Generally speaking, there are only two modes of transportation – unimodal and intermodal. Although both modes apply to the transportation of both, passengers and freight, the core focus throughout these lessons will apply specifically to the transport of general freight commodities. Do not confuse this with Less Than TruckLoad LTL and Full Truck Load FTL freight. Unimodal and intermodal are “modes” of transportation.

General commodities represent cargo labeled “non-household goods” such as pre-fabricated materials like steel, lumber, machinery, livestock and groceries. Household goods represent home furnishings such as furniture and other items already owned by the end-consumer.

The term “Unimodal” is used to describe the transportation of freight or passengers using one distinct method of transportation.

If you broker a load that is picked up from the shipper and delivered to the destination by the same motor carrier, that load is considered a unimodal shipment. Unless you already have inside connections for intermodal freight, it is likely that the majority of your freight customers will utilize unimodal methodology. However, just because you broker a load from a point of origin to its ultimate destination, that does not mean that your shipment was not an intermodal shipment at some point during its transit.

Unimodal shipments are simplified because they are typically a result of trade markets doing business within the Continental United States. Most shipments within North America need only one mode of transportation – commercial vehicles. However, depending on the volume of the commodity being transported and its final destination (such as Canada, Mexico, or across the U.S.), intermodal shipping may be the most cost effective and time saving method of transit.

The term “Intermodal” is used to describe the transportation of freight or passengers using a combination of at least two different transportation methods or modes. In order to qualify as an intermodal shipment, freight must be transported by at least two of these modes:

A manufacturer in Korea may ship computer parts via rail to a seaport, via ship to the United States, then via train to a regional distribution center, and finally via truck to the consignee.

Intermodal freight transportation is an efficient way to move shipments between destinations because the cargo is usually containerized and easily handled using common equipment designed to move containers. Depending upon the commodity being shipped and the size of the shipment, the shipper can choose from among these standard size shipping containers:

Depending upon the commodity being shipped, these containers may be dry, refrigerated, or designed to transport liquids or gasses. Having container size standards eliminates logistical problems and makes it more efficient for all parties involved in the shipment because the same standardized material handling equipment can be used to move all of the different container sizes.

When you think about the need to move commodities from one location to another, and how packing similar items together in an easy-to-handle container reduces the shipping cost and effort involved, it shouldn’t seem surprising to you that the first recorded instances of intermodal shipping occurred back in 18th century England!

In those times, coal mining companies were seeking an efficient way to transport their product from the mines to the coal companies for ultimate delivery to the homes and factories that burned coal for heat and to run equipment.

Coal containers, or loose boxes, were developed to address this need. The boxes were loaded with coal at the mine, transported by horse-drawn wagon to barges waiting on the Bridgewater Canal, and then offloaded to rail cars or other horse-drawn wagons for final delivery to the coal bulk distribution centers.

The concept was well received and by the 1800’s, very rudimentary forms of intermodal transportation sprung up and were being used to ship furniture and even passenger baggage between rail centers and seaports. However, it wasn’t until 1911 that intermodal shipping became established in the United States.

The biggest impediment to the success of intermodal shipping during those times was a lack of standardization of the shipping containers used. It was not uncommon for a shipment to arrive at a port or rail center only to be discovered that the facility lacked the equipment or manpower needed to handle the particular type or size of container.

As the concept of intermodal shipping began to spread, several attempts were made to create standardized containers. The first attempt was in the United Kingdom in the 1920’s when the RCH (Railway Clearing House) designed 5 and 10-foot wooden containers to be used by trains and trucks for door-to-door shipping.

The need to move supplies quickly and efficiently from the United States across the European theatre of operations during World War II was the guiding force behind the invention of palletized freight. WWII also saw the first attempts to ship truck trailers via rail and the term “piggyback” shipping was coined.

However, true shipping container standards did not come into their own until the 1950s when the United States Department of Defense (DOD) standardized on an 8′ x 8′ x 10′ container to be used for shipping military supplies and equipment.

In the late 1960’s and early 1970’s, the ISO (International Organization for Standardization) issued world-wide standards based upon the DOD specifications. As a result, these containers became known as “ISO containers.”

As the number of intermodal freight shipments increased, new standards were developed to accommodate larger and heavier shipments as well as to take advantage in the design efficiencies of modern vessels, rail cars, and over-the-road trucks and trailers. Undoubtedly, the standards in use today will change again as future transportation efficiencies occur.

In the US alone, railway intermodal shipping saw a 300% increase between 1980 and 2002.
Nearly 70% of those shipments utilize what is called the “double stack rail car” which not only increases the number of containers that can be transported at the same time, but increases security by stacking the containers in such a way that the doors of the most accessible lower containers cannot be opened until the top containers are removed.

Although trains are restricted to the double-stack method because of gross weight requirements, standardized containers are frequently stacked 7-high on seagoing container ships.

Thanks to the efforts of the ISO to create world-wide container standards, port and railway operators are able to predict their material handling needs and purchase the necessary equipment to process containerized freight.

Transtainers: Used to transfer containers from sea-going vessels onto trucks and rail cars. The transtainer is rail-mounted and is equipped with a large crane boom that is used to transfer the containers from the ship to waiting railcars or trucks. The transtainer moves parallel to the side of the ship so that it can reach all of the containers from stern to bow.

Gantry Cranes: Also called a straddle carrier because it is capable of straddling rail and road vehicles, it consists of a spreader beam and crane system that can move in all directions allowing for the precise placement of containers.

Grappler Lift: Similar to the straddle carrier in design and functionality. It uses a claw-like hook to remove the container instead of straps and cable.

Reach Stackers: These devices use lifting arms and spreader beams to lift and stack containers.

Rail Transport: Semi-trailers transported on railway flat or spine cars (“piggyback”).

Roadrailer: Used by the Norfolk Southern Railway, railway wheel assemblies are placed between the trailers which convert them into railway cars. This is an extremely cost-effective and efficient way to ship semi-trailers because no flat cars are required. Semi-trailers transported via this method must meet certain design and strength specifications. Other types of ISO containers can be shipped on flat or spine cars.

Vessels: Container ships can hold thousands of containers depending upon the size of the ship. Container ships are commonly rated using one of these two terms:

TEU refers to the quantity of 20-foot containers the vessel is capable of carrying. FEU refers to the number of 40-foot containers. A vessel that can hold 1,000 40-foot containers or 2,000 20-foot containers would have a rating of 2,000 TEU. Some of the world’s largest container ships are rated at 8,000 TEU or higher.

Motor Carriers: Motor carriers are used to transport containers and semi-trailers between seaports and rail centers. This type of intermodal shipping is called drayage. Of course, trucks are also used to deliver containers and semi-trailers directly to the consignee (the person receiving the freight).

