Beyond The Road (The Transportation Industry Podcast)
Ep. 16 | Freight Brokerage Deep Dive: What Are They, What Do They Do, How They Make Money and More
Sep 06, 2022Season 1Episode 16
Anderson Trucking Service (ATS)
Freight brokerage companies are a staple piece of the transportation industry. With their assistance, companies with cargo to collect and freight to distribute can do so in a swift, and often cost-effective, manner.
But what is a freight brokerage really? What do they do, how do they source capacity, what should you expect when working with one and, perhaps most importantly, how do they actually make money?
With so much on the line each time you hand freight off to a brokerage, it’s important that you feel as comfortable as possible when doing so.
That’s why, in this episode of Beyond The Road, we’ll sit down with an experienced freight broker to take an in-depth look at what these companies bring to the table and go over what you should think about when selecting yours going forward.
Information Covered in This Episode:
What is a Freight Brokerage and What Do They Do?
What Services Do Freight Brokers Offer?
What Happens After You Tender Your Broker a Load?
How Do Freight Brokers Offer Load Tracking?
How Do Freight Brokerages Choose Carriers?
How Does a Freight Broker Make Money?
What Are The Advantages of Using a Freight Brokerage?
What Are The Disadvantages of Using a Freight Brokerage?
Freight brokerage companies are a staple piece of the transportation industry. With their assistance, companies with cargo to collect and freight to distribute can do so in a swift, and often cost-effective, manner.
But what is a freight brokerage really? What do they do, how do they source capacity, what should you expect when working with one and, perhaps most importantly, how do they actually make money?
With so much on the line each time you hand freight off to a brokerage, it’s important that you feel as comfortable as possible when doing so.
That’s why, in this episode of Beyond The Road, we’ll sit down with an experienced freight broker to take an in-depth look at what these companies bring to the table and go over what you should think about when selecting yours going forward.
Information Covered in This Episode:
What is a Freight Brokerage and What Do They Do?
What Services Do Freight Brokers Offer?
What Happens After You Tender Your Broker a Load?
How Do Freight Brokers Offer Load Tracking?
How Do Freight Brokerages Choose Carriers?
How Does a Freight Broker Make Money?
What Are The Advantages of Using a Freight Brokerage?
What Are The Disadvantages of Using a Freight Brokerage?
Freight brokerage companies are a staple piece of the transportation industry, with their assistance companies with cargoes to collect and freight to distribute can do so in a swift and cost effective manner. But what is a freight brokerage? Really? What do they do? How do they source capacity? What should you expect when working with one? And perhaps most importantly, how do they actually make money? With so much on the line every time you hand your freight off to a brokerage, it's important that you feel as comfortable as possible when doing so. That's why in this episode of Beyond The Road, we'll sit down with an experienced freight broker to take an in depth look at what these companies bring to the table and go over what you should think about when selecting yours going forward. Stick around. Welcome back to another episode of Beyond The Road (The Transportation Industry Podcast) where we talk all things transportation, and logistics. Joining me today is a Keith Samuelson is here to join me to talk about all things. Freight brokerage, we're going to do a bit of a deep dive for Yeah, hopefully, maybe we'll see if we can get how deep we can get. But, Keith, thank you for coming on the podcast. Hey, you're
Keith:
Hey, you're welcome, Eli. Absolutely, excited to be here.
Eli:
Yes. It's very exciting. It's an exciting time to be in the freight brokerage business. Would you say? A lot of freight moving.
Keith:
Yeah, that it is. It's been busy. It's been crazy.
Eli:
Yeah, a lot of market volatility as of late, maybe they'll spot rates are going down a little bit, hopefully.
Keith:
Hold on to your contract rates while you got them.
Eli:
Hold on to your contract rates when you got them. Keith, let's talk a little bit about you and your history in transportation. You started at ATS as a national sales representative. Correct?
Keith:
Yes, yeah, national sales rep in March of 2020, right at the beginning of the pandemic, so started as a national sales rep. Kind of just worked my way through the grind and recently promoted to sales manager on July 1. So yeah, congrats on the promotion.
Eli:
Yeah, very well deserved.
Keith:
Thanks, man. Appreciate it.
