A Shippers Guide to Selecting a Freight Broker – Part 2

I would like to thank the readers of this blog for their positive feedback on last week’s posting and for their suggestions on other items to consider in selecting a freight broker. Here are some items that should be added to the list that was included in that blog.

Financial Stability

There are freight brokers of all shapes and sizes operating throughout North America. They can range from one or two person operations working out of their basements with a telephone line, fax machine and internet connection to multimillion dollar businesses. Size is not necessarily a determinant of a good freight broker although larger companies are more likely to have more support staff, a larger data base of carriers and better technology than some of their smaller competitors. However, financial stability should be a key element in your decision-making process. Financially stable companies are going to be more able to pay their carriers in a timely manner, less likely to haggle over claims and more likely to handle higher volumes of business without getting into a credit crunch. Most importantly, the more financially stable brokers are more likely to be around for a while.

Compliance & Regulatory Adherence

As Steve Luciano, VP or Procurement Services at Livingston International mentioned in his comment to last week’s blog, shippers must ensure that they have covered off any liabilities or exposures when utilizing a Freight Broker. They must ask questions like “does the freight broker utilize industry accepted Broker-Carrier contracts, Client-Broker contracts, and Co-Broker Agreements? How much freight will be double brokered? The shipper must ensure that the carriers utilized by the freight broker are compliant and have acceptable insurance coverage, DOT/MOT satisfactory safety ratings, WSIB coverage and a proven track record. “ Will you have the same insurance coverage if your load is stolen or damaged by your broker's carrier as compared to dealing directly with an asset based carrier?

Technology/Systems

Does the freight broker have an operating system to manage key areas of the business? The areas are Operations, Sales, Billing, Payables, Compliance and Fuel Surcharge. As Steve Luciano mentioned in his posting last week, “managing the Fuel Surcharge is the single most complex issue for Freight Brokers today.” Do your due diligence to find out the broker's IT platform and IT capabilities.

Quality and Availability of Staff

This manifests itself in several ways. Will your freight broker be able to provide your company with dedicated staff or are you dealing with a new person every day? How well do they understand the unique needs of your business? Are the broker’s people well trained? Can they handle a variety of services (e.g. over the road truck and intermodal) or will you get switched from one department to another? Are they proactive in dealing with potential service problems or do you only find out when your customer finds out?

With the two lists that have been compiled, you now have a fairly comprehensive set of criteria to select a freight broker. As a final suggestion, do some reference checks. Some brokers can put on a “good show” but cannot “deliver the goods.” While some brokers will give you selected customers to call, do your own due diligence. Shipper surveys and frank discussions with your trusted colleagues may be your best bet to get a true reading on the quality of a prospective freight broker.