between the two. It is the broker that ensures that the cargo arrives at its destination on time. However, they never take possession of it.
Brokers provide a single point of contact for shippers. They negotiate the price, plan the route and track the freight on behalf of the shipper.
From the carrier’s perspective, freight brokers help to optimize routes. They increase the carrier’s profits by reducing deadhead miles. It is in the best interests of the broker to negotiate low transport rates. This is because the broker earns, as a commission, the difference between the freight rate paid to the carrier and that paid by the shipper.
What Is Dispatcher?
A dispatcher handles the receipt and transmission of information about the location of cargo on the road. The dispatcher may be employed by a carrier or contracted to them.
Many independent dispatchers help smaller carriers to find loads using load boards and brokers. They use the carrier’s lane preferences, equipment specifications, and preferred freight rates to find brokers and shippers. Then they negotiate rates.
Dispatchers bridge the gap between customers and truck drivers. They coordinate movements to ensure on-time delivery of goods. A dispatcher uses a transport management system to optimize fleet movements.
They work with truck drivers to find loads, and schedule trucks to uplift and deliver cargo. Dispatchers must have excellent communication skills and should consider getting certified in supply chain management.
Comparing a Freight Broker & Dispatcher
Both dispatchers and freight brokers serve as middlemen between the customer and transport carriers. Yet, there are several differences between the two.
Dispatchers Represent the Carrier
Dispatchers receive a percentage of the carrier’s rate as payment for work done. They are, therefore, motivated to negotiate the best prices for the carrier. They help carriers to find available loads and can help the carrier to navigate around risky areas such as poor weather or road repairs. Dispatchers play the part of a logistics department in trucking dispatch.
The Goal of the Freight Broker is to Grow the Business
Dispatchers represent the best interests of the cargo carrier but freight brokers work to grow their own business. The freight broker’s profit comes from the difference between the negotiated freight rate and the price that the shipper pays.
It is in the best interest of the freight broker to negotiate the lowest transport rate and charge their customers the highest rate possible. Freight brokers tread a thin line between paying as little as possible and losing the interest of the carrier.
Dispatchers are not Licensed
Dispatchers are not licensed or insured but freight brokers are. The Federal Motor Safety Administration FMCSA regulates the freight broker actions. There have been calls for the FMCSA to raise the standards of dispatch services since dispatchers are not regulated.
Brokers Invoice the Shipper and Pay the Carrier–Dispatchers Deal with Carriers
Freight brokers operate independently they bill the shipper and pay the carrier. Dispatchers do not invoice the shipper. The agreement between the dispatcher and the carrier does not include the shipper. Because of this, dispatchers will often prioritize their relationship with the carrier rather than with the shipper.
Dispatchers Do a lot of the Admin Work for Carriers
Dispatchers help to reduce the burden of admin work for the carrier. This is particularly important for small owner-operators. They may not have structures that can manage all the paperwork required for billing and compliance.
Dispatchers search load boards to find cargo to fill the load and maximize truck utilization. The dispatcher’s income depends on load maximization and higher negotiated transport rates.
Dispatch services also help trucking companies with invoicing and revenue collection. They will assist other customer service and compliance-related admin. If the carrier uses factoring many dispatchers will generate invoices and submit them to the factoring company.
Which is Best For You?
Freight brokers have their benefits, helping carriers to fill their trucks. Still, if you’re an owner carrier, it’s good to know that the freight broker will try to negotiate the lowest transport rates. Their profit depends on it.
Dispatchers work for carriers but they also use freight brokers to find loads. Keep in mind that dispatchers only make money if they find you loads. Because they receive a percentage of the negotiated price, it is in their interests to find the best rate for the load.
A 2019 FreightWaves survey found that freight brokers earn between 13% and 15% of the load’s gross margin. This is a good indicator of the amount you will have to pay. Find the best prices for your load by shopping around.
A trucking dispatcher must have a specific skillset. Once you have these skills there is no need to wait. A trucking dispatcher must have good communication skills, and must have passed their GED. Some dispatchers also have a degree in logistics. Trucking experience will also serve you well.
A freight broker may own trucks but the government does regulate how they use them. They must avoid double brokerage. This happens when a carrier gets a load through a broker and then brokers it to another company.