Eli:
Yeah, it seems like you're always doing a lot of things what does that grind look like as a national sales rep what kind of stuff are you do you typically see on a day to day basis?
Keith:
I mean at the beginning it's grinding on the phones making calls you know as many touches as you can with customers and and just trying to become that trusted voice in the industry and and really just earning the opportunities to help your customers move freight and really the rubber meets the road at least all the guys once you get that first opportunity you can say anything you want but until you prove it and you actually you know, move a load from point A to point B and everything goes smooth or even even better if there's problems and you are able to find solutions to the problems and really show your customer what why they work with ATS. I think that that that's really the kicker there.
Eli:
Yeah. And ATS Logistics is a relatively large freight brokerage. Yeah. When you say yeah, yeah, we're pretty big, I'd say yeah, pretty big. So I mean, that opens a lot of doors opportunity for you to kind of go after you know, different markets and stuff when you say so. What kind of freight? Are you more most familiar with moving as a broker?
Keith:
Me personally, I move a lot of over-dimensional specialized freight, flatbeds, step decks. And then you know, another customer mind we're moving a ton of food commodity. Sure. The food and beverage industry? Yeah. Whether it be driving or reefer so I guess it's hard for me to say you know, I just do this because you know, I have I have a large bulk of my a large chunk of my businesses open deck, right over dimensional specialized freight. And, you know, the other half of it is drive and reefer freight moving at for the food industry.
Eli:
Is it difficult for a broker to switch between service offerings like that the drive and the reefer, the enclosed trailers, and then the open deck?
Keith:
Not too bad. I think what's nice is that you stay in tune with the whole market, you know, you don't just know flatbed rates really well, or you just don't know, you know, where reefers are at. But I feel like I have a pretty good touch on the industry in general. Yeah. And even though that industry is constantly changing, I mean, we've seen driving rates this year plummet from, you know, January, February to where they're at now, who would have thought we'd be here?
Eli:
Yeah, I suppose that's maybe a choice you made. Is that a kind of a choice you made to go after multiple service offerings and multiple industries and being able to offer all those services? Because, I feel like it'd be maybe easier to just hone in on one and and just make that your market of focus.
Keith:
I mean, I would agree. It is my choice to make that decision. And the reason I made that is just to be versatile, you know, and considering the market we're in Yeah, if you were to have if I was only have drive and freight and rates plummet. I'm losing a lot of my, my revenue stream, right? Because that plummets and that I can still lean on my flatbed my open deck freight that has helped pretty consistent.
Eli:
Yeah, it's definitely it's kind of a hedge a little bit there from your perspective. I hadn't thought about that but yeah.
Keith:
Definitely yeah, like to be versatile, you know, be comfortable doing a little bit of everything, jack of all
Eli:
And you get to work with a diversity of customers and trades. impact, you know, a large portion of, you know, United States or I guess, global industry. Geez.
Keith:
Yeah, that's for sure.
Eli:
That's cool.
Keith:
We move freight all over the U.S., I don't think there's just one area that I'm focused on that I only move loads in for my customers, we're really nationwide.
Eli:
So if we're thinking about domestic or nationwide shippers, or a company that has freight to move domestically, there, there's a couple of major options they have, right, so they can work directly with the carrier, or they can work with a freight brokerage or a third party provider. Today, I want to kind of take a deep dive and look at freight brokerage as a business and maybe outline what that means for the shippers that work with with a broker. So if you could maybe just you know, off the off the top of your head or based on your own understanding or definition, what is a freight? What exactly is a freight brokerage?
Keith:
I mean, the really simple aspect of a freight brokerage is we're the middleman between a shipper and a carrier. Yeah, so we're responsible for basically when your customer sends you a tender, we're responsible, make sure the load goes from point A to point B in it, and it happens smoothly. And that can be anything in between, right? No, I don't think freight broker is just strictly responsible for scheduling a truck. Because we're also responsible to confirm pickup and delivery address, right, make sure that appointments are scheduled. And if there's a hiccup on the load, reschedule appointments and confirm that everything while in transit is gonna go smoothly, as well as updating the customer with any in transit updates, as far as tracking goes.