River Barges: Barges are used to transport ro-ro (roll on/roll off) freight up and down large rivers such as the Hudson and Mississippi River.

Pipelines: Pipelines are used to transport commodities such as natural gas and oil.

In addition to the saving realized by reduced freight handling, as well as the ability to affect door-to-door transportation and increased cargo security, all parties in the intermodal shipment enjoy the convenience of using one single Bill of Lading from the shipment’s point of origin to its final destination. Computerized shipping and tracking systems make it easy to track shipments and report on the their location in near real-time.

The complexities of today’s global supply chain means that shipping can no longer be considered a separate part of the manufacturing process. Today’s large manufacturers are using computerized systems to integrate shipping logistics directly into their supply chain. Mid-sized and smaller manufacturers are increasingly relying on third party logistics 3PL freight brokers to handle intermodal shipping responsibilities.

The availability of these computerized systems and third-party providers means that shippers are no longer as concerned with the method of shipping as they are the cost associated with the shipment. The most successful freight brokers will be those who are able to provide the most cost effective and time-sensitive intermodal shipping arrangements.

One of the obvious issues that the shipping industry needed to address was ownership, safekeeping and repair of shipping containers and trailers which were rarely in possession of the actual equipment owners.

The fact that freight travels in the same container from the start of the shipment until it is completed means that shipping containers pass through several modes, and these modes are usually owned and operated by one or more different companies. It was important to have a set of enforceable rules dictating responsibility for the care and maintenance of shipping containers as they passed through the various modes. There was also a need to address the logistics of re-using and returning empty containers to their rightful owners.

In order to avoid every shipper having their own contract that would need to be signed by every other shipper involved in any particular intermodal shipment, an industry association was formed consisting of shippers and container owners. This organization created a uniform agreement called The Uniform Intermodal Interchange & Facilities Access Agreement. The Intermodal Association of North America is the trade industry that administers the agreement in the North America.

“The Uniform Intermodal Interchange & Facilities Access Agreement is a standard interchange contract developed to promote intermodal productivity and operating efficiencies through the development of uniform industry processes and procedures governing the interchange of intermodal equipment between ocean carriers, railroads, equipment leasing companies and intermodal trucking companies.” – www.uiia.org

After the events of September 11th 2001, the United States and other major countries began to step up their port security in order to prevent terrorists from shipping dangerous items and weapons without detection. Because containerized freight receives little scrutiny, and offers opportunities to ship large quantities of dangerous material to locations around the world, national governments are paying closer attention to the intermodal shipping industry.

The U.S. Congress, as well as the U.S. Department of Homeland Security (DHS), are working to provide more secure parts by sponsoring various legislation designed to make it more difficult to smuggle dangerous cargo into and out of seaports around the world.

Congress. H.R. 1817 – the DHS seeks to consolidate and systematize the process of conducting background checks and credentialing of transportation workers. The bill also seeks to amend current marine cargo container security measures and establish guidelines for assigning degrees of risk imposed by each container depending upon its country of origin and other factors.

Transportation Security Improvement Act of 2005 – establishes at least five regional Transportation Security Agency (TSA) intermodal cargo security managers to implement security measures for the inspection of containers.

S. 376, the Intermodal Shipping Container Security Act – requires the DHS to establish intermodal shipping container security strategies that, among other requirements, requires that no less than half of all imported containers contain “smart box” technology.

H.R. 173 and H.R. 785 – contain provisions for establishing a federal database for reporting cargo-related crime and security threat information.

There is much more pending legislation and the issues surrounding cargo security are expected to receive even more attention as terror-related threats increase around the world.

The parties involved in an intermodal shipment are the shipper, the intermodal carriers and the receiver.

Shippers – purchase the services of intermodal carriers.

Intermodal Carriers – transport goods provided by shippers.

Receivers – accept freight shipments from the Intermodal Carriers at the final intermodal network at destination. Receivers process the shipments and send them on to their ultimate destination, usually by truck. So, in reality, the receivers also take on the role of shipper to complete the final leg of the intermodal shipment.

Intermodal shipping offers the shipper the benefit of utilizing least cost routing and intermodal network efficiencies to transport a shipment across multiple modals with a minimum of paperwork and a small investment of administrative time.

Here is an example of a typical truck/rail/truck intermodal shipment:

The number of intermodal shipments will continue to grow as the world experiences steadily increasing traffic congestion on its highways and as fuels costs continue to spiral upwards.

The global marketplace cannot prosper without efficient, safe and relatively low-cost transportation networks providing seamless end-to-end transportation of goods. Intermodal transportation is the most efficient way to move freight around the nation and around the world.

Intermodal shipping has contributed to the efforts of the railroad industry to stay alive and, in fact, is largely responsible for the current renewed interest in rail shipments. The trucking industry is more impacted by fuel costs and surface road conditions than the railways are, and the railways are hampered by their inability to provide door-to-door freight transportation. Combined, however, these two modes of transportation represent a low cost, fuel and time efficient way to move freight.

Major package shippers, such as UPS, now turn to piggyback as an alternative to sending their tractor trailer fleet across the country to move non-express packages. UPS alone completes nearly one million piggyback shipments per year.

Large metropolitan areas are destined to benefit from their ability to become major shipping hubs. This is due largely to their proximity to sea ports and rail lines. As a property broker, you can take advantage of today’s advanced communication technologies and tap into logistic markets that would have been out-of-reach for you a few years ago.

Freight shipping documents are a vital aspect of today’s logistic operations. Although technology has enhanced the printing and processing speed of these documents, they must physically remain with the shipment from the point of origination to the final destination. Shipping documents are formed on the premise of liability, mode of transportation, and type of collection. There are three primary documents involved in every transportation transaction:

A bill of lading, often abbreviated as “BOL” or “B/L”, is a legal document issued by the carrier as proof that a shipment has been received from the shipper, by the carrier, for ultimate delivery to the consignee. The term is derived from the word bill, meaning a “listing of costs for services to be provided,” and the word lade which means “loading cargo.” See the following bill of lading types below:

The second document used in intermodal shipments is the carrier freight bill or invoice which is presented to the shipper, the consignee or to some other entity depending upon the terms of the shipment.

Elements of a Freight Bill: The freight bill should contain the following information:

The third document in an intermodal shipment provides proof that the shipper delivered the goods to the consignee. Once it is signed by the consignee, the shipment is considered to be completed. A copy of the freight bill is retained by both the consignee and the shipper. If there is any loss or damage to the shipment, it is indicated on the delivery receipt as well as on any subsequent claim forms.

The delivery receipt usually contains the same information found on the bill of lading and the freight bill. Intermodal shipments that travel by air also may include an Air Waybill, which is the equivalent of a bill of lading and contains all of the same data.

