Is “freight brokers” a bad word? Ok, a bad phrase?
I suppose brokers in other industries face the same challenge with respect to image. Society has certainly hung a negative rap around the necks of people who play third-party roles in business. That’s why we’re always talking about “cutting out the middleman.”
Some people have an inherent problem with people who get involved in business transactions and take a cut of the action. They figure it would be neater and cleaner if Party A and Party B just dealt directly with each other all the time. But we know that’s not true in the freight market. Those middlemen (and middle women) provide a lot of important help and support to people who might not be able to function in the market without it.
I care about this a lot. I’ve been developing TMS software for freight brokers for more than 20 years and I see the value they bring to the market.
Many of the big players have their own in-house experts. But most companies that need to ship freight are not that big, and they don’t have nearly as many people – or as much expertise – in-house. Actually, 90% of the carrier market consists of companies with 10 or fewer trucks.
Freight brokers make the connections between these parties. And when they do, they make sure critical issues are covered. Brokers look at the supply chain from a different perspective, offering consultive insight along with tons of flexibility that helps limit shipper and carrier risk.
An individual shipper will know his or her specific needs very well. An individual carrier will know his or her own capacity and availability. But brokers see the whole market. They bring a broader expertise to help make better connections between shippers and carriers because the broker considers a broader array of factors.
Freight brokers help mitigate risk by confirming carrier invoices. The broker makes sure carrier insurance is covered and routes are optimized to cut down on wasted drive time, tracking your shipment from pickup to final destination. They help to resolve claims for their customers. They ensure that inconveniences are in order for international shipping. And they almost always have access to a technology stack – combined with extensive industry experience and expertise – that puts shippers and carriers in a better position to approach the market.
Not every shipper needs to work through a broker. But most need to focus on what’s sitting on their docks, not the changing dynamics of the freight market. And carriers have their own issues to focus on. But it doesn’t make a lot of sense that freight brokers who provide all this help, encouragement and value get dinged.
Just consider the way people think about other industries that perform a similar service. Travel agents have been around for decades. Their role has changed as online bookings sites have emerged, but the best travel agents are still at it, helping clients plan their trips.
For the most part, people love travel agents. They find you a flight, lodging, rental cars and places to eat. A popular service now sees travel agents planning an entire day’s worth of activities for travelers going to an unfamiliar city.
What is the difference between travel agents and freight brokers? Not much, really. Both make connections and arrangements for clients who either lack the time, knowledge, resources or inclination to do it themselves. Both take a cut, and the parties who pay that cut understand it’s beneficial for them to do so.
Logistics software companies act as a kind of technology broker, providing technical expertise and support to shippers. They can then focus on areas where they have more expertise, like building carrier and shipper relationships. Software providers are intermediaries, supporting and partnering with brokers who in turn support shippers and carriers, who keep freight moving.
Most industries are more complicated than the casual observer realizes, with many tiers of players providing support in various ways. The supply chain/logistics industry is no different. While it sounds attractive at times to talk about cutting out the middleman, our industry works better when companies are able to focus on what they do well and lean on outside support when they need it.
Freight brokers help make a massive segment of our industry viable, and that helps maintain capacity that’s critical to the entire nation.
It’s time for freight brokers to take back the (not dirty) word. I would like to see them, many of whom I have worked with for decades, come out boldly and talk about the value they bring to the industry. Their clients will surely affirm it, and so will I.
Thanks for what you do, brokers. I hope you wear the word proudly. People will get the message.
Walter Mitchell is CEO of Tai Software