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ОглавлениеThe basic concept of freight brokering is pretty simple: A shipper (or consignor, as they’re sometimes referred to) calls you with a load. You complete your own internal paperwork and check with your carriers to see who has a vehicle available. If you already have a relationship with a carrier, you fax or email them an addendum to your basic contract that describes this particular load and the rate. If the carrier agrees, the company’s representative signs the document and sends it back. (If you don’t already have a relationship with the carrier, you’ll need to set up a carrier/broker agreement before you finalize the deal on the first shipment.)
Next, the carrier dispatches the driver. It’s a good idea to require that the driver call you (or use your online tracking system) to confirm that the load has been picked up, and again when it has been delivered.
After the shipment has been delivered, the carrier will send you an invoice and the original bill of lading. You invoice your customer (the shipper), pay the trucker, and then, ideally, do the whole thing again with another shipment.
A successful freight broker will ultimately be handling this process simultaneously on behalf of multiple shippers and/or handle multiple shipments simultaneously on behalf of a single shipper. Thus, it’s essential that you always keep track of all relevant details that are pertinent to each job.
When you arrange a shipment, you’ll need information from both the shipper and the carrier. Much of this information should be kept on file in your office. Again, this is something specialized software can help you manage.
Maintaining detailed information on shippers helps you provide better customer service, and saves you from having to take the time to ask the same questions with each shipment. Keep the following information:
• Company name
• Physical address
• Billing address, if different from physical address
• All telephone numbers (cell phones, voice mail, fax, pagers), including any toll-free numbers
• All email addresses
• Contact people (including traffic and shipping managers, freight payable person, and anyone else you may deal with)
• Type of freight shipped (machinery, produce, chemicals, etc.)
• Type of equipment (trucks) required
• Pallet exchange requirements
• Other special requirements
• Any other pickup information you require (such as warehouse locations or other distribution points)
aha!
Use any of the popular contact management or freight brokerage software packages to maintain your customer information. This will make the data easily accessible for anyone in the office, simple to keep current, and easy for you to monitor the status of accounts from a sales management perspective.
Many specialized software applications designed for use by freight brokers are based online. This means that you pay a monthly access fee and can access the applications and your data from any internet-connected Windows PC, Mac, or even a smartphone or tablet.
This information will not change frequently, but you should always make sure you have current information. Immediately update anything you find out about during the course of handling a shipment, such as a change in personnel, a new phone number, or an updated email address. Once a year, you should call each customer and review their information to ensure your files are up to date.
Pitch this exercise as a benefit. Explain to the customer that you have a policy of checking your files periodically in order to confirm their completeness and accuracy, and that you want to go over what you have on file in order to confirm that it is correct. When you are finished, ask if there’s anything else you should know that would help you serve the customer better, or if there are any shipping needs you don’t know about that you could help with.
Keep in mind, the shipping needs of your clients (shippers) will change often, sometimes seasonally. It’s important for you to know when these changes happen, so you can easily keep up with and be prepared to handle each shipper’s ever evolving needs.
Of course, with each shipment you’ll need to know the destination company’s name, address, contact person, and phone number. If your customers ship to the same places over and over, you’ll want to keep this information on file to make it easier and faster to prepare the documentation for each load.
This information is not only necessary for your carriers (how else will they know where to take the freight if you don’t tell them?), but it also gives you another potential shipper. If the consignee (the recipient of the shipment) is a manufacturer, they may have goods your carrier can pick up after dropping off your initial shipper’s load. If the consignee has freight to send back to the initial shipper—or even someone else in the same area—and your carrier can handle this load as well, the carrier gets a very productive round trip. The trucker does not have to return empty (which means generating no revenue) or take the time and effort to find a load on its own.
Be sure to find out in advance if the shipper requires a pallet exchange, which saves carriers from having to return pallets to shippers and saves shippers from having to replace pallets all the time. It works like this: Many types of goods are loaded onto pallets, which are then loaded onto trucks. Many drivers carry empty pallets in their trucks. When they receive a load on pallets, they exchange their empty pallets for those used by the shipper for the materials just picked up. When the driver reaches the destination, the loaded pallets are swapped for empty ones, replenishing the driver’s supply.