Eli:
So you are, essentially, especially at ATS logistics, which would be technically I suppose, considered like a traditional brokerage, right, in the sense that they have a, like a sales part and then an Operations Division. So you function within ATS logistics as the point of contact for the customer, correct? Yes. And then your counterpart is carrier representative, which does, what do they do?
Keith:
Yeah, so we work with the operations team or a carrier rep. And their relationship is with the drivers and the carriers. I personally, I don't make a phone call to drivers. That's a little bit out of my out of my realm. And that's where we lean on our operations team, for them to make sure that they have clear communications. And they set the expectations of the load with the drivers and the carriers.
Eli:
So when we're thinking about freight brokerage as a third party, they have to have the relationship with the shipper. And then they also have to have the ability to follow through and cover the load. How, like when we're talking about traditional brokerage, like ATS, or you know, some other company, how does having that individual carrier wrapper like that separate division of operations? How does that impact your ability to follow through for customers?
Keith:
Well, I mean, I think for us, the ability where it really helps there is having someone to hold accountable, but yet a team behind managing and covering the freight, you know, my responsibility is to find the freight, work with customers and earn the opportunity to move the loads, price it accordingly. And it's the operations job to cover the freight and and make sure that everything in transit goes smooth. Right. And I think having that separation and kind of knowing your roles, with good teams, you work together and everything, everything goes really smoothly.
Eli:
I suppose as the size of your freight brokerage changes is that because I want to kind of get into this service offerings our free approach can potentially offer so how does that how does that impact those services a freight brokerage is able to you know offer?
Keith:
I think it allows you to offer more services because you have a full team of carrier representatives for vans or for flatbeds or for the different specialties of transportation so I think having having that split at split method that allows you to offer a little bit more to your customers.
Eli:
And as you grow and as you get more operations employees and sales employees you're able to, I suppose, offer more services like I don't know what do we offer at ATS we offer almost anything?
Keith:
We offer anything from dry vans, reefers, flatbed,s step decks over dimensional freight, heavy haul. Yeah, I mean we do I do a ton of Port work we can move containers. We can really move we can really do about anything and if and if it starts dabbling with international that we can work with, you know, our international team to on that front.
Eli:
How about, I want can kind of walk me through and the listeners through what happens after you are awarded a load. After, so after a shipper like tenders you a load what's going on there?
Keith:
Yeah. So I mean, when when we're tendered the freight, that's basically our agreement in our contract that says, you know, we are contracted to move this load from point A to point B. At that point, we're going to get the load in the system. And we're going to update all the details based off of what that tender says make sure pickup and delivery address are accurate. We're gonna call the shipper and receiver and just confirm hours of operation. Do we need an appointment? Is it first come first serve? What does that look like? And then at that point, once we have all those details confirmed, we're going to pass the baton over to our operations team, the carrier reps, and they're going to get working on securing the driver. And it's really about finding the right driver at the right place at the right time. You know, because Sure, there's a lot of trucks out on the road, but you need to find the guy that is willing to go to Southern California. And he can knows that and that driver needs to know that he can get a load when it gets to get back out of there once he's there.
Eli:
So so the operations employees in that situation are responsible for that right fit right, just finding that right fit driver, the driver that and connecting it with with the freight that you have booked?
Keith:
Exactly. That's exactly it.
Eli:
What about load tracking? Freight brokers? You know, you're you're one step removed from the truck itself, right? How like, can you offer the same tracking capabilities are how does a freight brokerage go about offering freight tracking technologies and capabilities to their, their customer?
Unknown:
Yeah, we have a few different ways that we can offer tracking. One would be tracking based off of the ELD logs. So the driver's electronic logs, basically, that's tying right into their tractor, and physically knowing where the truck is at all times. Another way would be through applications, you know, customer portals with some of the applications that we work with macro point and trucker tools. And what we do there is we send, we send the driver a link that basically they click into and accept it. And it's actually tracking based on their cell phone, and where their assaults are where the driver is located, not necessarily where the truck is located. But it still gives you a pretty good inclination of where that load is currently at. And then the last method for tracking would be old school making a phone call making check calls, seeing where the drivers are at currently, whether you're calling driver or dispatcher, touching base, seeing where they're at. Are they running into any slowdowns? Now the cool thing with check calls is you can ask how's it going? Are you running into any issues? Is there traffic? Is there a big storm? What you know what's going on? Are we going to still make on time deliveries?