The term FOB is used primarily for domestic transportation. Among the six most commonly used FOB designations are FOB Origin and FOB Destination.

INCOTERMS (international commercial terms) are used in lieu of FOB for international shipments, Published by the International Chamber of Commerce (ICC), in order to set out responsibilities before and after certain points in the international transportation cycle.

LTL shipping is one of the three major truck-based shipping methods. The other two methods are full truckload (FTL) and Parcel. LTL is the most efficient choice for shippers who have more freight than can be handled by a parcel carrier, and less than enough freight to fill an entire truck. FTL carriers are the most economical choice for shippers who have enough freight to fill a 48′ or 53′ trailer, and a parcel carrier is typically used to transport small shipments where each item weighs 150 pounds or less.

The typical LTL shipment weighs anywhere between 100 and 10,000 pounds. Carriers providing LTL service pick up freight from multiple area shippers and then organize it into trailers where it is then taken to the delivering terminal, or to one or more hub terminals, where the freight is consolidated and continues on its way.

The LTL company’s local driver usually picks up freight from area shippers in the morning, and then goes back on the road to deliver inbound freight to area consignees in the afternoon.

Full Truckload (FTL) carriers often drop a trailer at the shipper’s location where it is then filled with freight that is usually destined for one location. There are times, however, where a FTL shipment will be destined for multiple locations. This may be the case, for example, when a multi-location grocery store orders a full truckload of produce to be distributed among several of its stores located along the delivery route.

Once the trailer is fully loaded, the driver receives all of the shipper’s paperwork which includes the following:

Depending on how the freight company works, the driver may deliver the freight to its ultimate destination, or return the loaded trailer to a terminal where it will be picked up by an over-the-road driver. The driver may also drive to a pre-determined relay stop where a fresh driver will continue the trip.

FTL shipping usually results in lower occurrences of freight claims than with LTL shipping because the freight is only handled twice. LTL shipments, on the other hand, are handled each time they are consolidated with other shipments and loaded on to a different trailer.

LTL shippers usually develop routes which they service on a pre-determined basis. The driver stops at each location on the route and picks up any outbound freight. Once the trailer is fully loaded, or the route has been completed for the day, the driver returns to the local terminal where the freight is unloaded and processed. Processing includes weighing and inspecting each item for damage and to ensure that the item meets the shipping company’s size and commodity requirements.

After the freight has been processed, and all of the shipping documents been completed, the freight is loaded onto another trailer where it begins the journey to its ultimate destination. Along the way, the freight may be unloaded and reloaded multiple times at “breakbulk” locations, interim terminals, or at the final delivering terminal.

Because most LTL shipments go through this multiple handling process, delivery times are longer than FTL freight which usually moves directly from the shipper’s location to the consignee’s.

The biggest advantage of shipping LTL is that it is usually less expensive than arranging for an FTL carrier to handle a partial shipment. Additional advantages include the LTL carrier’s availability to perform certain services which are not usually available from FTL carriers. Some of these additional services include:

The costs for these services vary, but are typically offered at either a pre-negotiated flat-rate, or on a weight-based formula which may be calculated on a per-pound or per-hundredweight basis.

Some shippers who have an elevated volume of LTL freight may choose to use an FTL company to deliver a full trailer to a regional LTL shipper who then breaks the shipment up for final delivery to each consignee.

For example: A manufacturer in Chicago may receive a large order from a company in California who wants the shipment delivered to its multiple retail locations within the state.

The manufacturer, in this case, might hire an FTL or “linehaul” company to take the shipment to a regional LTL freight company in California. The LTL company would receive the shipment and then break it up for delivery to each of the consignee’s retail locations.

Parcel carriers, such as UPS, will usually only transport freight up to a certain weight limit such as 150 lbs. Often times a parcel carrier will attempt to compete with an LTL carrier by trying to persuade the shipper to break the shipment down into multiple pieces that fall within the carriers weight limit.

These multi-piece shipments are known as “Hundredweight” shipments, because the total weight of the shipment is divided by 100, rounded to the nearest 100 pounds, and then subjected to the carrier’s hundredweight tariff.

For example, if a shipper had 100 items, each weighing 1.5 pounds, the total shipment would be calculated at the hundredweight tariff for 200 lbs. That weight was the result of this formula: 100 x 1.5 = 150; 150 rounded to the nearest 100 pounds is 200.

The LTL carrier, on the other hand, would have the shipper shrink wrap and palletize the 100 pieces of freight into one easily handled shipment, which reduces the risk of damage and reduces handling time versus the parcel carrier’s method. Depending on the LTL carrier’s tariffs, that shipment may only be charged the freight rate for the actual 150 lbs.

Regardless of whether the LTL carrier rounds the shipment weight up to the nearest 100 pounds or not, LTL rates are typically cheaper than parcel carrier’s rates.

LTL and Parcel carriers both use the hub and terminal methodology to move their freight along pre-defined routes. Delivery times for both of these carriers are longer than FTL, in most cases, because the freight does not go directly from the shipper to the consignee. Both LTL and parcel carriers typically have a daily or other regularly occurring schedule of pick-up times along pre-defined routes. Both types of carriers usually offer some method of enabling the shipper to schedule pickups online and to track the status of shipments while en-route.

Some shippers will use an LTL carrier to deliver shipments consisting of a large number of parcels, that are all destined for a particular region, to a regional hub of a parcel carrier.

For example: A shipper in Chicago has 1,000 pieces going to Indiana, 500 to Ohio, and 500 to Pennsylvania. The shipper shrink wraps and palletizes the shipment according to the delivery state and then uses an LTL carrier to deliver each palette to a parcel carrier that handles parcel deliveries within that state. The parcel carrier receives the pallets, breaks down the shipment, and places each parcel into its normal distribution channel.

This method is also referred to as “zone skipping.” The shipper uses the LTL carrier to skip over several of the parcel carrier’s freight zones. This is more economical than paying the parcel carrier to handle the entire shipment from its point of origin to its ultimate destination because LTL carriers charge less per pound than parcel carriers.

Some shippers, however, do not approve of this method because it increases risk of loss or damage due to the additional handling points that are introduced along the way.

Due to the fact that freight shipped with LTL carriers is subject to multiple handling, it is important to ensure that each shipment is packed carefully and securely to avoid damage caused by dropping, tossing and other activities that occur when freight is loaded and unloaded.

The best choice is to load freight onto pallets, or to use sturdy shipping crates or extra-rugged cardboard boxes whenever possible. Well-packaged freight reduces risk of loss, damage, or theft while being handled.

Freight that is sent via LTL carriers is also more subject to being lost or incorrectly routed along the way. It’s important advise shippers to place the shipment’s tracking number on all sides of each piece of freight. Each piece of freight should also be labeled with its destination, State and Zip Code.