When you complete a load sheet for each shipment, include the identification numbers of the tractor and trailer that hauled the load. The carriers will provide you with their equipment numbers; it’s standard procedure.
Keep up-to-date information on carriers even if you don’t have any loads for them at the moment. By maintaining files on carriers, you will know immediately which routes they travel and what kinds of trucks they have. This will help you select a carrier quickly when a shipper calls. Keep the following information:
• Carrier’s name
• Type of carrier (contract, common, etc.)
• Physical address
• Billing address, if different from physical address
• All telephone numbers (cell phones, voice mail, fax, pagers), including any toll-free numbers
• All email addresses
• Contact person (in most cases, the dispatcher)
• Other terminals, phone numbers, and contacts
• Type and size of equipment available
• Motor carrier’s license number
• Federal tax identification number
• Whether or not the carrier offers pallet exchanges
• Carrier’s traffic lanes and backhaul requirements
Beyond the basic information about a carrier that helps you make the selection, you should obtain the following additional data before you actually give that carrier a load:
• Copy of current insurance certificates and updates
• Certificate of authority
• Copy of current general-commodity tariff and updates (if applicable)
There are several online-based services you can subscribe to as a freight broker to help you quickly find carriers, negotiate fees, and maintain up-to-date records. DAT Solutions, LLC’s DAT RateView service (www.dat.com/products/rateview) will help you find carriers and negotiate rates based on timely and localized information.
These key documents prove that the carrier is licensed to transport freight and is insured if cargo is lost or damaged. You should not only confirm that the carrier is insured, but also note when the insurance expires. When that date arrives, check with the carrier for proof that the coverage has been renewed. Certificates of insurance usually include a provision that the holder will be notified by the company upon cancellation of coverage.
In addition to these items, ask your carriers for a statement that they assume full responsibility for paying all fuel taxes, including ton-mile taxes (taxes based on the weight and distance), in all states through which they travel. Also, while on lease or contract, they should pay fines for any and all violations incurred. Though carriers generally make it a standard part of their business operation to pay these fines, you should obtain a written agreement to that effect and place it in your files.
You should also retain any correspondence, agreements, rate quotations, policy changes, memos, etc., along with copies of all contracts, bills of lading, and invoices you send or receive.
There are tens of thousands of carriers operating in the United States. Your job as a broker is to identify the ones that provide services your customers need and to confirm their reliability before using them.
You’ll find carriers listed in a number of directories, trade magazines, and online services. Word-of-mouth is also a good way to find carriers; as you’re out there networking, pay attention to what others are saying about particular trucking companies and follow up on good reports.
stat fact
Approximately 90 percent of interstate motor carriers operate six trucks or fewer.
You can also look for trucks at truck stops and on the road. When you see trucks that are clean and well-maintained, speak to the driver and find out something about the company. If it isn’t practical to speak to the driver, make a note of the company name and headquarters location (it will be on the truck or the cab) and give the company a call.
“For 18 years, I’ve written down the names of trucking companies I see on the highway,” says Bloomingdale, Illinois-based freight broker Ron Williamson. “I’ll call that company and ask if it has any extra trucks it can provide us.”
Of course, don’t overlook the internet as a source for carriers. There are a number of online databases that allow shippers and carriers to post their freight and equipment needs. (See the Appendix for a sample listing of these resources.)
Once you’ve found a carrier that might be useful, you need more information before you turn a load over to it. Ask for copies of the carrier’s certificate of authority, current insurance certificates, and current tariff. You should also get references from satisfied customers and take the time to check those references. Finally, check a credit reporting bureau or financial rating service to find out what the carrier’s financial condition is. You want to be sure the carriers you work with are reliable and financially sound.
