What does a freight broker do? The simplest answer is that a freight broker serves as an intermediary between shippers and carriers.
The shipping industry is complex and full of moving parts. From trucks and airplanes to marine vessels and container cranes, a lot of pieces of equipment are responsible for moving a lot of different cargo around at the hands of the people on the ground.
Freight brokers help workers navigate the multiple moving parts of the chain to ensure that the cargo makes it safely to its intended destination.
Read on to explore how freight brokers make money, what companies use freight brokers, how to obtain a broker license for freight, and more!
How Does a Freight Broker Work?
There is a continued demand for freight services, which is largely due in part to the explosive growth of eCommerce. As such, freight brokers are in high demand as well because they play a critical role in connecting key parts of the transportation process.
A freight broker is an intermediary. They do not own the cargo nor do they own the vessels that ship cargo. Instead, a freight broker uses their skills and resources to help both parties succeed. They provide a valuable service to shippers and carriers alike, and the brokers earn a commission for their involvement in the shipping process.
While this may be a very brief overview, we’ll dive deeper into the topic below to answer some of the most frequently asked questions about freight brokers and how much a freight broker makes per load, how freight workers get their loads and other details about what freight broker agents do.
What Do Freight Brokers Do?
A freight broker is the primary means of communication and connection between carriers and shippers. As a middleman, freight brokers ensure that the handoff goes smoothly and that the freight arrives safely as well as on time.
Why Do Companies Use Freight Brokers?
There are many reasons that a company would want to utilize a freight broker. The two major reasons why companies use freight brokers is that the brokers can help companies find the best shipping solutions and handle every detail so that business owners can continue focusing on their day-to-day operations.
There are many other reasons why companies use freight brokers:
- They utilize the latest technology to trace and track shipments.
- They have established relationships with carriers globally.
- They tackle issues if any arise.
- They can help save you money.
- They have a large volume of business which means better pricing.
Companies that utilize freight brokers receive all of the aforementioned benefits, making the partnership mutually beneficial for all parties involved.
What Skills Does a Freight Broker Need?
Freight brokers need skills that allow them to be adaptable in fast-paced environments. These skills include:
- Computer skills
- Time management
- Multi-tasking skills
- Negotiation skills
- Well-equipped at organization
- Management experience
And most importantly, freight brokers need to have good people skills! This includes being helpful not only to clients and vendors, but also with customers should a mishap or misunderstanding arise.
How Do Freight Broker Services Help You?
Freight brokers are a vital asset to organizations. They help with securing carriers for your business in a cost-effective and rapid manner.
In the event that there is a problem with the carrier, a freight broker will step in and act on your behalf. They help productively optimize your business’ transportation and cargo needs.
How Do Freight Brokers Make Money?
Freight brokers make money through commissions. Traditionally, freight brokers will make anywhere from 25% to 35% of each shipment.
For example, a freight broker can negotiate with the shipper to haul the cargo for $5,000. Then, they will work with a trucking or hauling company to complete the transport for $4,000. The freight broker will then earn the $1,000 difference as payment for facilitating the transportation process from start to finish.
Example of a Freight Broker
An example of a freight broker is Worldwide Express. This freight broker provides their clients with logistics consultants to improve their shipping operations.
In doing so, they will learn about their clients’ goals and create solutions that simplify the shipping process. With the close alliance they have with their carriers, they can offer value to everyone involved in the process.
Features to Consider With Freight Brokers
How can freight broker services help you? As we explored above, there are many ways to decrease shipping costs, handle the entire shipping process, and improve productivity overall, which takes a lot off of your plate.
But just because they can do these things doesn’t mean that all freight brokers are equally as competent or experienced. Make sure you consider the following features before you select a freight broker to work with you and your business.
While you might be tempted to choose the freight broker with the cheapest prices, you should actually consider other factors before making a final decision. While cost savings do play a pivotal role in your business needs, it’s true that you get what you pay for.
Consider not only the cost but also the value of what is provided at that price point. A broker that has the tools, longevity, and capabilities can still help save you money, even if they are a little more expensive than some newer freight brokers that are available.
The process of shipping freight is tricky and complex. Having a master of shipping will ensure that you receive excellent service. As we all know, we cannot predict the future and incidents sometimes happen.
An established freight broker with a long history in the business can provide you with superior service across all facets of the shipping process. This includes any and all speed bumps that you might come across along the way.
Ease of Use
The goal of hiring a broker is to simplify the shipping process for you and your company. Select a broker that improves the efficiency of your operations and makes the transportation process a lot smoother.
Technology is an essential part of the freight broker selection process. Your freight broker should be able to offer you the absolute best technology that will not only help you find the best transportation options but also keep an eye on your shipments from beginning to end.
