We recently saw a question on a supply chain forum asking what seemed, at first, like a straightforward question: “What is a freight broker?” We brainstormed a simple answer and thought we might be finished answering the question.
However, we found that conversation easily led to a slew of other questions and trains of thought. The conversation continued for an hour as we went around the table on the topic of freight transportation brokers in today’s supply chain atmosphere.
If you’ve wondered if freight brokerage is the right fit for your supply chain needs, but feel like you don’t quite have a full grasp on the concepts—have no fear.
In today’s “Freight Broker 101” lesson, we’ll break down the basic answer, then take it to the next level by challenging you to determine when the best time is for you to start working with one.
What is a Freight Broker?
Simply put, a freight broker company is a liaison between businesses with shipping requirements and transportation carriers. A shipper has their wants and needs, and a driver or transportation carrier has their needs and agenda; this includes anything from pre-planned routes to the type of deliveries each truck can make.
A freight broker is a person who arranges the deal between the two and ensures they communicate and execute the freight hand-off efficiently. They are your “middle man” between your manufacturer and the transport that will take your product to its destination.
Is There a Difference Between a Freight Broker and a 3PL?
Yes... and no.
A broker is an intermediary between shippers and carriers who arrange transportation. For example, our brokers at Kenco are the single point of contact for their accounts. They are responsible for the sale, negotiating with the carrier, and making sure the truck arrives on time and carries out its route. Brokers often perform supply chain consulting services to help shippers optimize the best method to ship their products.
While freight brokers serve one aspect of transportation, a 3PL is an all-in-one logistics provider offering a wide array of supply chain services. Freight brokerage is just one of the many tools in the "3PL belt."
Is there a reason to choose one over the other?
Working with a freight transportation broker won't limit you, but working with a 3PL means working with a company that knows your unique business supply chain needs intimately. A 3PL can also offer other value-added services and a developed network—something a freight broker might lack.
When Do You Need a Freight Broker?
There is no industry vertical that needs a freight broker more than any other. Every industry and every company in an industry is different, and you will have individual needs when it comes to your freight shipping and handling.
But when you start to get the feeling you might need a freight broker to bolster your current transportation process aspect, you’re in the right place.
Through our years of experience, we typically see three common attributes among those looking for a freight broker. These are three common situations you might find yourself in as you ask, “Could it be time to research and meet with freight brokers as an option for our business?”
You may need a freight broker if:
- You want to reduce transportation costs and lost time
- You have an issue with your current provider’s dependability or service
- You are doing well with your current process, but need more capacity or resources
Now, let's jump into how you'll use a freight brokerage partner in each of these situations.
If you want to reduce costs:
Generally, specialization leads to cost reduction. For example, you may be an expert at making sinks but not an expert at making economic shipping decisions that ensure lower costs. Freight brokers and 3PLs are the experts when it comes to shipping, and relying on their knowledge and experience could be exactly what you need to optimize this arm of your supply chain.
As a 3PL, we invest heavily into the supply chain to ensure cost reduction wherever we can—sharing the savings with you. Utilizing a freight broker's services could be the cost-saving method you need most to ensure maximum optimization, cost savings, and to understand your delivery network better.
If your current solution is frustrating or unreliable:
Sometimes it's a current provider who doesn't deliver on time or an asset-based company with trouble adjusting to supply chain hiccups—such as a sick driver or an over-committed fleet. You may even have a straw-that-broke-the-camel’s-back situation that comes to mind at this exact moment, where your provider missed a big delivery and lost a client.
Issues like this are easily overcome through freight brokerage.
Your broker specializes in solved dependability issues, and they work for you to minimize missed or late deliveries. A freight broker ensures your transportation network works better for your customers and your specific needs at
If your process is currently working, but you need more capacity or resources:
Hopefully, business is booming, and you are looking to add another transportation provider. Congratulations! This is one of our favorite reasons to work with clients because it's all about growing your organization using this positive momentum.
Working with a freight broker during this time can help you capitalize on your growth and success. Freight brokers are also experts at optimizing different modes of shipping to find the most economical method while ensuring timeframes are protected as well.
Picking a Broker
Just because a freight broker has name recognition and works in your zip code doesn’t mean they are the best solution for your businesses. There are some brokers who don’t provide the quality and analysis you deserve at a high standard, so you will want to carefully consider the brokerage team you choose to work with.
Just like in any business, your vetting process will be essential to future to success.
These three questions are the most important to lead within your initial conversations:
- Are they financially stable?
- Are they licensed by the FMCSA?
- How do they vet, monitor, and select their partner carriers?
Financial stability means reliability and a better guarantee the company will be a viable partner in the long-term. Surety bonds protect your company if there's default on a contract. This is essential protection. A broker can also be a legal safety net for a shipper.
Confidence in your vetting process (and the partner you subsequently choose) is paramount to your cost savings and success when utilizing a freight broker – or any transportation provider.
In the end, you may realize initial price is not the most important factor in choosing your broker. Perhaps after your conversations using the questions and information above, you choose to pay more upfront to work with a broker who guarantees higher overall savings and better value––which ultimately grows your revenue substantially.