In the course of our consulting practice, we review and analyze many carriers’ freight networks. This consultation includes reviewing clients’ strengths and weaknesses when it comes to managing transportation services. While every carrier we visit uses transportation brokers, most do not have a strategy for those relationships. Carrier/broker relationships are largely transactional in nature and are typically handled at a low level in the carrier’s organization. Carriers should have a strategy for managing brokers and should treat brokers as valued sales agents, not as the enemy. A good relationship with a broker that pays your bills timely and acts like a customer to help keep your trucks moving productively can be a valuable partner.
However, not all brokers are created equal. Here are six tips for strategically managing transportation brokers:
- Do your homework and check out the broker carefully. The large national brokers have good credit and pay in a timely manner. There are many regional brokers that fit this profile as well.
- Look for brokers that are certified by the Transportation Intermediaries Association (TIA) as they have subscribed to the TIA Code of Ethics.
- Use brokers to supplement your sales efforts at the edges of your freight network where you do not have consistent sales coverage.
- Analyze where you are currently using brokers. Which lanes make sense to move your trucks to the next profitable (high margin) load? Which freight is driver-friendly? Can I make a volume commitment to the broker in return for a commitment from the broker to provide consistent loads? Can I negotiate regular rates on the loads? Is the broker’s contract reasonable and are the terms acceptable? Can I work with leadership to manage the relationship? In short, treat the relationship with the broker as you would treat the relationship with a direct customer.
- Know your rates (use a rate index such as the TMW Netwise Market Rate Index or truckloadrate.com) and negotiate with the broker. Most broker freight will be low margin (backhaul) so make sure you are profitable on the loads before and after the broker load.
- Beware of brokers that prebook. An emerging trend is that brokers are making carrier's lives “easy” by booking loads a week or more prior to pick up. This practice lets the carrier's customer service and planning groups feel good as there is freight on the books, but can create a passive attitude when customer freight becomes available closer to the pickup date. Customer freight needs to be the priority, but broker reps can be aggressive and highly motivated to form strong relationships with carrier reps.
Brokers, like everybody, are in business to make money. Many carriers concern themselves with the broker’s profit margin on loads tendered to the carrier. The profit margin the carrier should be concerned about is its own – not the broker’s.
Your freight network should be engineered for profitability, and managing transportation brokers effectively is key to your success. Brokers should not replace the direct relationships a carrier has with its primary customers. Sales staff should be held accountable for procuring profitable freight in their assigned areas. When these efforts fall short, find a reputable broker and form a strategic alliance.
Think of your freight network as a bucket: the customers are the big rocks and the brokers are the pebbles and sand that fill up the open spaces between the big rocks – all working together to complete your freight network.
SEPARATE FACT FROM OPINION
At KSMTA, we can help you separate the franchise lanes from the toxic lanes.
Broker Management | Freight Network | Trucking Profitability