A freight broker is an individual or company that serves as a liaison between another individual or company that needs shipping services and an authorized motor carrier. Though a freight broker plays an important role in the movement of cargo, the broker doesn't function as a shipper or a carrier. Instead, a freight broker works to determine the needs of a shipper and connects that shipper with a carrier willing to transport the items at an acceptable price.
To operate as a freight broker, a business or individual must obtain a license from the Federal Motor Carrier Safety Administration (FMCSA). Freight brokers are also expected to carry insurance to protect both their business clients and their customers from loss. In many areas, freight brokers are required to carry surety bonds as well.
Freight broker services are valuable to both shippers and motor carriers. Freight brokers help shippers find reliable carriers that might otherwise be difficult to locate. They assist motor carriers in filling their trucks and earning money for transporting a wide variety of items. For their efforts, freight brokers earn commissions.
Freight brokers use their knowledge of the shipping industry and technological resources to help shippers and carriers accomplish their goals. Many companies find the services provided by freight brokers indispensable. In fact, some companies hire brokers to coordinate all of their shipping needs.
Often, freight brokers are confused with forwarders. Though a freight forwarder performs some of the same tasks as a freight broker, the two are not the same. A forwarder takes possession of the items being shipped, consolidates smaller shipments, and arranges for the transportation of the consolidated shipments. By contrast, a freight broker never takes possession of items being shipped.
Many freight brokers gain experience in the industry by working for a shipper or carrier. In this way, an aspiring broker can gain technical knowledge, as well as vital business contacts. Others enroll in freight broker training courses. However, such training courses can be costly and do not always provide the connections important for success in this field.
Some freight brokers begin their careers as agents rather than actual brokers. Freight broker agents are independent contractors who work as representatives of a broker. These agents handle assigned areas and are able to operate locally even without having numerous contacts in the industry. Start up costs for broker agents are usually minimal. Typically, a computer, telephone, and fax machine are all that is required to work as a home-based agent for a freight broker.
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," says Robert A. Voltmann, executive director and CEO of the Transportation Intermediaries Association.
Brokers provide an important and valuable service to both motor carriers and shippers. They help carriers fill the trucks and earn a commission for their efforts. They help shippers find reliable motor carriers that they (the shippers) might not have otherwise known about. In fact, some companies use brokers as their traffic department, allowing the broker to coordinate all their shipping needs.
Brokers aren't 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 eased, creating new entrepreneurial opportunities in the third-party logistics arena.
Content Source: Wisegeek
Freight Forwarding Business