The ideal solution is to affix labels containing all of the following information:

This makes it easier for shipping and receiving personnel to identify each piece of freight and to make sure that it does not end up being loaded onto the wrong truck.

LTL shipping depends upon thin profit margins in order to offer competitive rates. As a result, LTL freight companies must pay close attention to their costs. The two biggest expenses facing an LTL carrier are labor and fuel. Many LTL carriers utilize union labor, so there is little room for negotiating labor rates. This makes fuel management a high expense management priority. This means that every trailer needs to be fully utilized in order to extract the most revenue per mile driven. Full utilization means that every trailer is carrying the maximum in weight and volume. This is referred to as achieving maximum “freight mix.”

One way that LTL carriers try to achieve a maximum freight mix is to use a dual-tiered transportation network that combines large freight way-stations (often called “breakbulks”) which feed freight to smaller locations called “freight terminals.” A breakbulk gets its name from the fact that bulk shipments received there are broken down to smaller regional-based shipments before being forwarded out to the network of terminals. This is similar to the “hub and spoke” procedure used by regional passenger and freight airlines.

The breakbulk method is favorable because it allows the carrier to choose from a wide variety of shapes and weights in order to achieve the optimum freight mix for each shipment. Here is an example of how the breakbulk process works:

Just as FTL freight is sometimes shipped in containers by rail or sea to a destination terminal, not all LTL freight travels solely by truck either. Freight shipped by more than one mode of transportation is called “intermodal shipping.”

LTL carriers often use rail or even air carriers to move freight along its way. LTL carriers are big consumers of rail and air transportation and enjoy the lowest available freight rates as a result of their mutually-profitable relationship.

LTL carriers particularly favor rail transportation because they are able to monitor rail carrier performance closely, which helps to ensure that the railroad carrier is on time. Many LTL carriers build their terminals along rail lines so that rail-carried freight can be delivered right to their terminals without having to be trucked from the rail yard.

Unless specified by the shipper, it is up to the LTL carrier to determine whether or not intermodal methods are the best way to handle any particular shipment. Depending upon the type of freight being shipped, the ultimate destination and its delivery deadline, an LTL carrier may use any combination of truck, rail, air and sea carriers for delivery.

An in-depth look at intermodal shipping opens the door to complete logistics solutions such as those found in today’s Third Party Logistics 3PL companies. Although LTL freight is not the basis of this material, it is important that you understand various aspects of logistics – unimodal and intermodal as well as LTL and FTL. The motive for discussing these topics is because even though you may not take complete logistic control over your customer’s logistics needs, you may at some point work with a motor carrier or freight forwarder who does.

A Third Party Logistics provider, also known as 3PL or Contract Logistics, is a company that provides outsourced logistic services and supply chain management for shippers and manufacturers with a large or complex distribution network.

Unlike the average freight broker, 3PL providers specialize in warehousing, transportation, and distribution services. These Added Value Services can be tailored to the customer’s needs based on their demands and delivery service requirements.

Between the late 1970’s and mid 1980’s, corporations began outsourcing much of their logistics and supply chain management requirements to 3PL companies, whether in part or entirely, in order to operate more competitively. Outsourcing, as in any industry, decreases assets and overhead, allowing for more time and financial resources necessary to focus on their core objectives.

Generally speaking, there are two types of 3PL providers, asset-based and non asset-based. Although this distinguishes their financial stance, the type of services offered by each can differ significantly.

3PL contracts begin with a service demand assessment between the Customer and the 3PL. They do not reach the negotiation stage until all of the requirements have been reviewed in great detail. They must investigate market trends and service demands as they develop and compare logistic concepts.

During the assessment, they’ll decide what to outsource and create a business plan including cost, phasing, communication and IT requirements. Once a thorough assessment has been established, both parties must agree on the expectations and performance of the other party. They must agree on combined planning and an open exchange of information to ensure optimum communication for a mutually beneficial contract.

The main benefit of implementing 3PL lies in the logistics expertise of the personnel who specialize in supply chain management and distribution. As long as information can be exchanged freely and the lines of communication are optimal, 3PL customers should experience excellent customer service.

The benefits of implementing 3PL certainly outweigh the limitations, although clients of 3PL providers should also consider the one drawback, which is loss of control. By streamlining their distribution channel, clients may sacrifice some degree of personalization with their customers. That is why the assessment process is so critical. Their loss of control must be justified in other areas of the agreement to make absolute sure a sacrifice in one area, will prove beneficial in another.

Due to many factors including product demands and global development, it is becoming increasingly difficult for 3PL providers to meet ALL of the diverse requirements of today’s client. The need for more expertise has created yet another position in the world of logistics known as Fourth Party Logistics.

4PL providers incorporate their own resources and capabilities with other organizations in order to further enhance and streamline supply chain solutions, using asset-based 3PL providers to administer the actual distribution.

Third Party Logistics is not specific to a particular industry or type of freight. 3PL providers are logistic specialists that customize their management services to virtually any scale. The needs of each client vary tremendously so it would be impossible to articulate without thoroughly investigating their individual needs. 3PL contract agreements range from basic services to the most technologically advanced distribution requirements covering ALL aspects of clients’ logistic needs.

Becoming a 3PL provider begins with a team of specialists and requires years of combined expertise in all aspects of logistics. You, on the other hand are likely begin your career as a freight broker while working from your home office.

We are not implying that you should completely disregard an open invitation for a 3PL contract. Although, if you are just beginning, it is in your best interest to wait until you have plenty of experience or a team of experienced negotiators working with you before attempting to take on the role of total logistics management.

There are plenty of unimodal shipments traveling within North America. If your long term objective is to build a large organization, you may consider leveraging the use of independent freight agents. At some point during your expansion you will have to shift your own involvement from moving freight to moving money for your agents. We will expand on that subject more in the lessons to come.

Freight Classification is the starting point for negotiating freight rates. Classification is computed using complex metrics which are based on a combination of factors such as density, stow-ability, handling, and liability of the commodity or commodities to be transported. In short, freight classification is used to determine the transportability of various commodities.

For example: A full truckload of paper towels would have much greater density than a full truckload of sheet metal screws. The volume required to legally transport a load of paper towels would be far greater than that of the screws. Conversely, a load of personal computers might require the same volume density as a load of the paper towels, yet the liability associated with the paper towels is far less than that of the computers. By classifying commodities into a transportable format, it offers both shippers and carriers a medium to begin the negotiation process.

Most brokers do not utilize freight classification in order to determine freight charges. One exception to that would be if the broker is also a motor carrier or freight forwarder. Even then, freight classification typically applies to the carrier side of the business, but more specifically, Houshold Goods Carriers. Therefore, if you do not plan to expand your business beyond brokering general commodities, there is really no need to concern yourself with freight classification. However, if you are already a motor carrier or plan to become one, this section may be helpful in planning to publish a tariff and solicit customers requiring rates based on classification.