Avoid using major carriers that have terminals all over the country. These carriers do not take loads directly from pickup to destination; rather, they relay a load from one terminal point to another. This process takes additional time and increases the amount of handling, which increases the risk of loss or damage. It’s better if the driver who picks up the load delivers it.
stat fact
It costs carriers a significant amount of money per day to let a truck sit, waiting to find a load to avoid an empty backhaul. “That’s why brokers are so much in demand,” says Bloomingdale, Illinois-based freight broker Ron Williamson. “If it’s Tuesday, you don’t want that driver sitting in town until Friday.”
Some carriers use a procedure called pooling, where loads are dropped and left until a driver with the proper equipment and destination is available to pick them up. Though this may sound like an effective practice, it causes delays in transit time, and you should avoid carriers that employ this method. Such a policy will give you a competitive edge by enabling your shippers to meet tight delivery schedules.
In the beginning, it’s a good idea to handle full truckloads (FTLs), only because they’re easier to deal with than less-than-truckload (LTL) shipments. It’s impractical for many carriers to handle a partial load; you would need to arrange for the driver to pick up two or more LTL shipments headed for the same destination. That may seem a bit overwhelming when you’re just getting started, but as you gain experience, you’ll be able to handle both FTL and LTL shipments easily.
Freight charges are based on a number of variables, but the two main factors are the weight of the load and the distance it must travel. Rates are also affected by the type of truck needed, whether the driver needs to make one or more stops to pick up the freight, and whether the driver needs to make more than one stop to deliver the goods. Each shipment is entitled to one pickup and one delivery with no extra charge; you can usually negotiate the rate for additional stops with the carrier.
Before you begin shopping for rates for specific shipments, get an idea of the current “going rates” for the types of shipments you’re likely to be handling. You can do this by requesting copies of tariffs from several carriers and studying them.
Many shippers—especially large companies with experienced traffic departments—will not leave it up to you to quote a rate but will tell you how much they are willing to pay. If this amount is unreasonable, you’ll need to negotiate with the shipper or decline to handle the load.
Calculating freight pricing is not a simple process. Carriers negotiate rates based on commodity, value, equipment availability, volume, customer-service factors, and payment history, among other things. As a broker, you need to know what the market issues are, as well as what can cause increases or decreases in the per-mile rate, such as driver shortages, fuel surcharges, seasonal changes, toll roads, and so on.
stat fact
Annual revenue from trucking each year is around $700 billion—more than 80 percent of total revenue earned by all domestic transport modes.
Your income is generated by the commissions you earn on each load. You’ll be paid one of two ways: You can bill the shipper the amount you are going to pay the carrier plus the amount of your commission, or the carrier can bill the shipper directly and then pay you a commission from its revenue.
The most common way to handle billing and commissions is to have the carrier bill you, and then you bill your customers (the shippers). Cherry Hill, New Jersey-based freight broker Bill Tucker says this is much easier and less confusing for your customers than if they are billed directly by the carrier.
• Know Your Limits
As a broker, by law you may not charge or receive compensation from a motor carrier for brokerage service if you own or have a material interest in the shipment. You are also not able to exercise control over the shipment because you own the shipper, the shipper owns your company, or there is a common ownership of the two.
In addition, you may not give or offer to give anything of value to any shipper or consignee (or their officers or employees) other than inexpensive advertising items that are distributed for promotional purposes.
If the carrier bills your customer directly, your customers will receive multiple styles of bills on a variety of billing cycles, and they will have to do the extra work of matching up the bill to the shipment. “When their computer generates a bill of lading for the broker and the carrier bills them, it gets confusing,” Tucker says. “Nowadays, almost all freight brokers bill the shipper and pay the carrier. It’s much simpler for the shipper.”
As a freight broker, your commission is negotiable. You can get whatever the traffic will bear. The average broker’s commission is between 8 and 15 percent of the shipping charges, sometimes higher, and a new broker can typically expect to earn between 8 and 10 percent.
“It all comes down to negotiating,” says Indianapolis-based freight broker Chuck Andrews. “If you’re in a highly competitive market area—like in Atlanta, where there is a lot of freight and not very many trucks—your commission will be much lower than the industry average.”