Eli:
Yeah. So you still have that ability to touch base?
Keith:
Yeah. Regardless of how you're tracking, you can always reach out and touch base with your driver to see where they're at. But yeah, it's just very efficient to be able to use those applications, mobile apps to know on the fly where they're at.
Eli:
Yeah, I wonder if that touch base for larger carriers. Are you speaking to that? Fleet Manager? Are you? Are you speaking to that drivers? Fleet Manager? Are you speaking to the truck driver?
Keith:
It can be both I think majority of the time they're reaching out and touch base with the dispatcher. Dispatcher seeing seeing where the trucks at and at times the dispatcher man, I know they need to, they need to reach out and they need to do a check call on their driver, or the dispatcher can look at the ELD and see where they're located.
Eli:
Right. So freight brokerage, as a broker, you have ability, the ability to kind of proactively
Keith:
Oh, yeah, yeah. Yeah. I, I feel like, I feel very confident and tracking loads for my customers.
Eli:
Yeah. And it's just getting more and more. It's just getting easier.
Keith:
Oh, it's just getting better. I'll tell you, two years ago when I started to now. And the percentage of trucks that we're tracking is substantially higher. Yeah. It's looking good.
Eli:
Kind of harking back to what we were talking about with the, with the connecting the shipper with that best fit solution for a freight broker should be able to do that they need to have a pretty, you know, expansive network within an area within a region within the nation of carriers. Yep. So what are we thinking about as a freight broker is when we're choosing trucking companies or carriers to work with or carriers to give access to the load boards?
Keith:
Yeah, I mean, we're, we're vetting all the carriers that we work with, and whether it be checking on financial stability, and seeing how long they've been in business, checking on star ratings, you know, insurance ratings, I shouldn't say insurance, but real real realistically checking on just past ratings, how they worked with other other brokers other carriers, and what that looks like, and then making decisions from there and then internally tracking once we start working with a broker, or I'm sorry, excuse me, when we start working With the carrier, we can take notes on that every load that they do with us, we can see how many loads we've done with them. How have they gone? Are there any red flags? Anything that says maybe we shouldn't use them in the
Eli:
Oh, sure. Yeah. So you're able to just kind of note down future? any on time performance, you know, errors or issues that have arisin. Yep. Leave notes in the system based on the carrier. Sure. And then no matter which one of the sales reps or managers uses that. . . .
Keith:
Yeah, and that's not necessarily used by the sales side.
Eli:
Oh, sure.
Keith:
That's gonna be on the carrier representatives to it's their relationship, you know, they have a relationship with carriers are the drivers and it's there's their responsibility to keep notes in the system so that we know what things are looking like.
Eli:
Sure. Well, to this point, we kind of know what what that process looks like. And thanks for illustrating what it looks like, you know, start to finish what the broker gets the load, especially at ATS logistics. I suppose there are other types of freight brokerages. You know, there are those agent model freight brokerages, I suppose that we actually have a podcast on if you want to check out listeners, but those agent model freight brokerages where that agent is kind of cradle to grave, you know, booking the load, finding the truck, doing all those things, one stop shop, one stop shop. So and those are, you know, not far and not few and far between either. It seems like there's a lot of agents out there. Yeah, just because there's kind of a low barrier to entry with that freight brokerage business. When we think about freight brokerage and especially from shippers perspective, there are kind of some misconceptions or yeah, maybe biases toward this business of freight brokers, just because you don't you know, have a truck in hand or own assets, typically. So let's kind of talk about how a freight brokerage makes money because one of those misconceptions is that like a freight brokerage is just trying to price gouge you. And I mean, we don't have to get into like the nitty gritty details, you know, you know, like, revenue numbers and stuff are, yeah, but just at a high level, how are you making money as a broker?
Unknown:
Well, I mean, the high level side of it is, we're making money on the margin, which is the difference between the rate charged to the customer for load minus the cost paid to the carrier, and as well as taking out any operating costs. Right, and that's gonna leave you margin. And that's going to be where the profit would be. And realistically, mean, the margin really varies on on the type of on the type of load, you know, are you are you moving flatbeds? Are you moving over dimensional? Because some of these, there's a lot more planning that goes into them than others.