Some motor carriers choose to use an in-house classification system to simplify their own rate calculations. While an in-house system may be helpful to the carrier, they hold virtually no merit in the event of a court proceeding.

Other Motor Carriers choose third party systems developed by industry specialists. The finest example of a third party classification system is the National Motor Freight Classification (NMFC) designed by the National Classification Committee (NCC), a board of the National Motor Freight Traffic Association (NMFTA).

The National Classification Committee has grouped thousands of products into a scheme of 18 classes which are numbered chronologically from a low of 50 to a high of 500 determined on the basis of four elements: density, stow-ability, handling and liability. However, the NMFC originated from much more than mere class methodology. It also provides a standard for product packaging, rules and Bills of Lading.

The NMFTA is also responsible for the conception of the Standard Carrier Alpha Code, (SCAC) and the Standard Point Location Code (SPLC).

A Standard Carrier Alpha Code (SCAC) is a unique 2 to 4 letter code used to identify motor carriers and transportation companies. A SCAC is required to do business with any agency of U.S. Government and some commercial businesses as well. They are also required on any tariff filed with regulatory agencies such as the Surface Transportation Board (STB).

You will need a SCAC code if:

A Standard Point Location Code (SPLC) is designed to identify shipping and receiving points by geographic location. This is accomplished using two digits to identify State, County and City and three digits to identify Sub-Code.

The NMFTA has made the SPLC available for purchase in print or CD-Rom. If you would like a copy of the SPLC or need to order a SCAC, you can order them directly from the NMFTA by following the link below:

National Motor Freight Traffic Association

https://secure.nmfta.org/New/Introduction.aspx

Today, Federal Law does not require motor carriers to participate in the NMFC. However, if they are not a participant, carriers are prohibited by Federal Law from referencing any provision of the National Motor Freight Classification in their contracts or tariffs.

A freight mover tariff is a legal document published by motor carriers. It clearly states rates, rules, classifications, and regulations for transporting and handling freight. Although the definition itself is simple, some tariffs can be quite complex due to varying tariff rates. Calculation of tariff rates depend on the freight classification as well as the rules pertaining to particular commodities being transferred.

Experienced freight managers spend a great deal of time searching the tariff tables of a number of carriers in an attempt to find the lowest rate for the commodity being shipped. Many of the more experienced shipping personnel have become quite proficient at finding alternate classifications for their commodity that offers a lower freight rate.

Freight mover tariffs should not be confused with import tariffs, a form of tax levied upon foreign manufacturers against certain goods being exported into the United States. You should also understand that tariff rates are published by motor carriers and freight forwarders. It is not a one-on-one Business to Business (B2B) contract.

As a new broker or agent, you’ll most likely begin working with general freight commodities and contract carriers, rather than household goods and common carriers. Therefore, if you are not directly involved with the carrier side of the business, it is unlikely that you will have a need to publish a tariff.

Freight tariffs came into being as a result of collusion between railroad companies back in the 1800’s which resulted in unfair competitive practices and price fixing.

Many big shippers were given rebates under the table which resulted in smaller shippers paying more for transportation to and from the same destinations. Shippers needing freight transportation between points that were served by only one rail line were also victims of price gouging by greedy railroad owners who took advantage of the lack of competition.

Most rail carriers participated in a practice called pooling whereby they all deposited their revenues in a common account and distributed the profits among all participating carriers who agreed to the price fixing schemes.

The first steps towards eliminating these unfair practices came in 1887 when U.S. President Grover Cleveland signed the Interstate Commerce Act which established legal protections against pooling, price fixing and arbitrary freight rates. This move introduced the conception of published tariffs and the protection they continue to offer to this day.

The railroads banned together to fight this legislation and were successful in getting the Supreme Court to side with them in many of their challenges. However, industry leaders, who were the victims of the railroads’ unfair practices, banded together to help support the law.

All of this pressure resulted in the passing of the Sherman Antitrust Act in 1890. The Act was the start of the Government’s involvement in the regulation of interstate commerce. In conclusion, both shippers and motor carriers are bound by the tariff specification, and both are entitled to legally dispute charges.

Prior to the Trucking Industry Regulatory Reform Act of 1994 (TIRRA), common carriers were required to file their tariffs with the Interstate Commerce Commission (ICC), which was charged with the responsibility of reviewing and approving all tariff filings. Before the TIRRA, transportation companies were exempt from the Sherman Antitrust Act, allowing transporters to band together and set rates which fixed by mutual agreement.

The TIRRA removed the federal tariff registration requirement and opened up the freight industry to competitive rates. One of the benefits of the industry’s deregulation is that freight rates for the same commodity classification can vary widely among carriers.

Today, only household goods carriers and motor carriers involved in transporting freight through non-contiguous domestic trade zones are still required to file their tariffs with the U.S. Government’s Surface Transportation Board (STB). The STB took over the regulatory responsibility after the ICC was dissolved in 1995. Non-contiguous domestic trade zones refer to freight shipments originating or terminating in Alaska, Hawaii, or any territory or possession of the United States.

Household goods shippers are still required to file their tariffs because most consumers are not experienced shippers and are subject to being taken advantage of by unscrupulous household goods transporters. Having regulated tariffs provides a degree of protection for the public.

The U.S. Government takes this very seriously, with good cause, and will not hesitate to fine or otherwise sanction violators for failing to post tariffs and failure to abide by the rules and rates stated in their tariffs. Sanctions can range from a letter of warning, to fines of hundreds of thousands of dollars, and even cost the violating company their right to transport household goods.

Although tariffs for non-household goods carriers are generally no longer required to be filed with the STB, federal law still requires that tariffs be furnished to a shipper upon request.

A tariff protects both the customer and the motor carrier by clearly establishing the rates and requirements associated with a shipment. Without a tariff agreement in place, disputes could arise over costs or related shipping details which would often result in the disruption of commerce. This is particularly true with complex shipments which may involve multiple tariffs to cover shipping, loading and unloading drayage, etc.

Many carriers will include charges that come from what are termed a referenced tariff such as those listed in the National Motor Freight Classification or House Hold Goods (HHG) Mileage Guide. However, carriers are prohibited from charging those tariffs unless they can prove that they are an active participant in the referenced tariff.

This means a carrier cannot enforce a referenced tariff rate unless the freight company has executed a power of attorney authorizing them to participate in the referenced tariff. When a carrier quotes a referenced tariff, the shipper has the right to ask for documentary evidence of the carrier’s participation. If the documentation is not provided, the shipper has the right to refuse any charges stated in the referenced tariff.