Keep in mind that your commission is your gross revenue, and out of that you must pay your overhead: rent, taxes, payroll, sales commissions, utilities, debts, etc. Williamson estimates that most brokers are lucky to earn a net profit of one to two percent after expenses.
Although you, your carriers, and your shippers need to agree on the total freight expenses for shipments, the prices of transporting freight can be broken down into smaller units. Those numbers are used to help carriers measure their own profitability and by shippers to set prices of their goods and determine profit levels. For example, carriers are interested in the total fee for any given trip, and they also want to know their fee per mile. Shippers are often interested in the cost by weight, typically measured in 100-pound units and referred to as “cost per hundredweight” (abbreviated “cwt”). These numbers are easy to calculate with simple arithmetic.
To quote a rate for a customer, follow these ten steps:
1. Find out the point of origin.
2. Find out the destination.
3. Determine the gross weight of the load.
4. Ask if the carrier will need to make stop-offs or split pickups.
5. Check whether pallets are required.
6. Find out when the load(s) will be ready for pickup.
7. Find out when the load(s) can be/need to be delivered.
8. Ask if appointments are necessary at origin or destination.
9. Find out who gets billed for the freight charges.
10. Obtain the frequency and number of similar shipments.
• Profit Prophet
When someone is considering starting a business, often one of his or her first questions is: “How soon will I start making money?” What they really mean is: “How soon will I start making a profit?” For a freight brokerage, the answer to that question is “It depends.”
You’ll start generating revenue with your first shipment. How long you take to actually begin making a profit will depend on the size of your operation, your monthly overhead expenses, how many customers you had when you opened your doors, and the thoroughness and aggressiveness of your business plan. Indianapolis-based freight broker Chuck Andrews says that if you have shippers lined up from the beginning and you’re aggressive, you could be profitable within 90 days. But if you only have a few customers and aren’t able to move a lot of freight, it could take a year or more.
With this information, you’ll be able to contact carriers for quotes that will be accurate. Few things are more frustrating in this business than to quote a rate based on incomplete information. A quote will be impacted if the customer needs extra services that you have to charge for. If you didn’t calculate these fees into your initial quote, then you have to tell the client that their final bill will be higher than your original estimate. Needless to say, customers don’t like this, and you could lose future business as a result. Once you quote a price, your clients will expect you to adhere to it.
Once you match a load with a carrier, you must fill out a number of forms. This is something you can do manually, or utilizing specialized software can help you streamline the process.
First, you and the carrier need to enter into an agreement covering current and future dealings. The Transportation Intermediaries Association provides sample agreements in its New Broker Kit (www.tianet.org/TIAnetOrg/Meetings/Event_Display_TIACon.aspx?EventKey=NBK), but the freight brokers we talked with recommended that you develop your own contracts, agreements, and forms, customizing them to your particular operation. To do this, you’ll need to consult with an attorney who specializes in this industry.
Once you have a carrier agreement on file, you need to send the carrier a load confirmation and rate agreement form for each specific load. When the carrier picks up the load from the shipper, the shipper will give the carrier a bill of lading listing the goods being transported and any special arrangements the driver needs to make for the load. When the driver reaches the consignee (recipient of the shipment), he needs to have someone there sign for the load.
If an independent contractor unloads the freight at the consignee’s location, the driver needs to obtain a contract labor receipt from this worker. Depending on your arrangement with the carrier, the driver or trucking company will invoice you, the shipper, or the consignee for transportation services.
The carrier/broker agreement outlines the terms under which you will work with a given carrier. It’s designed to apply to all the dealings you have with a particular carrier and should also provide for any future changes.
When writing the carrier/broker agreement, make sure to do all of the following:
tip
In most cases, when a broker and a carrier are entering into a new relationship, it is the broker who creates and introduces the contract. Though the carrier may negotiate certain points, it is typically the responsibility of the broker to handle this administrative task.
• Note the carrier’s motor carrier (MC) or license number, full corporate name, and address.
• If you will be working with this carrier on a contract basis, state that the freight and rates will be negotiated for each shipment.
