Start Your Own Freight Brokerage Business

Your Step-By-Step Guide to Success

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• Publisher: Entrepreneur Press
• Year: 2017
• ISBN:
  9781613083604
• Edition: 5
• Topic: Business
• Subtopic: Transportation Industry
• Index: Business

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With 70% of all manufactured and retail goods transported by truck in the U.S., it's the perfect time to broker your own share of this $700 billion transportation industry. Learn to apply your time management and communication skills as you pair shippers and carriers to move cargo and make money in the process—straight from your home.The experts of Entrepreneur equip you with the knowledge you need to start your own business, manage day-to-day operations, prepare for minute-by-minute changes, and tackle unexpected challenges in freight transportation.You'll learn how to:

• Gain the right training and education before you get started
• Set competitive rates, craft professional quotes and manage collections
• Get bonded and certified to meet industry requirements
• Manage delays, damage claims, and cargo loss effectively
• Find and build relationships with reliable carriers
• Track and manage your daily financials, sales and operations
• Organize your business with sample checklists, worksheets, and contracts

Plus, gain new insider tips from industry experts including founders of Brooke Transportation Training Solutions and AGT Global Logistics. Whether you want to be your own boss, work from nearly anywhere, or capitalize on this stable, multibillion-dollar industry, freight brokerage business is for you. Use this book to get started today!

CHAPTER

1

Introduction to the Freight Brokerage Business

The transportation industry in general, and the trucking industry specifically, are critical to the economic and social survival of local communities, the country, and, indeed, the entire world. Think about the times major transportation systems have failed because of mechanical problems, natural disasters, or labor conflicts. When cargo can’t move, the repercussions are serious and widespread. For example, store shelves are emptied, perishable goods spoil, factories are shut down, workers become idled, and the economic repercussions quickly become catastrophic.

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fun fact

According to a recent survey in Transportation Journal magazine, the aspects brokers enjoy most about their work are solving problems for customers and the fast-paced environment.

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The United States may be shifting from a manufacturing to an information-based economy, and technology is certainly impacting every business, but there will never be a time when goods do not have to move. Thus, the freight transportation needs of manufacturers, distributors, wholesalers, retailers, online merchants, and many other types of businesses is growing rapidly within the United States. Furthermore, the need for shippers to transport their cargo in a timely, efficient, and cost-effective manner can mean the difference between profitability and significant financial loss. This presents a tremendous and potentially lucrative opportunity for knowledgeable and skilled freight brokers.

“Logistics professionals in the United States—shippers, intermediaries, and carriers—have transformed the way we do business,” says Robert A. Voltmann, president and CEO of the Transportation Intermediaries Association (TIA) in Alexandria, Virginia (www.tianet.org). “In the process, our national economy has been transformed as well. Transportation has become a strategic asset. Inventory is now stored in motion, as we have been able to move to just-in-time delivery. More goods are being moved with more efficiency and reliability than ever before.”

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• Terminology Explained

Broker means a person who, for compensation, arranges or offers to arrange the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.

Brokerage or brokerage service is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor, or consignee. Non-brokerage service is all other service performed by a broker on behalf of a motor carrier, consignor, or consignee.

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Take a look around your home or office. It’s highly unlikely that you have much—if anything at all—that didn’t reach you either entirely or partially by truck. The size and scope of the motor freight industry can be overwhelming. This is not something most people think about on a day-to-day basis, as long as what’s needed shows up at their door (or at their local store) when it’s expected.

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fun fact

According to U.S. Freight Brokers, “70 percent of all manufactured and retail goods transported within the United States on an annual basis are via truck.” However, research conducted and published within Logistics Today in March 2016, suggests that during the past decade, larger freight brokers have done significantly better than small, independent brokers because these larger organizations are able to better leverage technology, hire larger and more experienced teams of salespeople, keep prices low, plus use their size, financial stability, and experience as a selling point with potential customers and clients.

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The good news for you is that there’s plenty of room for you to start and grow a profitable business serving the transportation industry as a freight broker. What exactly is a freight broker? Very simply, it is an individual or a company that brings together a shipper that needs to transport goods with an authorized motor carrier that wants to provide the service. The legal definitions of broker and brokerage service are found in the Code of Federal Regulations, 49CFR371.3:

A freight broker falls into the category of transportation intermediary, which is a company that is neither a shipper nor an asset-owning carrier, but plays a role in the movement of cargo. “Transportation intermediaries leverage their knowledge, investment in technology, and people resources to help both the shipper and carrier succeed,” explained Voltmann.