Although the industry has been mostly deregulated, the government still retains the right to determine whether the tariff is reasonable, and can specifically reject any tariff which it deems to be unreasonable. This protects shippers from rogue carriers who are in a position to take advantage of a shipper or group of shippers due to their geographic location, or other disadvantages making it difficult to find a number of competitive shippers willing to service them. The TIRRA protects both the shipper and the carrier by allowing either party the right to dispute or challenge a rate within six full months from the date that the rate was paid.

Generally, the agreed to and billed rate for all tariffs is the final rate that will be paid unless either party exercises its right to dispute the charges within the six month grace period. If a dispute is filed within the allotted time period, the dispute is then covered under the Negotiated Rates Act of 1993 which provides for a 36-month statute of limitations for either party to collect the disputed amount. The six month time limitation underscores the importance of both party’s need to perform timely and accurate freight bill auditing in order to protect their rights.

A shipper may enlist government assistance in any tariff rate dispute, including tariffs involving the shipment of household goods, by making a request for an Applicability Review of the charges billed to the shipper by the carrier. These requests are investigated by the STB’s Office of Compliance and Enforcement (OCE).

The process involves an in-depth review of all shipping documents and any related forms and/or paperwork, as well as a copy of the carrier’s published tariffs, in order to determine whether or not the contested charges were consistent.

A written finding will be provided to the shipper upon completion of the review process. Should the findings go against the carrier, the shipper may present the written finding as evidence in any court procedure or lawsuit to recover the unlawful charges. There is no cost to the shipper for this review process.

Although there are some minor variations on a state-by-state basis, most freight tariffs are required to meet the following guidelines in order to be accepted by the various state and federal regulatory agencies, including the federal mandate that all tariffs be easy to read and understand.

Measurement units which may be misunderstood must be clearly defined. For example, it is not sufficient to list a rate per “ton” without defining the weight associated with the term. Examples include a 2,000 lb “net ton” and a 2,240 pounds “gross” or “long” ton.

The Table of Contents should provide the reader with the exact page number and location of all information contained within the tariff.

This is an alphabetical list of all carriers who are participating in the tariff by nature of the fact that these carriers have submitted a power of attorney attesting to their participation.

This is an alphabetical list detailing all commodities and their rates as well as any exceptions affecting the listed commodity.

This is an alphabetical listing of all points served by the carrier along with the rates that are applicable for shipments to and from those points.

The tariff must clearly list any exceptions to the published tariff rates, classification procedures, or any foreign tariffs that impact the posted tariff rates.

All wording in the tariff regarding rates and rules must be presented in clear and unambiguous language. In addition, all abbreviations, symbols and reference marks must be clearly identified the first time they are used.

All rates must be listed in cents or dollars and cents per measurement. Measurements may include per pound, per 100 pounds, per barrel, per ton, etc. Minimum rates must be clearly stated.

Measurement units which may be misunderstood must be clearly defined. For example, it is not sufficient to list a rate per “ton” without defining the weight associated with the term. Examples include a 2,000 lb “net ton” and a 2,240 pounds “gross” or “long” ton.

Motor Carriers will typically notify their customers that the rates and rules of cartage are based upon tariffs. Carriers who use tariffs to determine their shipping rates and rules are required to make a copy of those tariffs available to the shipper upon request.

Shippers should always ask to examine the tariff in advance so they know how their freight is being classified and how their rates are being determined. Having the opportunity to examine a carrier’s tariff in advance also provides the shipper with the opportunity to shop around for more favorable rates.

It is the shipper’s responsibility to keep tariff information up-to-date so that it is always able to determine all shipment-related costs including trailer detention charges, inside or non-curbside delivery charges, drayage, lumper charges, crane charges and other related expenses which can often add a considerable cost above and beyond the standard tariff rates.

For the protection of all parties, tariff rates should be used as the basis for calculating freight and related charges, as well as defining the rules governing the shipment any time commodities are transported.

Properly published tariffs provide a valuable service to both the motor carrier and the shipper. All parties are protected from misunderstandings or outright fraudulent actions by a written agreement spelling out the exact terms and conditions governing any shipment, including the rate agreed upon by both parties.

Part of your job as a freight broker or agent will be to find freight to move, meaning you will be coordinating loads. Coordinating a load is the act of actually searching for and finding a truck/carrier to haul the load for your shipper.

Finding freight to move is not a difficult task, although it can become somewhat time consuming, particularly if you are choosy about the type of freight you are willing to deal with. Our objective in this lesson is to help you prevent the wasted time and expense that sometimes accompanies load coordination by pointing you in the right direction with the right mindset. We will explain here how to obtain your customers based on a combination of two things – meeting the needs of your customer, while simultaneously maximizing the reach of your marketing efforts.

Regardless of how you obtain your customers, take into consideration the materials a particular company uses and how they use them. For example, a seamstress certainly needs a continuous supply of needles and thread, but it is unlikely they would ever need an entire truckload at once, so obviously you don’t want to spend your time searching for such commodities. On the other hand, a steel truss company needs a continuous supply of pre-fabricated (pre-fab) “stock” steel to make engineered roof trusses.

Therefore, you have pre-fab freight going in one door, and end-product being shipped out another door. And while your target market is not limited to pre-fab transit, it should open your eyes to the possibilities for all shippers. The shipper’s commodity is far less important than its material consumption and end-production.

As long as your customer (shipper or mfg co) consumes products, they will produce products as well. They certainly need their freight moved so it is important to remember you are not trying to sell them something they don’t need. You are simply the medium between them and the best way to get that need met, and there are hundreds of thousands of shippers and manufacturers in need of your services.

If it is a new manufacturing company they may not yet have anyone handling their shipping requirements. If it is a shipper that has been in business for a while, they likely have someone taking care of this for them. Even so, most shippers continue to create business relations with freight brokers and agents regardless of how many they have handling their freight requirements.

From their prospective, you can never have too many helpers, not to mention that keeping their options open enables them to continually shop for the best service at the best price. That’s actually good news for you – proof that you can compete in the marketplace.

You will need to “know your freight,” become familiar with the company you’re working with and what kind of loads they need moved. If possible, take a look around and get a sense of the freight they handle or ship. Is it pre-fabricated steel or an end-product such as frozen food? Does it require a dry van, flatbed, refrigerated, or specialized trailer to move their load? You should know this before contacting anyone about moving their freight.

If it requires a dry van trailer (regular box trailer) you will need to know how much it will weigh. When a motor carrier calls about a load you have posted, that will be one of their questions. Some trucks weight more than others and cannot handle heavy loads. If it requires an open trailer such as a flatbed, or step-deck trailer, you will need to determine if the load must be kept dry, or requires a tarp.

