Everything You Need to Know About Freight Brokerage Business

 

The freight brokerage industry is mostly untapped that provides abundant opportunities to earn huge sums of money by starting a freight brokerage business. Also, with the increase in international trading, the demand for shipping companies has increased tremendously. If you are looking for ways to get your thriving freight brokerage business or start a new business, then you have landed at the right place. Here will guide you through the important aspects of the freight brokerage business. But before we delve deep into the topic, let’s quickly familiarize you with the term freight broker.

What is a Freight Broker?

It is an individual or a company that is responsible for fixing a deal between the shippers (who want to transport their goods) and a motor carrier company that is willing to provide the service. To put it simply, it acts as a middleman between the shipping company and a motor carrier company. Also, it is important to take note that it is neither a shipper nor an asset-owning carrier, but plays an active role in the movement of cargo. A freight broker provides an incredibly important service to both parties: the shipper and the motor carrier company. It is because the shipper finds it very hard to find a reliable motor carrier company. Similarly, the motor carrier doesn’t have many leads or enough contracts to earn good profits.

Players Involved in the Freight Brokerage Business

Given below are the key players involved in the freight brokerage business.

• Freight broker
• Shipper
• Motor carrier
• Freight Forwarder
• Import-export broker
• Agricultural truck broker
• Shipper’s associations

Freight broker – As mentioned earlier, a freight broker is a person who is responsible for fixing a deal between the shipper and the Motor Carrier Company.

Shipper - A shipper is the person/individual/business that wants to ship its products or goods.

Motor carrier – It can be defined as a company or an organization that extends its transportation services to the shipper. Motor carriers are of two types a private company (it provides truck transportation of its own cargo) and one that is for hire (a company that is paid to give transportation services of cargo belonging to others).

Freight forwarder – Many times it is misconstrued as a freight broker. However, there is a yawning gap of difference between the two. A freight forwarder usually takes possession of products; accumulates different smaller shipments into one large shipment. Large shipment is then arranged for transport of larger shipments using different shipments such as land, air, and water carriers.

Import-export broker – These brokers connect with U.S customs, international carriers, other government agencies, other companies, and organizations that are involved in international freight transportation.

Agricultural truck broker – They have the role to arrange motor carrier service for exempt agricultural products. They are usually small and operate in one area of the country.

Shipper’s associations – They play a very important role in pooling shipments. They are basically are exempt nonprofit, cooperative organizations formed by shippers. Their way of working is pretty much aligned to that of freight forwarders, but their service is only limited to its members.

Education and Experience

 Many brokers suggest prior work experience can be really helpful. It will help you to gain not only technical expertise but also would network within the industry. It will be really helpful. Networking is extremely important in this industry as it is critical for success in the industry. Brokers can also opt to use agents that can help them develop a broader scope of operations. Moreover, you also have the option to start as an agent rather than a broker. Agents are independent contractors who represent a freight broker in a particular area.

Target Market

Before actually starting your business, you need to choose a specific niche that you will target. When you target a particular market segment, you can modify your business and tailor your service package and marketing efforts to meet that particular segment's needs. After some time you will also be recognized as an expert in that particular segment and would also attract new customers. You can specialize in a particular niche considering the following factors.

• Geography
• Location of the shipper
• Destination of the freight
• Types of cargo
• Size of loads

Operations

The freight brokeragebusiness working is simple and easy to understand. A shipper is the one who may call a freight broker with a load. You are expected to complete your internal paperwork and check with the list of carriers and see who can provide you with the vehicle. If you are already in touch with the carrier, you can simply fax it as an appendix to your basic contract that describes this particular load and informs about the rates. However, if you are not in touch with the carrier, you will need to set up a broker agreement before you finalize the deal.

Record-keeping requirements

In the freight brokerage business, you are required to comply with the Code of Federal Regulations and requirements. A wise decision would be to always keep the list of shippers and carriers to speed up your business operations. This would help you avoid repeating the information and would increase your convenience in doing the freight brokerage business. It is important to note that you are required to keep a record of each transaction. The record must show the following.

• The address and name of the shipper
• Address, name, and registration number of the originating motor carrier
• Freight bill number
• The compensation received by the broker for the brokerage service and the name of the payer.
• Detail of any no brokerage services given with each shipment or other activity amount received as compensation and the name of the payer.
• The amount of any freight charges collected by the broker along with the date of payment to the carrier.

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