If you ask truck drivers and shippers, some might tell you freight brokers are the worst thing to ever happen to the trucking industry. And some might tell you they are one of the best things to ever happen to them. In reality, and taking into consideration how the industry currently functions, freight brokers are necessary and useful. But with the way technology advances, will this statement be true in a few years? will traditional freight brokers remain key to the logistics process?
To try to answer these questions and to establish the “good or bad” behind the existence of Brokers in the transportation industry, one should start by understanding why brokers exist, how they came to be and what purpose they serve in the logistics process.
Let’s look at the history first. With the partial deregulation of the trucking industry in 1980 by the Motor Carrier Act of 1980, the sector was opened to new players and new forms of doing business. More companies starting shipping further and selling to new customers in new markets along the country. This increased the number of trucking companies in operation and increased the levels of competition and productivity along the transportation industry in general. This influx of new service providers decreased shipping costs and gave shippers the opportunity to start looking for better, more reliable carriers and options. This produced the perfect mix for freight brokers to become an important part of the equation.
Small shippers turned to freight brokers to leverage their buying power and get better deals from better carriers. Large shippers who had their own transportation departments turned to freight brokers to be able to cover the overflow they couldn’t cover on their own. In turn, carriers turned into freight brokers to have access to bigger and better accounts, now they could haul for the big boys even if they had a very small fleet. Freight brokers simplified the very complex process of making sure shipments found reliable trucks and vice versa while acting as a guarantor to all parties involved in the process.
But times are changing, technology has evolved and become more accessible to everyone, while making available the data and tools needed for anyone to compete on a leveled playing field.
For example, years back, one of the brokers’ main strengths was the huge database of reliable carriers they would have, it gave the impression that only through the right freight broker, a customer would be able to cover their shipments all the time, and to a point, that statement was true. But not anymore, today, anyone with an old laptop and a little bit of knowledge has access to every single carrier available and to their safety records, compliance, insurance, licensing information, and much more, even reviews from current or former customers of a carrier are available with one click. Today, onboarding a carrier to anyone’s network is as easy as sending an email. Contracts are sent and signed in minutes, documents are reviewed, and its authenticity confirmed faster than ever before. The full power of all of America’s transportation network is in everyone’s screen when needed.
So why do we still need brokers? Well, the answer is, we don’t. At least not traditional freight brokers. Only the brokers that come out of their traditional roles as middleman and become an actual partner to both their shippers and carriers will survive. Effective logistics will only be possible trough achieving real cooperation between the parts. The broker needs to become an ally to the parties involved in the process instead of just trying to profit from hiding “secrets” from them. An approach with much more transparency in which the broker will need to bring actual value to the process to justify its existence has arrived. Only those smart enough to recognize the challenges and adapt to this new reality will thrive and maybe even grow and become essential to their customers.