A Freight Broker buys and sells freight transportation services.
A Freight Broker’s customer is a shipper, receiver or third party with a shipment to be moved.
A Freight Broker’s service is to source, make arrangements with, and pay a carrier to move the shipment.
The Freight Broker never sees the freight and never owns the freight.
The Freight Broker never sees the truck, and never owns the truck.
The Freight Broker never sees the driver, does not employ the driver, and does not instruct the driver.
The Freight Broker prices and establishes the details of the shipment with the customer.
The Freight Broker also arranges the details of the shipment with the carrier.
The customer and the carrier never deal directly with each other, except that the shipper, who may or may not be the customer, loads the drivers’ truck and both the shipper and the driver sign the Bill of Lading, which is the shipping contract, and upon delivery, the receiver, who may or may not be the customer, unloads the truck generally in the presence of the driver, and the receiver also signs the Bill of Lading.
The Freight Broker is the typical middleman, the typical match-maker.
To enhance their services and to distinguish themselves from other Freight Brokers and from carriers, modern Freight Brokers offer a range of ancillary services beyond their basic match-making function. These services can include carrier qualification, shipment tracking, customs co-ordination, and various customer-specific freight management functions.
The Freight Broker’s Role in the Competitive Marketplace
The Freight Broker competes for freight directly with carriers, often the same group of carriers that carry the broker’s freight. There is a definite rivalry, but there is also a mutual respect, acceptance, and co-dependency. In the current freight transportation marketplace, each has a role and a contribution to make, and neither can thrive without the other.
Whereas the carrier seeks freight in geographic markets it typically has trucks in, the Freight Broker seeks freight in markets where it expects there will trucks in need of a shipment. In theory, the Freight Broker has access to every empty truck in a region, or a continent, whereas a carrier is concerned only about its own trucks.
In essence, brokerage operations act as an industry relief value when there is excess demand, and an industry safety value when there is excess supply. for shippers, Freight Brokers’ activities bring more trucks into play, thereby effectively increasing competition for their freight.
Freight Brokers also inject an element of price stability in the freight transportation market, because carriers tend to be much more willing to accept one-time shipments from Freight Brokers at or near marginal cost recovery (as opposed to average cost recovery), than they are from customers directly.