Once you have established the type of loads/customers you prefer dealing with, you should target that market, and identify yourself as a professional in that particular sector of the business. By choosing a specialty, such as overdimensional and oversize loads, you will not only become more valuable to yourself, but to those with whom you deal with on a daily basis. The downside to specializing in one type of trailer freight is that it can limit prospective customers.

Nearly everything found in today’s marketplace was moved, re-moved, and moved again by a truck. Think of one product – any product. Think of what materials make up this product. Is there a demand for this product? Look at the tires on your automobile. Do you realize how many trucks it takes to supply the products necessary to make those tires?

In the most basic of transportation needs, it will take a tanker truck to haul the petroleum, a flatbed truck to supply them with the cables for radial tires and another truck for special holding compounds generally hauled in a dry-van. Then, when your tires are manufactured, they’ll be sent to a distribution center. From the distribution center, they will be sent to retail stores around the country.

This is yet another example of material consumption and end-product which expands your service possibilities. The example above contains a minimum of five avenues in which to profit! Can you see where this is going? Each time those tires are shipped, it creates another potential stream of income for your business!

Do not make the mistake of letting the ‘curb appeal’ of a backyard business determine weather or not you work with them. Mom and pop shops often have a family business that offers stability and steady customers with loads frequently going to the same places, thus making your job that much easier. In the beginning, you will want to start with the small to medium size companies. They are sometimes more flexible concerning your payment needs and they will offer you the personalization that is sometimes not found when working with large corporate entities.

This is an important thing to remember, and often overlooked. Maybe you know a forklift operator or truck driver at a local manufacturing company. Excellent! Your foot is already in the door. Start asking questions. Find out who the traffic manager is. Traffic managers may also be referred to as shipping or receiving supervisors. At least get his/her name, and if possible, get their phone number too. Ask your friend if you may use them as a reference when you call. Contact that person and let them know you are a freight broker/agent and if there is anything you can do for them, to let you know.

I recommend asking them if you can fax or email them a proposal explaining your rates and fuel surcharges. Most likely, they’ll accept. It might be a few days before they call you, but chances are, they will get into a pinch at some point and need your help. At which point you would fax them a set-up package (contract between you and your customer) to get the ball rolling. Our experience is that if they call you once, they will call you again, only much more often, and in many cases, on a regular basis.

You will learn that the transportation business employs rather “laid back” terminology compared to other industries. You should also keep in mind that the traffic manager or employee of a manufacturer has a great deal of influence as to “who” moves freight for that company.

Another way to secure customers is by offering people you know a “finders fee” if they bring you a customer that uses your service. This is a great way to motivate outside sales people or even part time helpers.

College campuses that offer a sales and marketing curriculum to their students love this kind of thing because it offers their students a real opportunity to market outside sales without the pressure of living expenses. It’s a win win for you and the student. They can work a schedule that fits their needs and you can hire them and pay them a one time finder’s fee based on their results.

The Internet is the most resourceful tool available to freight brokers and agents. But sadly, many of them fail to capture the rewards of its full potential.

www.ThomasNet.com publishes both, a paperback and online directory of shippers and manufacturers from all types of business models. The nice thing about surfing their website is that shippers and manufacturers enter a lot of detailed information about their company.

You can often use this information to learn about their target market. The number of employees they have can give you an idea about the size of a company. Another size indication is the company’s net worth, which the shippers have the option to include.

Therefore, if you plan to target small shippers, you might seek out shippers with under $1,000,000 in sales. And likewise, you would seek out higher net worth amounts for larger customers with more sales volume.

You can also log on to any search engine and perform a search for a specific type of manufacturer by searching for commodity or type of freight in which you seek. If you are looking for flatbed freight in Colorado, you could search for various commodities that ship on flatbed and stepdeck trailers in that area.

For instance, you might type the following into your browsers search bar:

“Concrete Culverts, Co.”

You may have to search for a while to find a manufacturer. Keep in mind that many of the online stores are retailers, not manufacturers. However, since they too buy and sell products, they remain a prospect and should not be ignored.

You can also try searching by typing in the full state name such as (Colorado) instead of the state abbreviation (Co.). Doing so should give you a completely different result. With that said, if you are unsuccessful at finding what you’re looking for, try typing it in using various keyword combinations.

If you are a Gold or Platinum member of Freight Broker Boot Camp you most likely already have free access to the shipper database under the TOOLS section in your membership portal.

BUT if you are specifically focusing on the PRODUCE industry, we have developed a proprietary database of 25,000+ Produce shippers: including growers, brokers, wholesale and retail buyers. CLICK HERE for details.

There are a number of factors that contribute to the results you’ll have with direct mail. Whether you already have a warm market or wish to market your services to a specific target population, direct mail can be very effective. However, it can also become pricey, particularly if you attempt to market yourself to businesses that have no need for your services.

www.postcardservices.com offers a variety of services that range from importing any existing leads you may have, to targeting their list of business leads. The benefit to utilizing their database of business leads is that you can easily narrow your target market by selecting the type and location of the businesses you wish to market to.

The great advantage of direct mail marketing is that you can narrow your market with precision, which will essentially get you the best bang for your buck. It all boils down to Return on Investment (ROI). Experienced marketers will tell you that it’s more important to market to 100 warm leads than to 10,000 cold leads.

Buying leads online is another option for finding customers and worth the investment if you acquire quality targeted leads, which is key here. You don’t want to spend money on leads or a lead service and end up with cold, dead, or non-targeted leads that are essentially no use to you. While you can do a search online for the specific leads you’re seeking, you may end up spending a lot of time researching and sifting through hundreds of results having nothing to do with what you’re searching for. There are several options, but here we will discuss an option that will not only save you time searching, but will also provide you with valuable features to help you target, analyze, and manage your leads all in one place.

Salesgenie.com may be one of the most valuable resources available, whether you’re just starting out as a new agent in search of your first customers, or a seasoned broker interested in boosting your current revenue. Salesgenie is a prospecting and lead generation service that provides detailed and unlimited access to literally millions of businesses, big and small, as well as over 600,000 manufacturers. While that sounds like a lot to fumble through, they have made it easy to target exactly what you’re looking for.

Using Salesgenie, you have several initial search options including:

You can also search by specific information such as company name, phone number, address, etc., and Salesgenie will not only show you your matches and closely related matches, they will also suggest additional matches based on the criteria you enter. You will then be able to narrow your search further if you choose to select the “size” of the business/manufacturer you’re looking for either by number of employees, annual sales volume, or advanced criteria such as location type (Corporate Headquarters, Branch, etc).

You can then target even further by selecting very specific geographic location criteria including setting radius parameters around a particular area. For example, you can provide a zip code and find every Business/Manufacturer within a specified radius of 0 up to 150 miles of that targeted area. While there are even more advanced search options available with this service, we will now move on to results, but it’s already plain to see the power of laser targeting your leads to specific business/manufacturer types and location.