Eli:
Yeah, no, I believe that. So it's the margin. So it's, it's a number that you've quoted. And how are you coming up with this number that you've quoted, typically?
Keith:
We're going to use a market data, whether it be internal or external market data. And just using also holidays, you know, day of the week, transit time, there's so many things that go into quoting. I mean, that's a whole nother ballgame. I could talk about that for 20 minutes alone, right? Yeah. But the the nitty gritty of it is, you're going to take the market data, and you're going to evaluate what is it going to take for us to secure a truck on this load? Based on the given load details. Does it need tarps? Is there dunnage? Those are all acid soils that are going to be added to the rate. Yeah, because majority is on we're paying that to the driver.
Eli:
Yeah. How does having that, that wide network of carriers or like a, like the breadth of reach of a freight brokerage that has a network? Like how does that impact your ability to price things competitively?
Keith:
Well, kind of, like we talked about earlier, finding the right driver at the right place at the right time, you know, when you have a bigger pool of drivers to choose from or carriers to choose from? A lot better chances of finding the right, right guy at the right time at the right place.
Eli:
Yeah, I would imagine that that's kind of where the margin comes in. Like you're able to, like price it more competitively or on par with, with what the carrier would be able to do. Absolutely.
Keith:
Yeah, I mean, in depending on I think there's the margins are really going to vary to on the lane. If you're doing something very simple, where you know, there's a ton of trucks. Maybe it's Chicago to Houston, you know, there's a ton of drivers in Chicago. And there's a ton of drivers in Houston and there's freight at both locations. So why would why would somebody not want to just jump back and forth right? Pretty easy lane, and you can be extremely competitive on it.
Eli:
Are there ever instances when when you misquote something you miss you miss quoted, and then what happens?
Keith:
Oh yeah. You hear about it all the time. Whether it be I mean, when you're new or or you're just really busy. I've I've quoted a dry van as a flatbed.
Eli:
Oh, sure.
Keith:
And it's like, oh boy, you go back and you look at the rates and you don't make a decision either you're gonna go to your customer told me made a mistake or you're gonna bite the bullet and yeah, try to make it happen. Yeah. How do you make that decision? Depending on what the And yeah, and depending on the customer, if it's. . . current market rate is?
Eli:
Depending on how far off you are, I suppose too.
Unknown:
Yeah, yeah, if you're if you're way off, and it's gonna be a pretty big hit, you may have to have a conversation and at least get you up to the point where you can just breakeven on it. But I've been there done that.
Eli:
Yeah. And sometimes it's out of your control, too, I suppose. Maybe you quote something into the future, and then something changes.
Keith:
Yeah. And we noticed that a lot last year, and the year will the past couple of years with the market volatility. It's hard to predict where things are going to be in two weeks, rather than trying to quote something three months out.
Eli:
Right. Yeah. And that's, I suppose, true of even asset companies, you know, they need to pay their drivers appropriately. So yep, anybody can misquote it. But it's just kind of funny thinking about that.
Keith:
Yeah, mistakes happen. It, I think the biggest thing is just being transparent about it.
Eli:
Yeah. And a good transportation company will explain what happened, what went wrong, and in some cases, even take a hit, which is kind of a cool thing ATS was able to do as a debt free.
Keith:
Been there, done that taken the hit. But you know, in, in turn, it means a lot to your customer, when you quote and you give a rate and they award it to you, there was 10 Other people quoting it, they awarded you because you were the best rate in or you were the best fit for the job. And all of a sudden, you got to come back. Oh, sorry. You know, I think the ability that we can lean on it and, and just move forward, whether it be a big loss or not just take care of it and have a long term relationship that we have with the customer.
Eli:
Let's talk about the unique advantages when we're choosing between an asset carrier or a freight brokerage or working with, you know, handing our logistics over to a 3PL, what are the unique advantages of working with a freight brokerage, specifically closely with a brokerage?
