How exactly do brokers figure out their rates?

Supply and demand is a factor. Also how quick the shipper needs it moved or a service failure "might" add to the cost. Depends on the freight. Full truckload of reefer or van is probably coming from an established shipper that knows the approximate rate since they have been doing shipments for years. Which would fall into supply and demand. If a new broker wanted that freight, they would have to undercut the last guy to get it or call on that day of a service failure and get lucky. Sometimes shippers also swap out brokers due to the shipper hitting credit limits. They might run up a $100k tab on broker credit and the broker basically cuts them off. In moves in the next big broker willing to in essence be the bank for the next 90 days and $100k credit.

Also mileage plays a part. Long hauls usually have a lower profit margin. A broker might shoot for 3-6% on a 2000 mile move or they might go for 18% on a short move. At the end of the day, brokers try to average 15% or better on all moves. LTL usually boosts that up. Normal shipments are probably in the 5-12% range. Brokerages use quick pay to boost the bottom line 2-5%.

If a shipper gives a broker a price that is too low, the broker then can choose to do a $0 move to try and "get in" the account and hope for better days, or go back to the shipper and see if they can add a few dollars. There are "lane maker" rate programs on DAT and others that give a rough estimate. I've found those to be off at least 10% too light on rates. I think those are reported from factoring companies. So that is saying not only is a carrier factoring, they are also hauling cheap. Surely a failure coming.

On heavy haul/specialized equipment that maybe is more of a one load and done, you would generally call carriers and get their rates with permits and fees and go from there. So each type of freight and volume makes a difference. The head honchos of brokerage firms want to see a 15-18% margin total generally.

Lastly one thing trucks should remember is that some shippers mass email loads. That one load might be posted 20 times, looking like there is freight in the area and you might assume the supply is up. A load could also be posted by multiple dispatchers in the same office. If you see the same cities (assuming they actually post the correct cities) it's probably one load and not raining freight. Those are the tougher ones to get as it becomes a back and forth and a waiting game with the shipper to accept a price. Shippers can keep those for all I'm concerned. Let them wait til its too late in the day and then pay more. Good cost savings plan there.

 

What a lot of the drivers do not believe is the brokers sometimes do not make the rates. I have a few shippers that send me the loads or lanes they have with a price right on them . Some will work with you on price and some just say that's the price if you can not get a truck for that someone will. Like everything there is good and bad brokers shippers drivers.

 

I'm going to take a guess and say maybe they look at one of those loadboards that has a "Rate Check" or something to gauge the price per mile. Example: Load out of Harrisburg, PA going South. pay $0.0003 per mile.
Load out of Atlanta, GA going North. pay $2.00 per mile.

 

I think some of them do that. Then they do not want to hear everyone say no. I wish they would try and cover the loads for what they say. I try to be very fair with the trucks i use. Always try to get them the best rate i can. I had trucks and drivers of my own and understand what it takes to run a truck. Shame on some of the trucks that run for some of the rates they do cause believe me once a shipper gets a broker to cover a load for say $1.20 -$1.50 a mile they think that is the new rate. I had a shipper offer me some loads today and i just told them i could not cover the loads for the rate they offered. But someone will take the loads and now they think that broker is great. The cheapest option is seldom the best deal .

 

Broker here.
Broker rate is difference between customer's comfort rate and carrier's comfort rate.
Both rates are fueled by supply and demand, ie market.
There is no such thing as "stupid idiot customer that pays $5000 to a broker for a loads that coverable for $1500". In my 4+ years of brokering I have not seen any customers like that - only cut-throats. No broker is dictating their rates to customers.
BTW, if any of you know customers like that - let me know please. I will take my 10% - the rest is yours via no-fee 1 day quickpay.

 

Alex i am a broker to and you are spot on with what you say. The only time most shippers pay is when it has to go and they have run out of options. I just did a load today shipper wanted to pay $750 on load which they had been trying to cover for two days . I had a truck for $1100 said no all day long but kept saying load has to go. Well the end result was it cost them $1300 to get it moved. So as much as the truckers think we the brokers are holding all the money it is the shippers that relay set the rates.

 

Ok yea fair enough, sometimes the shipper doesn't want to pay a lot to move it. But. I know for a fact, that there is a shipper that pays $1200 to move government loads here in my town and when I see postings at rates of $600-$700 then that's a little much. I move then for a few brokers for around $900. Some of us truckers know more about the loads and the money and the shippers than the brokers. When I call up about a load that I know well and Iget some low offer, then I just end up calling another broker til I get a fair rate. I don't mind if the broker makes 25-30%. But any more than that is taking too much.

 

6wheeler anything more than 15% is to much. That is what a good broker will make. No need to screw people over.

 

I look at a lot of different variables. I have customers who are just looking for quotes and I'll take a look at truckload rate index (TRI) and I will also check to see if we have ran any similar lanes with similar miles & weight. Chances are we have and I'll get a general idea of what the rate should be. Seasons also come into play as well as where you will most likely have to pull a truck from. I move freight out of the middle of nowhere Kansas, Nebraska and Iowa area on a daily basis and I am constantly deadheading carriers 70+ miles so I build that into a rate.