• State that the carrier is liable for any damage or loss to the freight that occurs while the carrier transports it.
• Note that the carrier is responsible for any personal injury or damage to vehicles or equipment that occurs while the freight is in the carrier’s possession.
• State when the carrier will receive payment and what the carrier must provide before you will pay (such as bills of lading).
Figure 3–1 on page 40 shows a sample Carrier/Broker Agreement.
Load Confirmation and Rate Agreement
Once a carrier agrees to move a given load, you should complete and send a load confirmation and rate agreement form. This should include the name and address of both the shipper and the consignee, a trip number (for tracking purposes), any information on extra pickups or stops, pickup and delivery dates, a brief description of the commodity to be shipped, and your commission or brokerage fee structure. See Figure 3–2 on page 41 for a sample Load Confirmation and Rate Agreement.
At the time of the pickup, the shipper will provide the driver with a bill of lading. This form will include information on the nature and size of the load, its destination, and any required special handling. The driver signs the bill of lading as an acknowledgment of receiving the load described by the shipper.
The bill of lading is prepared and handled by the shipper and the carrier. As the broker, you will not be directly concerned with it, but you need to keep a signed copy in your files. The carrier usually sends this to you, along with its invoice for transportation services.
FIGURE 3–1: Sample Carrier/Broker Agreement
FIGURE 3–2: Sample Load Confirmation and Rate Agreement
Drivers may occasionally work with contract laborers who unload trucks once they reach the consignee. If they do, the laborer will give the driver a contract labor receipt, which the carrier sends to you. The driver or carrier pays the laborer and turns to you for reimbursement. If your shipper is willing to cover this cost, pay it. Even if your shipper doesn’t want to pay for contract labor, you may want to consider absorbing the expense so you can maintain good relations with the driver and carrier. See Figure 3–3 for a sample Contract Labor Receipt.
FIGURE 3–3: Sample Contract Labor Receipt
After making the delivery and obtaining proof of delivery, the carrier sends you an invoice, along with the bill of lading. With these documents, you can prepare your own invoice to send to the shipper. (Unless, of course, the carrier bills the shipper directly.)
stat fact
According to the American Trucking Association, motor carriers collect 87 percent of total revenue earned by all modes of transportation.
Your invoice should include the billing date, the dates of pickup and delivery, the origin and destination, what was shipped (commodity, pieces and total weight), and additional fees (such as fees for exceeding weight limits or charges for contract labor). Bill your shipper as soon as you receive the complete invoice and bill of lading from your carrier.
If the shipper is sending the delivery “collect,” then you bill the consignee rather than the shipper. The shipper should provide you with billing information on these shipments. See Figure 3–4, page 44, for a sample invoice.
A contract of carriage is not a document itself, but it’s important that you understand the concept and what it includes. Many otherwise well-informed transportation professionals view the bill of lading as a contract of carriage—a common misconception. “A bill of lading is certainly a receipt used in a contract of carriage, but there are many elements required by that contract that are generally not stated on the bill of lading,” explained Bill Tucker. “Some examples: the price agreed to in the contract, all the services to be provided, rules to be used to handle exceptions, and accessorial charges that may be applicable.”
What makes up a contract of carriage? “A contract of carriage between a common carrier and a shipper (with or without a broker being involved) usually consists of some form of bill of lading, whether ‘standard’ or not, plus all the tariff provisions, pricing, rules, and service descriptions,” Tucker says. “Also part of the total contract is the intent of the parties; the regulatory rules that must be followed, whether federal, state or local; and all the other ‘usage of trade’ and precedent within which this transaction has occurred.”
At any given moment, most business owners have a very clear understanding of the mission of their companies. They know what they are doing, how, and where it’s being done, and who their customers are. Problems can arise, however, when that mission is not clearly articulated into a statement, written down, and communicated to others.