Keith:
Um, well, a couple things, I would say it'd be single point of contact, you know, here at ATS, at least we're a single point of contact for customers. They don't need to reach out to drivers, they don't need to touch base with carrier reps, you know, we are a single point of contact that's always available. The broker the other advantage to working with a broker is that we're managing the carrier relationships, the customer doesn't need to manage contracts, or insurance, or any of those aspects. That's all handled by the broker that setting up the load saves me one, it saves customers a lot of time, but a little bit of liability as well.
Eli:
Let's talk about why you wouldn't want to work with a brokerage?
Unknown:
Well, I honestly, I don't think there's any for me. I don't know any reasons why I wouldn't want to but I understand why. Customers have apprehensions to working with brokers. And like you said before, they don't have truck tech them, you know, we don't own any trucks. So that scares that scares customers that they're concerned on visibility for tracking. It scares them, or it concerns them that are we gonna be able to cover their load. And that kind of comes back to working with a bigger broker. Yeah, that we have, we have a wide range of carriers that we can assign to the freight. So that's where I can see some of the disadvantages. And I see that customers would be concerned. But I really do think that with a strong brokerage that yeah, we can be strong and cover those for that freight.
Eli:
Yeah, just playing devil's advocate here. What is like, is there something to be said, for brokers inability to just like to, to know exactly what they're saying to their customers door? Right. Like, you've never seen the truck and the trailer, you know, what if the equipment is, you know, in shoddy condition or something, I suppose that's maybe something you run into more with a, with a broker than an asset company.
Keith:
I mean, and that's all about the vetting process, right, you know, making sure that we are relaying the low details and what the expectations are for the loan. And when those details and expert expectations are aligned, there's no issues but absolutely, I've seen I have a customer that we're on Qantas togas and his rule is There better not be any holes in the in the tarps on the commerce, togas, and I've had slipped through the cracks so it can happen, but at the same time that it's all about how do you take the next step after you make a mistake? Sure, anybody can have a hole in the hole and tarps. But true that can be looked at more on the broker side.
Eli:
All right, cool. So let's think let's, after this conversation, if I'm leaving this podcast, and I'm thinking, Man, I should really just start adding a brokerage to my network. How should I do it? What should I look for in a brokerage company?
Keith:
I think you'd be looking for time in the game longevity, you know. How long have they been in business? How long have they have that MC number, financial stability technology? You know, do they have? Do they have a mobile app, they have a customer portal that can give you current tracking, they can pull PLDs you can pull their bol is from that's something a bunch of my customers really liked using the customer portal tracking capabilities would be another thing LTL you know, do they have an LTL portal system? And we have quick quote, do they have something like that to offer all ranges of transportation not just full truckload, but also LTL.
Eli:
Right. So they're making the investment in the technologies. That is an indicator of their financial stability as well, because those are big investments. But also they're really important for providing freight brokerage service at a high level.
Keith:
Yeah, I mean, it's tough to provide a high level of service without that technology in today's day and age.
Eli:
Anything else about freight brokerage that you want to say? I will say that we have a freight brokerage selection checklist linked in the show notes below for you listeners that are interested? That is 26 questions to help you vet your next freight brokerage.
Keith:
I think, you know, when you do start looking for a broker, make sure that you're working with somebody that's been in the game for a while they have some skin in the game, some financial stability, and they can offer technology for good tracking. And yeah, I think with that, looking at that checklist, they should be able to find all the extra details. Absolutely.
Eli:
All right. Thanks for coming on, Keith. Yeah, appreciate it. Thanks, Eli. You've been listening to beyond the road, the transportation industry podcast produced by Andersen trucking service. If you liked what you heard here today, make sure to follow along wherever you listen to podcasts, so you don't miss our next episode, which we publish every Tuesday. For more transportation industry related content and information, check out the ATS Learning Hub, where you'll find a comprehensive library of answers to transportations, most common questions in the form of blog articles, videos, case studies, podcasts, downloadable tools, and more. All created to help you become the supplier that always delivers for US customers. And if you'd like to learn more about freight brokerage, specifically how they function, how they find carriers, you know what they use to vet those those carriers and how they make money. I have linked a handful of articles in the show notes below that I would invite you to check out finally thanks for sticking with me. I'm Eli Simonson and I hope to speak to you again soon on another episode of beyond the road. The transportation industry podcast
