Whether it’s coping with traffic delays or establishing new routes, the freight industry is always in a state of flux and adaptation. Yet for all of the potential uncertainties that can crop up on a daily basis, one thing has remained ever-present in the industry for decades: brokers.
For years, facilitating rejected shipments has been a primary pain point for shippers and carriers alike. And while brokers have played a significant role in helping these shipments get off loading docks and delivered, the broker market is plagued by transparency and cost challenges that can ultimately hurt bottom lines and performance.
With that in mind, here are a few things brokers don’t want shippers and carriers to know.
1. Hidden fees
When dipping into the broker procurement market, shippers are accustomed to shopping around for the lowest broker fees. After all, each percentage point can add up over time. But shippers should be careful in this regard, as the broker fees on the sticker might say one thing, while the total cost of working with a given broker could be much higher. Knowing that shippers are in search of the lowest broker fees available, it’s common for brokers to hide fees elsewhere in the billing process -- resulting in much higher costs than what the upfront price may seem to be. Therefore, shippers must go beyond just the fee pricing level and find out exactly what’s in their invoices when partnering with a broker. Granted, this can be challenging when a time-sensitive shipment is sitting on the loading dock. However, by taking the time to do some deeper due diligence on the true costs associated with each broker, shippers can save millions.
2. Beware of quick pay
Carriers also need to be aware of the true cost of doing business with brokers, as well. As with any business, it’s ideal to receive payment for services rendered in a quick and timely fashion. Unfortunately, when working with brokers, carriers are often forced to wait at least several business days -- and often weeks -- before receiving payment. This can place a huge amount of financial burden on smaller carriers, in particular. With that in mind, brokers have begun rolling out “Quick Pay” options that allow carriers to receive payment much sooner. This is a more attractive option for carriers, but comes with a significant cost. For example, a broker may attach “convenience charges” up to $50 and beyond for “Quick Pay” service. This is a steep price for carriers to pay just so they can have access to their money in a more timely manner.
3. There’s a big technology gap
Despite data science and technology being central to business decisions today, there’s a significant technology gap in today’s freight broker market. For example, many brokers still heavily rely on manual, labor-intensive systems, which are prone to human error. This leads to major inefficiencies occurring in the procurement process. Transparency concerns also compound when a shipper tasks a broker with sourcing quotes or other initiatives, without visibility to the best information available. Additionally, given the lack of modern technology in use, tracking shipments becomes much more challenging and can undermine OTD. Simply put, shippers and carriers both deserve and need the best information possible to make decisions and many brokers are falling flat without the proper technology infrastructure in place.
For decades, the broker market has been a staple of the freighting and logistics industries. However, with that advent of newer technologies, shippers and carriers are no longer beholden strictly to the broker market. Given the long-term negative experience, high costs and lack of transparency, shippers and carriers may start to move away from the brokers market and towards more advanced solutions that give them more power in freight procurement.