The bad old days
Although freight brokers have been around for a long time, they have only in recent years been recognized as a necessary and responsible component in the freight transportation marketplace. Prior to 1980’s – 1990’s deregulation, freight brokers were sometimes painted as pirates and saboteurs, who would undermine comfortably monopolistic pricing structures, destabilize the market, be very slow to pay, and finally short pay.
Think upright open-backed wooden chairs in a small dingy room, the reek of stale cigar smoke, dim lighting from dust-caked bare bulbs, papers scattered everywhere, yesterday’s half-empty paper coffee cups, and three dial telephones in the midst of the mess, all ringing.
To be fair, years ago there were many brokers whose business ethics matched their reputation.
“asset-based”
To warn / scare their customers about brokers, carriers would speak about the benefits of being “asset-based”, implying, often correctly, that brokers ought to be used very carefully and very sparingly.
The argument was that brokers did not offer the financial stability represented by a fleet of trucks and a network of terminals. The implication was that the assets could be tapped in the event of a major problem.
You may still hear this phrase used from time to time today, often by old-school carriers whose “assets” are now largely leased or rented.
That was then, this is now
In the past 20 – 30 years, post-deregulation, carriers began to operate much further afield, for much lower rates, and they came to need a ready supply of backhaul freight to provide them with sufficient round-trip revenue.
And as more carriers began using brokers, the existing brokerages had to clean up their acts or retire, and new brokers with a well-founded business orientation were attracted to a now-professional marketplace.
And as brokers became more professional, more carriers and shippers became more comfortable with using brokers.
Carriers Themselves Become Brokers
The transformation between old and new became completely mature when carriers themselves very wisely began to open their own brokerage divisions.
Not only did these new divisions offer the prospect of additional revenue and profit, but they also created a pool of demand controlled within the company that could be used as a buffer: the brokerage division could supply the carrier’s own trucks in thin times, and could sell to other carriers when and where the carriers own fleet was fully utilized.
If you can’t beat ‘em, join ‘em.