By Gregg Gordon, President of GTO 2000
Transportation brokerages have come a long way since the early 1980s when deregulation of America’s trucking industry first opened the door. Brokerages are now widely recognized for filling a valuable niche in today’s movement of goods across the country while serving the interests and needs of both carriers and shippers.
Sadly, a few misconceptions still linger, due in part to a few bad apples that operated prior to the formation of the Transportation Intermediary Association and raising of ethical standards throughout the industry.
One of the biggest myths, however, has nothing to do with ethics. Rather, it revolves around transportation brokerages that are “non-asset based” – in other words, brokerages that don’t own trucks. Ironically, while this distinction is sometimes viewed as a negative, in fact it is a broker’s greatest advantage.
Availability and scalability
Part of the confusion likely comes from semantics. The industry term “non-asset based” is in itself misleading, because it incorrectly infers that a brokerage has no direct access to equipment. In fact, a transportation brokerage’s supply of trucks is scalable and much more flexible than even the carrier with a 100-plus fleet.
With any carrier company, when the last truck leaves the lot, it’s lights out. But not so for the typical transportation brokerage, which has access to many more thousands of trucks through its network of multiple carrier partnerships.
This scalability has made brokers particularly valuable for handling live loads, last-minute orders, peak seasonal demands, and the spot market (single loads), which has evolved into quite a prominent trend in manufacturing today.
Larger broker operations also have greater flexibility in the type of equipment offered, whether it’s a van, reefer, flatbed, full truckload, or LTL shipment. This allows for a one-stop arrangement for shippers as opposed to shopping for individual carriers who may have specific equipment or expertise only in hauling for certain industries.
With the broker’s virtually unlimited supply of trucks, one might assume the tradeoff is a lack of control, especially since there is no direct ownership. This, once again, is part of the myth.
Like our company, most brokerages mandate strict compliance policies for their carrier partners. These policies, monitored closer than ever before with today’s technology, require each carrier to meet specific benchmarks like maintaining on-time deliveries and the highest safety standards along with current insurance and the required authority. If these qualifications are not met, they are deemed unacceptable for use.
Another fear factor related to control is that a brokerage, acting as a third-party intermediary, may feel removed from the responsibility of reimbursing losses for a damaged shipment. But most brokerages carry their own contingent cargo insurance, and the very best take the extra step with primary insurance, providing double the coverage on loads.
Similarly, some shippers may have difficulty trusting that a fair share of their payments to a third party will flow through to the carrier. Or assuming that their loads won’t be double-brokered, passing from one third party to another. Like any company or industry, however, this is a matter of ethics and financial stability. Companies should always do their due diligence and choose brokerage partners that possess a solid financial standing and reputation.
Finally, we are left with the myth that brokers can’t be price-competitive without their own trucks. This, of course, runs counter to one of the biggest advantages of partnering with a broker that is plugged into a virtually unlimited database of carriers.
Transportation brokers clearly are in the best position to objectively select and optimize the most cost-efficient freight solutions, resulting in downward pressure on prices. Furthermore, brokers also are best-positioned to provide backhauls, which help save even more money for shippers.
‘The real truth’
It has been said that “myths are a waste of time because they prevent progression.” You might say the same holds true for the non-asset based brokerage operation, whose success is only held back when perception is allowed to distort reality. When given the opportunity, transportation brokers prove time after time, haul after haul, that its lack of assets is in fact its biggest asset. Therein lies the real truth.