According to the FMCSA (Federal Motor Carrier Safety Administration), truck brokers in the US numbered over 20 thousand companies at the end of 2013. In a single month, this number was reduced to under 13 thousand brokers. The catalyst for this reduction was an increase of the minimum surety bond for truck brokers from $10,000.00 to $75,000.00.
Certainly this was a major blow to the truck broker industry and no one wants to see that many companies go out of business in one fell swoop. On the other hand, it speaks to the volatility of many truck brokers who simply could not afford or obtain this security to maintain their business. Here are 5 considerations for carriers when choosing which brokers to work with.
- As stated above, the FMCSA only accredits brokers who post the minimum surety bond. Most surety bond premiums are based on a percentage of the bond amount. A truck broker with a good credit record and years of experience can obtain a bond premium for as low as 2% or $1500.00. Those with questionable credit scores and reputations can still obtain the surety but a higher rate of up to 12% or $9000.00. This explains the significant drop in truck brokers but also weeds out the truck brokers that carriers would not want to do business with.
- Multiple brokering practices can produce a myriad of headaches for the carrier. Even a double-brokered load increases the parties involved to four (shipper/broker/broker/carrier). In some cases, this can be higher. Carriers should insist on a broker providing sufficient evidence of their direct shipper customer base. Fewer parties reduces the risk of non-payment and potential damage to the carrier’s reputation through poor performance by the broker.
- Proof of liability insurance in the broker’s name is critical even though the broker is hiring a carrier to execute a move with the carrier’s equipment. The contract of carriage after all, is between the shipper and the broker. Many of the liability coverages are similar to a personal automobile insurance policy in that injury or loss due to an accident is actionable by the victim. Contingent cargo insurance coverage from the broker for loss or damage to the cargo is also required in the event of a claim by the shipper or receiver.
- Most carriers have a fleet of asset-based equipment consisting of closed vans of various sizes. But many also have a diverse fleet that may include flatbed trailers for bulk or heavy shipments. Refrigerated or reefer trailers are also a specialty for moving temperature controlled goods such as fresh produce or frozen products. Carriers that maintain this equipment would do well to ask their broker partners if their client base contains these kinds of shippers. Typically, freight rates are higher for specialty equipment due to supply and demand as they are not as abundant as regular dry van trailers.
- The trucking industry is vast across the country but it is surprising how compact the trucking community can be. Local, state and national trucking associations hold events and conferences around the country. This is the time for carriers to consult with colleagues as to which brokers have a sustainable existence and reputation. These are the brokers that you want to do business with in order to maintain a steady and profitable growth in your business. For centuries it is said; word of mouth has done more for increased sales than any other marketing program.
The above guidelines are simply a starting point when choosing which truck brokers to partner with. A careful vetting process is essential to increasing the bottom line and protecting your well-earned reputation.
C.L. Services, located in Atlanta, Georgia has been serving shippers as a truck broker for nearly 20 years. We offer FTL (van, reefer, flatbed, produce) and LTL cargo services throughout the United States and Canada with a Prosponsive® mindset towards customer focus and retention. Contact us to learn more.