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How to Select a Freight Broker for Your Trucking Company

Typically, a freight broker acts as the liaison between an authorized trucking company and an individual or company that needs shipping services. The role of a freight broker is essential to moving cargo to its final destination, he or she is not the shipper. Rather, you would hire a freight broker to look after your needs as the trucking company willing to transport the shipper's items for a reasonable price.

Successful operation as a freight broker requires licensing from the Federal Motor Carrier Safety Administration, adequate insurance protection and in situations, surety bonds.

Many of the services offered by a freight broker are valuable to your trucking company. They can help you connect with reliable shippers that will increase your earnings. Shippers look for the same from reliable carriers to handle their cargo properly.

In some cases, freight brokers are confused with the role of freight forwarders. Although freight forwarders perform similar duties as a freight broker, there are some distinct differences. For instance, forwarders take possession of shipped items to consolidate the items into small shipments. They make arrangements to transport the consolidated shipments.

In contrast, a freight broker never takes possession of the shipped items. They simply make sure that your company receives the items in a timely manner and has the correct information to make deliveries.

Hiring a quality freight broker is a versatile component of your vendor relationships. It is also one of the most important parts. Selecting the right freight broker to fit your needs requires following a few essential steps. Doing so will make sure you partner with someone – or some company – that does not compromise your reputation in the trucking industry.

Select a Licensed Freight Broker

As mentioned briefly, a freight broker is licensed through the FMCSA. This is the requirement of federal law when anyone is involved with arranging transportation services for pay. Stay away from anyone that brokers loads without the proper authority.

In addition to having a property broker license, a freight broker must carry a $10,000 surety bond in many areas. You can distinguish a broker license from a carrier license by the assigned number and letter. Broker licenses will have a “B”; carrier licenses have the letter “C” in the number. It is not unusual, however, for a freight broker to have both if they provide both services.

Select an Insured Freight Broker

Not only do you want to hire a licensed freight broker, but you also want one that carries adequate insurance coverage. Just as you do for your trucking company, insurance is essential to protect you in the business world.

Most freight brokers carry contingent cargo insurance, which will compensate shippers if cargo becomes lost or damaged. This insurance is necessary in cases where your insurance company refuses to pay for the losses.

Additionally, contingent cargo insurance is a second layer of protection for your trucking company for a valid claim. Most freight brokers also carry liability, and errors and omissions insurance. Both of these policies are industry standards.

Perform a Business Credit Check

You are building a relationship and a reputation with the freight broker that you choose to hire. It is also in your best interest to run a credit check to verify whether the freight broker is financially solvent. Are they profitable? Will they be able to pay for your services on time? Verify whether there are any judgments or liens against the broker. If so, you want to stay away from the freight broker with financial issues that can directly impact your business.

Select an Experienced Freight Broker

You will also want to verify how long the freight broker has been in business. The greatest challenges for any company, in any industry, occur during the first few years of operations. Survival becomes the primary objective during these lean days. The fortunate ones survive and build a history of successful executions along the way.

Therefore, you want to partner with a freight broker that has been in business for at least three years. This is the acceptable amount of time for a reputable freight broker to establish proper relationships with carriers. Your trucking company will receive the best rates if you align yourself with experience and success.

Look for a Freight Broker That Offers Multiple Services

In general, freight brokers primarily offer motor carrier services. Some also include multiple service modes including, but not limited to warehousing, air freight, flatbeds, vans and rail intermodal. This flexibility is a good sign that the freight broker can back up shortages that may occur with one mode.

Examine Trucking Selection Process

Examine the trucking selection process to determine if the freight broker uses electronic posting or if it also draws from other fleets. A simple electronic posting service is a centralized location to post available loads and trucks. Typically, private dedicated fleets and large motor carriers are not in the habit of posting load capacities. By using additional resources, the freight broker can be more effective in covering your loads.

Evaluate Carrier Management Process

As a the owner of a trucking company, you want to keep surprises at a minimum. Unwanted problems can arise if the freight broker fails to stay in constant communication with you. Providing instructions over the telephone is a start, but not enough to make sure you can deliver services as expected.

Determine the type of management process that a freight broker uses. Question how your trucking company will be matched to available loads. The freight broker should have a system in place to confirm when a load is picked up – and when it is delivered. Most freight brokers will provide a copy of their correspondence so you can have an understanding of their chosen process.

Choose a Freight Broker with Trade Group Memberships

Another way to determine the legitimacy of a freight broker is whether they have memberships in trade organizations. For example, Transportation Intermediaries Association requires member brokers to adhere to a strict code of ethics. A freight broker that makes a public commitment to conduct business with integrity is a safe choice.

After Making a Selection

Once you have selected a freight broker, make sure that a written contract outlines all business agreements. Having a written contract will explain the terms and conditions, and avoid misunderstandings that can cost business opportunities. Basically, the contract should address the freight broker's unique role in your business. Both you and the freight broker will have realistic expectations of the partnership.

You can find a sample of what to include in a good broker contract on the National Industrial Transportation League's website at www.nitl.org.

Working with Knowledgeable Freight Brokers

Generally, freight brokers use their expert knowledge of how the trucking industry works. With the aid of technical resources, freight brokers can help your trucking company connect with carriers to accomplish business goals. Once you have a reliable freight broker on your team, you will understand that the services they provide are indispensable.

Every business understands that good customer service is in the top five list for success. You want to keep it at the top when selecting a freight broker for your trucking company. Less time is spent on massaging new shipper relationships and more time on making deliveries on-time.

Additionally, you also want to consider the costs associated with hiring a freight broker. A good one will save you money; a bad one will cost you money and important business opportunities. Keep these tips handy when selecting a freight broker for your trucking company so there are no regrets.