Carriers

A carrier is a trucking company or rail carrier that is paid to provide transportation services. Carriers own their vehicles and equipment, in other words, carriers are asset-based. There are more than 564,000 authorized motor carriers in the United States.

Freight Brokerages

A freight brokerage is an entity that works as an intermediary between shippers and authorized motor carriers. Brokers help keep carriers loaded and they help shippers find reliable carriers, capable of matching available loads to available trucks on short notice. Also referred to as a Truck Broker and different than a Freight Forwarder, a Freight Broker must obtain legal authority to operate before they may conduct any business with shippers or carriers.

direct shipper customer

shippers

The customer of freight brokerages and carriers, a shipper is any business with cargo that needs to be transported. Every company has their own title for the person responsible for shipping. That “decision maker” is typically the Traffic Manager, Shipping Clerk, or Transportation Manager.

How do Freight Brokers make money?

Brokers and their Agents contact shippers who have available freight that needs to be transported from one city to another, they provide the shipper with a quote, and then the broker finds a carrier who is willing to pick up and deliver the shipment for less than the broker quoted the shipper. The difference is their profit margin.

green-watermelonFor example, a grocery store with a produce distribution center in Iowa buys 40,000 lbs. of watermelons from a farm in Florida. The grocery store’s Transportation Manager calls their favorite Broker because they need a semi-truck with a refrigerated trailer to haul the watermelons. The Broker tells the Transportation Manager that he/she can provide a truck for $4,000, to the Broker’s delight the Transportation Manager agrees to the rate and sends the broker a rate confirmation (contract between the shipper & brokerage). The broker then finds a carrier with an empty truck in FL (ideally one with a driver from IA) who is willing to take the load for $3,700 and sends the driver’s dispatcher a new rate confirmation (contract between the broker and carrier). Once the watermelons have been delivered; the carrier has been paid by the broker, and the broker has been paid by the shipper, the broker’s profit margin would be $300. In some cases, the broker’s customer may actually be the watermelon farmer, it just depends on who is scheduling trucks and paying for the transportation costs.

Why people start Freight Brokerages

A Freight Brokerage is a rather easy-to-start home based business that can turn a profit in a short time work from home cash flowand scale to any size due to the abundance of freight and capacity available to be matched. In fact, Entrepreneur magazine rated Freight Brokerages as the #1 home business to start. Many brokers and agents work out of home offices but some are fortune 500 companies with huge headquarters. Most successful companies today rely on the expertise of a supply chain management professional to keep their goods and services flowing to the marketplace quickly and efficiently. Some companies use brokers to coordinate all their shipping needs, while others rely solely on asset based companies. The majority of small carriers routinely rely on brokerages to stay loaded, utilizing a broker gives carriers the freedom to not know where they will be headed a week in advance. There is no salary cap for Freight Brokers and Freight Agents, their income potential is limitless. Individuals who obtain the necessary skills, tools, knowledge, and mentality DO make six figures annually. Because the shipping industry is so large and essential for our modern lifestyles it aids in stabilizing the U.S. economy, an independent Freight Brokerage is, in principle, recession proof.

The Transportation Industry is Massive

  • Spending in the U.S. logistics and transportation industry totaled $1.45 trillion in 2014 ($1,450,000,000,000), and represented 8.3 percent of annual gross domestic product (GDP)
  • The shipping industry provides jobs for 8.9 million trucking employees including 3.5 million truck drivers
  • To begin to understand why it is so big simply look around, the majority of the items in your home and office have been transported on a truck at some point in time, often as raw materials and as manufactured products
  • Together more than 500,000 trucking companies transport 70% of the freight tonnage in the industry, while the rail network accounts for approximately 16% of the freight tonnage transported
  • Trucking alone is larger in annual revenue than any U.S. manufacturing industry
  • Not even the largest companies who own tens of thousands of trucks are big enough to serve more than 2-3% of the industry demand. However, 90% of trucking companies have 5 trucks or less
  • There is such a high demand for trucking services now that the growing industry is currently undergoing a shortage of 35,000 to 40,000 semi-truck drivers. More shippers are relying on brokers than ever to help them find enough carrying capacity
  • Brokers coordinate 40% of the cargo transported, there is an abundance of freight to be matched
  • A report released by American Trucking Associations (ATA) in July of 2015 projects freight volumes will increase by nearly 29% over the next 11 years. “The outlook for all modes of freight transportation remains bright,” said ATA Chief Economist Bob Costello in releasing S. Freight Transportation Forecast to 2026. “Continued population growth, expansion of the energy sector and foreign trade will boost trucking, intermodal rail and pipeline shipments in particular.”

MAP-21

With changes made to legislation in recent years (MAP-21, 2013) it became more expensive more expensive to be an authorized freight broker, the required surety bond amount was raised to $75,000 from $10,000. When the legislation passed, 8,000 of the 21,000 brokerages de-activated their authority. Today (July 2016) +14,000 licensed brokers are in business. Learn how you can Get a $75,000 Freight Broker Surety Bond without spending $75,000.

Freight Brokers vs. Freight Agents

Analyze the similarities and differences between Freight Brokers and Freight Agents. Review the skills and characteristics that successful Brokers and Agents possess.

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