Dispatch vs. Brokerage: Do you rely solely on brokers to keep you loaded?

I would love your source on the margin brokers get. Personally I have yet to find a public broker that reports better than 15% margins.

 

99% brokerage freight for the two trucks I run. I feel like i make 99 phone calls per load i book, you've got to weed thru the junk.

 

There is no set fee brokers charge. Some may even dig into their own pocket to move a load for a valued customer, but that doesn't happen that often. I have known of brokers who charge as little as $50/load and some who will take as much as 50% off the top. I think that you will find that most will try to make around 20%. As to whether brokers are necessary to this business, there are a couple of ways in which to look at the relationship. In reality, we don't need brokers. However, brokers do provide a service. If you own trucks and want to spend the time selling your services to shippers, then you can save the brokers commission and negotiate your own rates. Someone will need to make sales calls on shippers and service those accounts. If you are not a people person or like making personal sales calls, then you may be better off dealing with brokers. I have seen instances where I can get a better rate through a broker than by dealing with a particular shipper directly. That isn't always the case, but it does happen. Brokers are sales people who bring suppliers together.

I think that there is more of a problem with 3pls than brokers. The 3pls will go in to a shipper get the business and use other brokers to sell the freight to carriers. Both get a commission and the truck could actually only receive 60% of the load rate (or less) after both get their cut. Most of the larger brokers offer quick pay. Carriers will usually need to discount the bill by a minimum of 1 1/2-2%. Some charge 8% of more for quick pay. With quick pay, carriers can often have their money in 24-48 hours from receipt of the proof of delivery. Shippers can and will usually take 30-45 days in which to pay carriers. With the back and forth and mail delivery, it could take up to 60 days to get your money once the load has been delivered. When you deal directly with shippers you will need to either have the financial resources to sit on those receivables, have a solid line of credit or factor the receivables at a discount.

There are pros and cons of dealing with brokers or shippers. If you are a small carrier, you may not be able to properly service some accounts. There are shippers who prefer dealing with brokers rather than having to find trucks to haul their freight. At this point, I believe there are too many fingers in the pie when it comes to dealing with brokers. Some of the brokerage firms will commonly broker from or through other brokers. That lowers rates and profitability of the carrier and can affect service to the shipper.

I would like to see more savvy carriers call on shippers directly rather than going through brokers. There is too much double brokering going on and rates are much too low for this time of year and for the costs of operating a motor carrier. If you decide to pursue direct shippers, I would caution you about being too low on your rates. Some carriers seem to think that the only way they can compete is with a low rate. I have never sold my services based upon a cheap price. In fact, I generally shoot for the higher price for my services. I provide a valued service and I expect to be paid fairly for my time and effort. Unfortunately, not everyone feel the same as me. That is why rates are at their current low level right now.

 

Gman, most true 3PLs charge a flat fee. That portion of the rate that goes to the 3PL is paying for services they provide that the customer would normally have paid the salary for. Rates with 3PLs really skew things. The rate paid is often higher than before the 3PL. But it now includes part or all of a logistics department. So it really isn't fair to compare because that rate that is paid may include warehousing, a shipping clerk, bid processing, billing, etc. All things that were paid outside of the rate before.

BTW, I love TRUE 3PLs. Once you get approved (not an easy task), you then get to bid on 100's of lanes a week.

 

Not all of those who call themselves 3PLs charge a flat fee. And not all who call themselves a 3PL are providing any more services than any brokerage. I think it is a way for some of them to get around the double brokering stigma. Some may only charge a flat fee based upon the services that they provide. Some have really destroyed the freight rates with some shippers. Just look at Menlo and what they have done to some of the military freight.

I think of most 3PLs like I do with some who call themselves marketing people. Many who call themselves marketing people haven't a clue as to what marketing is really all about. Most are salesmen who would rather call themselves marketing executives than salesmen. While sales is part of marketing, a salesman is not necessarily a marketing person. The same can be said of 3PLs. I understand that there are some who do provide additional services than brokering. But it is much easier for some to call themselves a logistics company than a freight broker or even a trucking company. All could be considered a part of logistics, but they are not necessarily a logistics company.

The 3PLs have changed the trucking industry and I am not sure that it is for the best. I think we could do better without them. It has made many brokers lazy since they can just call the 3PL or wait until the 3PL sends over their load list and then the broker tries to book the load with a carrier. Both take money out of the rate. There are too many fingers in the freight rate pie. I recall, not too many years ago, when most independents and carriers had a little book of brokers and shippers. Back then you could pretty easily stop into a shipper and get a load on the spot, if he had something. That little black book was gold for the trucker. We have too many brokers and all are fighting for a piece of a shrinking piece of the rate.

If everyone who owned a truck and had their authority were good businessmen and good negotiators, it would be much easier to get along without brokers. Unfortunately, that is not the case. We have too many people who are lazy and would rather take the easy way out even if it means less profit.

 

What you are describing is a broker calling themselves a 3PL. And while technically a broker provides part of the logistics chain it is commonly accepted that they are not a 3PL.

So you are talking about a broker that is playing 3PL and has found an unsophisticated customer.

I look at the real 3PLs we work with and you will never see them posting freight on a public load board. Some companies have brokerage divisions but keep the business separated. Yes there are exceptions but the real players that have dabbled on the darkside have gotten burnt. Personally we will not waste our time on bidding for a 3PL that doesn't separate the two sides. Why we don't work with CHR bids. I know they will always try a broker it first.

 

A 3PL does what a shipper should be doing for themselves. Not all who consider themselves 3PLs offer warehousing, etc., Some may. Whether these people are brokers calling themselves 3PLs or what you would term TRUE 3PLs, they still take money away from the truck. One way a shipper can justify using a 3PL is that they won't be paying out more money to move their freight. The 3PL can come in and take over everything. Their fee will come from the freight rate, directly or indirectly. It is still taking money away from the truck. There are major carriers who are essentially 3PLs. They go into a shipper and become their shipping department. They even have an office at a particular shipper. I know several instances where this is going on. A major shipper may be able to get by with one or two people in their department using a 3PL instead of having an entire staff. 3PLs are not new. It is merely a new name for something that has been around for many years. You don't have to use a 3PL to get decent rates. Sometimes, you can get as good or better rates dealing with brokers or shippers direct. I don't think that one is necessarily better than another. It is just another finger in the pie.