Each freight brokerage offers a certain number of team members. Teams often range from sole proprietors who run the business themselves to very large corporations. No matter the size of the team, it’s important that you make sure they are established and can handle the capacity your company brings without needing to onboard additional employees.
Supply Chain Management
Constant communication is a must between freight brokers and carriers. They need to be able to seamlessly monitor each shipment and utilize their skills to determine the ideal carrier for each business’ unique shipping needs. After all, you are giving the broker your company’s authority, so they should have mastery over the supply chain management process.
Key Positions at a Freight Brokerage
The freight brokerage industry is diverse. It offers a wide range of positions that are crucial for potential employees to understand. The key positions at a freight brokerage include:
- Agricultural Truck Broker: Unregulated agricultural truck brokers are generally smaller and operate in only one region of the country. They arrange services for exempt agricultural products.
- Freight Forwarder: People in this position are responsible for handling goods and they work to consolidate multiple small shipments into one larger shipment. After they have taken possession of the goods, they use land, air, and water carriers to transport the larger shipment all at once.
- Freight Agent: This position is filled by independent contractors who work for freight brokers. Freight agents fulfill duties relating to sales, customer service, and logistics on behalf of the broker’s business.
- Freight Broker: This position connects carriers with shippers who will then move the cargo and the goods.
- Import-Export Broker: Import-export brokers work with government agencies, like the U.S. Customs and Border Control, or international carriers. These brokers facilitate everything for importers and exporters involved in international transportation.
- Motor Carrier: This is a company that provides truck transportation services.
- Shipper: The shipper is the person or business with the goods or cargo that needs to be transported.
- Shipper Association: This is an exempt non-profit organization that operates similarly to freight forwarders. They are formed by shippers as a way of reducing costs and pooling multiple shipments together into one, but these services are only available to members of the associations, not the public.
Benefits of Using a Freight Broker
What does a freight broker agent do that can help you? They can provide your business with many benefits, including the following:
- Capacity: Freight brokers can help businesses handle their shipping operations, which makes it possible for business owners and managers to focus on more pertinent tasks.
- Relationship-Building: Just as the freight broker you work with will establish a trusted business relationship with you, they will also have business relationships with transportation providers. These relationships help maintain a level of service that ensures each party within the process is a valued member and create a network of productivity.
- Saves Money: Because freight brokers have already established relationships with other companies and work with quantities much larger than your business’ cargo, they can tap into bulk savings that will benefit your business, too.
Freight Broker Credentials
Before selecting the freight broker that you’d like to utilize, ensure that they have met all of the proper qualifications.
So, what does a freight broker need in terms of credentials? Freight brokers should have the following:
- FMCSA registration as a freight broker
- A broker’s surety bond or BMC-84
- Coverage in the amount of $75,000 minimum
- Unified Carrier Registration with the broker’s home state
Although freight brokers are not required to be insured, many choose to carry insurance. You should ask if your desired freight broker carries insurance before you make a decision to work with them.
Even though they do not take possession of the cargo and the liability generally falls on the carrier, a freight broker with errors and omissions insurance or contingent cargo insurance can take measures to mitigate risks for the shippers they work with.
Freight Broker vs Freight Forwarder
While we explored above that a freight broker acts as the intermediary between shippers and carriers, freight forwarders take it a step further. They physically take possession of the cargo, meaning it’s no longer in the hands of their clients.
From there, freight brokers reorganize, consolidate, and assemble the cargo to make it easier to ship. They can take multiple small shipments from various shippers and consolidate them into one much larger shipment.
Freight Broker vs Freight Agent
A freight agent is an independent contractor or small-business owner who has their own network of customers. They work under the authority of a licensed freight broker.
They complete the role of sales agent, customer service agent, and logistics specialist by dispatching trucks and solving issues that arise. The freight agent does not have to be licensed as they are working under the freight broker’s Federal Motor Carrier Safety Administration license.
Save Time and Money with A Freight Broker
When you have products or goods that need to be shipped, partnering with a freight broker can help you focus on your business while they take care of the transportation process. You’ll have peace of mind knowing that your products will reach their intended destination at a cost that is much lower than you could source on your own.
The highest paying freight often involves specialized loads such as hazardous materials, oversized loads, or temperature-controlled freight, as these require additional certifications, equipment, or precautions that not all carriers can provide.
To become a freight broker, you generally need to gain industry knowledge (often through work experience or training), register your business, obtain a broker authority from the Federal Motor Carrier Safety Administration (FMCSA) by filling out the OP-1 form, secure a surety bond or trust fund, and get appropriate insurance.
Yes, freight brokers are generally in high demand due to the significant role they play in the logistics and transportation industry, helping to efficiently connect shippers with carriers, especially in times of increased e-commerce and supply chain complexities. The specific level of demand can fluctuate with economic conditions and the balance of supply and demand in the freight market.
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