Freight Broker

Six Questions You Should Ask Your Freight Broker

Even though a freight broker is entrusting your trucks and drivers with their customers’ shipments, you’re on the hook if they’re not trustworthy, financially strong or a performance-focused operator. Here are the top six questions to ask before you take on a job with a new freight brokerage.

Is the freight broker financially stable and able to pay its carriers?

Perform a credit check to find out if they are profitable and how quickly they pay vendors. Are there any liens, lawsuits or legal judgments against them? If you turn up financial problems, keep your distance. Better to build an ongoing relationship with a brokerage that has been growing steadily in revenues, staff, technology and capabilities over the years. In a 2014 survey by Penske Logistics, chief executives of third-party logistics companies predicted the 3PL industry would grow 6.5% per year over the next three years and that their own businesses would grow by more than 10% at the same time. If their results are underperforming industry expectations, that’s a red flag.

Is the broker properly licensed and bonded?

Do they have a federal property broker license issued by the Federal Motor Carrier Safety Administration (FMCSA) and broker authority? Do they have a freight broker bond? A $75,000 surety bond is required by law for all brokers, providing protection for carriers in the event that a broker fails to pay freight charges. Check out the FMCSA’s searchable database to see if a freight broker is properly licensed and bonded.

How does it treat its carriers?

Do they establish and maintain mutually beneficial, long-term relationships with their carriers? How quickly do they pay trucking companies after a load is delivered? Do they pay on time and strive to eliminate costly deadhead miles? Partnerships built on trust and over time, where brokers and truckers work closely together, are most valuable. They help anticipate customer freight needs and boost shipper satisfaction, leading to more profitable, ongoing business.

Do they carry contingent cargo insurance?

Even though your trucks physically would be handling the freight, not the broker, contingent cargo insurance protects the shipper if a shipment is lost, stolen or damaged in transit. If you cannot or do not fully pay the claim loss, the broker’s insurance kicks in, providing backup. It is preferable to work with freight brokers who have this insurance.

How long has the brokerage been operating?

For the first one or two years, companies focus on survival. If it’s been around for a decade or longer, that’s a strong indicator that the business is solid. If it’s a startup with hardly any history, or a lot of customer complaints, steer clear. A good track record and thriving business are good signs that they execute well, and consequently are stable and successful. Unfortunately, the freight industry has seen its share of fly-by-night operators who pay their carriers late – or not at all. Save yourself the heartburn and research the brokerage online to learn about the company’s longevity, a measure of its experience and expertise.

Are communications clear, comprehensive and in writing?

Good communication on the front end and throughout the process avoids surprises and problems later on. You should get instructions in writing, as well as document details on loads you pick up and deliver. Relying on phone calls to get instructions, match loads to your capacity and prove that loads were picked up and delivered is not enough. And, before you do business, make sure you have a written contract with the broker.

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