Brokers provide an important and valuable service, which in many cases has become indispensable within recent years, to both motor carriers and shippers. Brokers help carriers fill their trucks and earn a commission for their efforts. They help shippers find reliable motor carriers that the shippers might not have otherwise known about. In fact, some companies use brokers as their traffic department, allowing the broker to coordinate all of their shipping needs.

Brokers are not new to the trucking industry; they’ve been around since the industry itself began in the early part of the 20th century. Prior to the 1970s, however, regulations governing brokers were so restrictive that few firms were willing to even try to gain entry into the industry. But with dramatic changes in federal transportation policy during the 1970s, regulatory restrictions have been eased, creating new entrepreneurial opportunities in the third-party logistics arena.

The Players

An industry so huge and diverse requires a wide range of participants to thrive. Some of these participants’ titles may be a bit confusing, and some of their responsibilities may overlap. But to keep things clear, and as simple as possible, let’s look at who the key players are and what they typically do.

• Freight broker. A freight broker is the middleman who connects shippers and carriers. Freight brokers are also known as “truck brokers,” “transportation brokers,” and “property brokers.” Though the term “freight broker” is used throughout this book, you may see or hear these other titles elsewhere.

• Shipper. A shipper is an entity that has products or goods to transport. Technically, shippers can be individuals or companies, but as a broker, you will deal most often with businesses in fields like manufacturing or agriculture.

• Motor carrier. A motor carrier is a company that provides truck transportation. There are two types of motor carriers: private (a company that provides truck transportation of its own cargo), and for hire (a company that is paid to provide truck transportation of cargo belonging to others). There are two types of for-hire carriers: common and contract. A common carrier serves the public under two stringent obligations: compulsory service and liability for loss or damage to goods. A contract carrier transports freight under contract with one or a limited number of shippers.

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tip

Many shippers who have their own fleets (private carriers) occasionally function as contract carriers. Many of their trips are one way, and they often work with brokers to find loads to carry on their return trips. Build relationships with private carriers whenever you can.

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• Freight forwarder. Often confused with freight brokers, freight forwarders are significantly different. Forwarders typically take possession of the goods, consolidate numerous smaller shipments into one large shipment, then arrange for transport of that larger shipment. To transport goods, surface freight forwarders use both motor freight and rail carriage; airfreight forwarders use cargo and passenger airlines; and ocean freight forwarders use water carriers.

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stat fact

Since trucking deregulation in the 1970s, the number of shippers associations has declined significantly.

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• Import-export broker. These people are facilitators for importers and exporters (import brokers are also referred to as customhouse brokers). Import-export brokers interface with U.S. Customs, other government agencies, international carriers, and other companies and organizations that are involved in international freight transportation.

• Agricultural truck broker. Generally small and operating in one area of the country, unregulated agricultural truck brokers arrange motor carrier service for exempt agricultural products.

• Shippers associations. Shippers associations are exempt, nonprofit, cooperative organizations formed by shippers to reduce transportation costs by pooling shipments. Shippers associations operate in a manner very similar to that of freight forwarders, but their services are limited to their members and are not available to the general public.

In a perfect world, of course, each entity in the industry would handle its traditional role and that’s all. However, the transportation industry is changing so rapidly that once-distinctive lines have blurred. Also, it’s quite common for a successful freight broker to expand his or her business by creating subsidiaries or additional companies that offer other freight services.

Plus, while it’s not possible to fully automate a freight brokerage business, technology and specialized software (from companies like DAT Solutions, LLC, www.dat.com/products/broker-tms) are currently being used heavily by freight brokers of all...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• Preface
• Chapter 1: Introduction to the Freight Brokerage Business
• Chapter 2: What Does the Business Require?
• Chapter 3: Operations
• Chapter 4: What Can Go Wrong?
• Chapter 5: Locating and Setting Up
• Chapter 6: Staffing Your Company
• Chapter 7: Marketing
• Chapter 8: Sales
• Chapter 9: Financial Management
• Chapter 10: Tales from the Trenches
• Appendix: Freight Broker Resources
• Glossary
• Index