How many times in your career have you been asked by a shipper, “Are you an asset based company”? If you have been a freight broker for more than a short period of time, it’s safe to assume you’ve been asked this question more than once.
Have you ever stopped and asked yourself why some shippers require brokers to own assets? Could it be as simple as the shipper not entirely understanding the world of freight brokering? Perhaps, but rarely is anything that simple. Let’s explore further some of the myths surrounding why a shipper would require assets and then prove once and for all why non asset based freight brokers can be a valuable ASSET to almost any shipper regardless of size.
Myth #1 Non Asset Based Freight Brokers Don’t Have Direct Access to Trucks
It’s often perceived if a freight broker is non-asset based that they don’t have direct access to trucks. This couldn’t be any further from the truth. Most freight brokers have access to thousands of trucks through various carrier partnerships. It may come as a big surprise to some shippers but, as a result of not being asset based, the freight broker’s network of trucks is typically much larger and more flexible then even the largest asset based carriers. For example if a trucking company owns 50 trucks versus a broker that has 1,000 carriers averaging 6 trucks each it’s obvious that the broker has more capacity to assist his customer in moving their freight because they are able to cast a wider net.
FACT: Experienced freight brokers can give shippers instant access to a large pool of qualified carriers and increased flexibility.
Myth #2 Non Asset Based Freight Broker Are Not Cost Effective
Some shippers believed that non asset based freight brokers can’t be competitive when it comes to price. Their thought is, if you remove the broker from the transaction it will result in lower prices for the shipper. Although it may seem logical, it’s not completely accurate. As we all know, there is power is in numbers. As a result of a freight brokers volume in a given lane, within a given market or with a group of carriers, they are able to leverage that volume and negotiate better pricing. Equally important is the fact that freight brokers routinely re-position assets resulting in less empty miles and more profit retention for their asset based carrier partners. Because no carrier wants to run empty, back hauls are typically done at a discounted rate which allows brokers to offer competitive rates while earning a small profit.
FACT: Smart freight brokers are able to leverage back hauls and volume to decrease their cost basis which allows them to make a small profit while maintaining competitive prices.
Myth #3 Non Asset Freight Brokers Have Less Control Than Asset Based
It’s easy for a shipper to assume if a Broker doesn’t own the assets that they in fact have no control. This too is inaccurate. Most freight brokers require their carriers to comply with strict company policies as it relates to compliance and performance. For example, experienced freight brokers require carriers to meet the highest safety standards as well as insuring all their carriers have an active carrier authority and are properly insured. Smart brokers also monitor their carrier’s service performance including on-time pickup, on-time delivery, complaints as well as freight claims. If service falls below a certain level, carriers are many times deemed NO LOAD to prevent future issues. .
When it comes to loss and/or damage of a shipment, shippers are sometimes concerned that they will not be reimbursed for damages during transit. The fact is, broker are required by the FMCSA to perform due diligence on every carrier including making sure each motor carrier they use has both a valid authority as well as the proper insurance to cover the value of the freight onboard in the event of a claim. Believe it or not this due diligence requirement that broker are required to perform on every motor carrier they use is a major benefit to doing business with brokers that is typically over looked. Not to mention that when a carrier legally or illegally brokers a load, any claims filed as a result of that load will not typically be covered by the carrier’s primary cargo insurance. In addition, good non asset based freight brokers carry at least $100,000 in contingent cargo insurance to help supplement the primary cargo insurance carried by asset based carrier.
FACT: Good brokers are masters at controlling the “controllables.” When it comes to delays due to weather, traffic, driver illness and equipment breakdown carriers have no advantage whether a customer’s product picks up or deliver on time in good condition.
So now what? We know that some shippers are reluctant to use non asset freight brokers. We’ve learned that a minority of shippers either don’t have a clear understanding of how experienced freight brokers work and/or they have been misinformed, causing them to shy away from freight brokers without assets.
At the end of the day, freight brokers play a vital and growing role in the world of logistics and will continue to play a vital role into the foreseeable future. The good news is more and more shippers are using non asset based broker’s year over year so the perception is changing. Once it becomes clear to the shipper, the role that freight broker’s play and how freight brokers can benefit them, the perception will change and the freight broker will have greater opportunities to convert those few reluctant shippers into customers. It simply and comes down to education, expectation, execution and delivery. In soliciting a hesitant shipper, if you are able to achieve these four key components, you’re heading in the right direction and should find greater success in converting those shippers who are reluctant to use non asset based freight brokers.
P.S. If you enjoyed the article take a minute to check out our Freight Broker/Agent Resource page for more great info!
Director of Business Development
Logistic Dynamics, Inc.