Best Practices for Freight Brokers

Apr 27, 2023 | Services

Freight brokers work as intermediaries between shippers and carriers in the transportation and logistics industry. Their role is vital in helping shippers move their freight as efficiently as possible while cutting down costs. Shipper-carrier relations can seem like a game of tug-of-war, with carriers wanting to push rates up and shippers trying to push rates down. A Freight Broker can utilize best practices to make it a positive experience for both parties.

Article Overview

Freight brokers are licensed professionals in transportation and are an essential part of making shipping more efficient, but what are some best practices that can help to make the transactions as seamless as possible?

Freight Brokers Role

First, it’s important to understand the freight broker’s role. We’ve already established them as an intermediary, but how in-depth does their role take them? What best practices and strategies should they be using? A freight broker’s primary focus should be to match a shipper’s freight volume with a carrier’s capacity. Brokers connect shippers with qualified carriers and communicate every step of the transportation process. Confirming weight and dimensions with the shipper to relay to the carrier, confirming pickup times and estimated time of arrival, any delivery details that the carrier may need to drop the load, and the list goes on and on. Every step of the process is communicated through the broker. Brokers not only need to find a carrier to move the freight but negotiate competitive rates that benefit both the shipper and the carrier.

A major reason shippers and carriers work with brokers is their ability to navigate the legal requirements in the industry. Things are constantly changing, and the broker can take the pressure off of shippers and carriers to ensure that shipments are moved within federal and state regulations.

Freight brokers operating in the U.S. are required to receive a valid license to comply with federal regulations. The Federal Motor Carrier Safety Administration (FMCSA) charges a one-time fee for a freight broker license, which is mandatory before working with any shippers.

Brokers must also be aware of any changes to regulations as they happen. For example, in 2019, the FMCSA instated new regulations requiring electronic logging devices to better enforce safety on the roads. This caused freight brokers to ensure that the carriers they were using were compliant with the new regulations before booking to avoid any legal repercussions.

Understanding Economic Impacts on Pricing

Knowing the quickest and most cost-effective ways to transport can help brokers become not only an expert but consultants for shippers. With insight into industry trends and any new regulations, brokers can navigate the transportation process for shippers that, in some ways, might be a little out of the loop.

By offering knowledge on the best ways to save on transportation, backed by relevant industry data, brokers can offer services to shippers that save on overall shipping costs. These savings can help ease higher prices and strengthen relationships in a professional network. Additionally, saving customers money can be a selling point in attracting new customers to leverage the company.

Choosing the Right Tech Stack

As a broker’s book of business grows and customers send more loads to the company, brokerages need efficient automation and digital tools for the best visibility. A robust transportation management system enables brokers to streamline and automate monotonous tasks such as carrier onboarding and load tendering.

The transportation industry never sleeps, and when offering around-the-clock availability, brokers are required to locate and give updates on freight to their customers. Successful brokers obtain relevant information to relay to the customer promptly. Ask for updates from the driver after pickup and when they arrive at the delivery location. Communication is key in staying informed with updates on the load that you are moving.

Certain software platforms can allow a third-party broker to pinpoint exactly where a load is to keep brokers accurately informed. If your company is willing to invest in a SaaS, make sure to require that every carrier registers for the platform before sending the rate con to prevent the risk of losing visibility on the load. Having a robust, automated tech stack is a game-changer for brokerages looking to take their business to the next level. 

Building and Leveraging a Carrier Network

In the supply chain, relationships are everything. They can be the deciding factor in the success or failure of a load. For times when things go south in the transportation industry, such as when last-minute shipments populate or when one carrier falls off a load, a strong, reliable carrier network leveraged for repower is crucial. 

To build a dynamic carrier network, start with carriers whose capabilities match the needs of shippers in your established network. 

Keep in mind that brokerages need the carrier as much as carriers need a 3PL. Knowing prices in origin and destination markets combined with additional visibility tools to calculate fair and honest rates builds trust within any carrier network.

To create a seamless experience from start to finish, gather all the information for the delivery and keep an open line of communication with the carrier. When facing changes or challenges, it’s essential to communicate the delivery plan clearly with both the carrier and the shipper. Positive experiences establish trusted partnerships.

Identify a Target Market

Whether a brokerage is segmented or has a cradle-to-grave model, sourcing business is a vital step to ensure quality service. Having a clear picture of services that can immediately be offered benchmarked against desired future services will help any broker establish a growth strategy. Our team recommends grouping by commodity and size for a more efficient approach. 

It is imperative to pinpoint a potential customer’s shortfalls and any obstacles in their supply chain that you can help them with. If a shipper is having trouble with their freight being delayed at the ports, focus on a drayage network that can strengthen their operation.

However, having an “all-the-freight” mentality and biting off more than you can chew can hurt your business as opposed to benefiting it. At the front end of the partnership, if you are unable to handle a shipper’s requests due to, for example, load volumes or lead times, it is best to be upfront that your network might not be the best for them to work with.

Know your network, know your customers, and most importantly, know your strengths and weaknesses.

Adapting to Change

Transportation is an ever-changing industry. As business moves forward, be willing and able to adapt to the changes depending on your customer’s needs. Some changes may not apply to some of your customers as much as others, so take time to know each of your customers on a personal level to tailor services offered to each customer individually.

Even if you are a natural-born salesman, there is a good chance that it won’t always come as easy as you think.

Not only do you need to sharpen your industry knowledge, but you also need to develop solutions for specific needs. Providing strategy and becoming a trusted partner to carriers and shippers is just one step toward becoming a successful freight broker. With a diverse range of knowledge in this industry, a broker can assist in consulting customers on better ways to save money and move their freight more efficiently.

The Bottom Line

Take time and put in the effort to keep your industry knowledge sharp, your network informed, and build strong business relationships.

Brokers sometimes have the option to work as much or as little as they’d like, so staying motivated and not giving up when it takes time to land that first account is crucial. Maintaining a willingness to commit to customers and strategizing the framework of the operation helps to develop a process that works.

The freight brokerage industry is highly competitive, and to succeed in the field, brokers should implement the practices of identifying a target market, choosing the right technology to handle it, building a strong network of carriers, and staying adaptable are ways to differentiate your brand in the market.

Related: Building Carrier Relationships