FIGURE 3–4: Sample Invoice
Even in a very small company, a written mission statement helps everyone involved see the big picture and keeps them focused on the true goals of the business. At a minimum, your mission statement should define who your primary customers are, identify the services you provide, and describe the geographical location in which you operate. A mission statement should be short—usually just one sentence and certainly no more than three. A good idea is to cap it at 100 words. Anything longer than that isn’t a mission statement and will probably confuse your employees. Your mission statement doesn’t have to be clever or catchy—just accurate.
To develop an effective mission statement, ask yourself these questions:
• Why does my company exist? Whom do we serve? What is our purpose?
• What are our strengths, weaknesses, opportunities, and threats?
• Considering the above, along with our expertise and resources, what business should we be in?
• What is important to us? What do we stand for?
Smyrna, Tennessee-based MCD Transportation’s mission statement reads: “To provide our customers with dependable transportation services based on fair and competitive pricing programs with an emphasis on customer service for all concerned parties. To be receptive to customers’ needs and react in a professional and timely manner. To recognize customers, carriers and vendors as our only assets for continued success.” Not only is the mission statement used as a marketing tool, but employees are also encouraged to periodically review it and suggest any changes they think are needed.
Use the Mission Statement Worksheet in Figure 3–5, page 46, to help you write one for your business.
For help creating a full business plan that includes a mission statement, consider using one of the following standalone software or online computer applications:
• BizPlanBuilder—www.businesspowertools.com/project/bizplanbuilder-small-cloud-business-plan-software-app-template-crowd-fund
• Business Plan Pro—www.businessplanpro.com
• LivePlan—www.liveplan.com
• Plan Write—www.brs-inc.com/pwb.asp
FIGURE 3–5: Mission Statement Worksheet
It’s likely that no industry is more affected by seasonal issues than transportation. The volume and type of freight moving often depends on the time of year. At times, there will be an abundance of trucks and drivers eager to haul loads, and other times balancing the federal budget will look like a simpler task than finding a single truck and driver. For example, even though you may not handle produce, produce season can cause a lack of trucks that affects your ability to serve your customers. Another busy season is, of course, the fourth quarter, as holiday merchandise and year-end orders are moving.
In addition to equipment availability, there’s also the issue of weather. Snow and ice can create dangerous driving conditions and affect transit times. Fog and rain can be year-round problems in various parts of the country. In dry seasons, areas prone to wildfires may experience road closures due to heavy smoke and fire jumping across highways. Tornadoes usually last just a few minutes and hurricanes take less than a day to pass through an area, but the damage they leave behind can have a major impact on the ability of truckers to move cargo.
Beyond the mechanics of seasonal issues—getting the freight on trucks and moved—is the impact of seasons on your revenue. If possible, build your customer base with accounts that are not strongly seasonal in nature. Expect some slowdowns at certain times of the year; prepare for those periods and use the time to evaluate your business and deal with any internal issues that need attention. You can also increase your sales efforts during slow periods. It’s very important to understand your customer base so you can accurately predict and prepare for the slow periods, especially when it comes to adjusting for a drop in cash flow.
The terrorist attacks of 9/11 have prompted increased security measures for all modes of transportation. An issue of particular impact on brokers has to do with who is driving the trucks. “You used to be able to drive right up to the shipping dock, get your load, and go,” says Joe Workman, president of Transportation Resources, Inc., a freight management company with headquarters in Winter Park, Florida. “Now, in many cases, drivers have to show identification before they are admitted to the premises, and some companies require drivers to be pre-qualified before picking up a load. Shippers are more concerned than they’ve ever been about who is hauling their freight.”
Workman says many shippers want to be able to maintain communication with drivers by either cell phone or satellite. “If drivers don’t have reliable on-the-road communication means, we can’t use them, and that cuts back on our available trucks.”
If you want to handle air freight, you should know that airlines now require cargo to come from known shippers. “Somebody with the carrier has to know you and vouch for you,” says Workman. “It’s harder now for new people to do business.”
Customers who ship sensitive or hazardous materials have special requirements, and you should find out what those are as far in advance as possible. Workman advises, “Know your customers—know who they are, what they do, and what you’re picking up.”