When your results are populated, and you choose to look at a specific business profile, you will see all of their contact information (phone, fax, email, address etc) as well as a location map, and many times even a picture of the facility. In addition to their location and contact information, you will see their corporate information (as available) including, but not limited to the following:

As you can see, you will have the power to generate extremely laser targeted customer leads, and you’ll have detailed information for each one allowing you to see at a glance whether they’re of interest, rather than spending hours researching and making phone calls in order to get the information necessary to decide.

Salesgenie has a powerful service which allows you to analyze your existing customers in order to generate new prospects. Very powerful. You can submit the details of your best customers via CSV file (up to 5,000 records) and Salesgenie will generate a new list of prospects matching the characteristics you select. Whether you have a handful or a long list full of excellent customers, it certainly can’t hurt to have more just like them, right?

In addition to providing details and targeted prospects, Salesgenie also offers a built-in contact manager in order to keep your leads organized, and other helpful prospecting tips. You can find out more by visiting www.salesgenie.com

Strangely, this is where many people fail to apply themselves. And if the truth be told, this is one area of marketing that allows you to leverage your resources and maximize your revenue through existing freight channels.

Locating shippers in your local area is a good place to start for outbound freight. But what happens when you dispatch your truck? Will you ever hire them again? Will you ever hear from them again? Not if you don’t make it happen!

Do you have daily or weekly recurring loads destined for the same areas? Chances are, you will. And if so, you should be looking at those destination areas for freight leaving those regions! Whenever possible, it only makes sense to reload the same motor carrier that just unloaded a shipment for you.

How can I locate backhaul shippers? Use the methods mentioned above. Whether you purchase a Master Shipper Database or a direct mailing list of targeted businesses, you will have at your disposal a list of warm market prospects with a need for your services.

Both of the methods mentioned above allow you to funnel your marketing efforts into particular demographic areas. Initially, you may spend more time building a customer base, but the customer base you build will allow you to enjoy a degree of autopilot perks, which would not be the case with the use of cold market leads.

For instance, If you begin by purchasing a direct mail list for construction or industrial corporations in Detroit, Michigan, the next list you purchase should be geared toward areas you began shipping to as a result of your Detroit shippers. If you have a shipper in Detroit shipping 5 loads per week to Valdosta, Georgia, you’ll get the most out of your marketing dollar by purchasing a direct mailing list of similar shippers in Valdosta. If you secure another shipper in Valdosta, GA who regularly ships 8 loads per week to St. Louis, Missouri, you would then begin to target shippers in St.Louis.

In the beginning, you’ll need to acquire customers without regard to location. But once you get rolling, you can increase your marketing ROI by targeting areas with backhaul freight. Backhaul shipments rarely return back to the exact location in which they originated. But even when backhaul shippers offer loads to other regions, you can repeat your marketing cycle over and over again. As a result, you’ll begin to build a database of shippers nationwide with loads traveling to and from various points of the country.

Establishing fair freight rates can be somewhat arduous for inexperienced brokers and agents. Yes, there is a “science” to it, so to speak, but that science is relative and based primarily on experience. However, it’s not as difficult as some would have you believe. In fact, there is now an online freight rate pricing utility that can be used as a rate guide for common shipments.

www.CarrierDepot.com offers a fantastic starting point for negotiations concerning common trailer types such as flatbed, dry van and refrigerated (reefer) trailers. But due to inconsistent rate patterns in specialized freight, such as oversize or overweight shipments, it’s best to handle them diligently. You should seek quotes from qualified motor carriers who specialize in those types of movements.

If you’ve been fortunate enough to obtain a list of areas your customer ships to on a regular basis, use it. Each destination will show different rates proportionate to comparable rates in that region. This is where CarrierDepot becomes a valuable tool, especially if you’re unfamiliar with inbound and outbound rates in various regions.

If you have a customer in Cleveland, Ohio who is a wholesale manufacturer who regularly ships to retail distribution centers in various regions of the country, you’ll need to know where those destinations are located. In this example, your customer ships to five distribution centers (known as DC’s). See the chart below.

Just because CarrierDepot’s pricing utility articulates a rate of $X.xx per mile, does not mean that is what you have to charge. It is simply presenting average rates based on the proprietary algorithms of computer generated data. How much you charge, is up to you.

If you’ll notice in the chart above, the higher populated areas such as Dallas and Atlanta had rates considered to be fair, but certainly not “exceptional.” One reason for this is that the carriers hauling into these domains have better freight opportunities when they depart and as a result, they will likely receive a similar rate when they leave.

Carriers hauling freight into Casper and Denver stand a good chance of departing those areas for a much lesser rate. So in order to offset these decreased inbound rates, they try to receive a higher per mile rate going in.

Carriers traveling the distance to Oceanside, California may be willing to accept more miles in lieu of better rates. This can be for many reasons. A long load with plenty of miles keeps that driver busy for several days which decreases the administrative workload required to keep him moving on brief runs. Additionally, Oceanside is a heavily populated area, thus the carrier will be able to maintain average rates when it’s time to depart.

Time and experience is the only way to familiarize yourself with freight traffic lanes. In the beginning, you may find it helpful to get a wall map and mark your origins and destinations as they occur. Although this is a long term project, doing so will not only help you get a handle on your traffic lanes but it also gives you valuable insight on where to concentrate your marketing efforts.

Freight rates often change from one day to the next and vary in different parts of the country due to supply and demand in that area, so unless there is a major spike in fuel costs, the rates you determine should be sufficient for 30 days or more. In fact, once a line haul rate has been agreed upon, many people find it less complicated to leave the base rate alone and negotiate solely on rate variables such as the truck fuel surcharge.

CarrierDepot.com is merely a foundation for the negotiating process, and these rates should be used only as a guide. Be prepared to sharpen your pencil and tweak them based on your customer’s needs. Once you’ve established a reasonable rate and your customer agrees to your proposal, have them sign a shipper/carrier agreement to lock in the rate.

Cheap freight can become a time sponge resulting in more work and less pay. You can easily invest more time than what it’s worth. Not every load is perfect and not every load pays well. There will be times you will need to offer a helping hand to your customer and do your best to move a load with a less than desirable rate.

A load is considered bad when a shipper simply cannot afford to pay a competitive rate or if it has an uncommon snag. For instance, if it is a heavy load that doesn’t pay well and it delivers deep into the heart of a highly populated metropolitan area, such as downtown Manhattan, Detroit, Chicago or other large city. It’s not that these places are “bad”, but maneuvering a semi-truck in these areas usually proves extremely difficult.

In addition to the difficult navigation of such a large truck in a congested area, the carrier must also consider his safety, the safety of others, and of course, be sure the freight he’s hauling is not damaged. More people, traffic, and other obstacles such as low underpasses increase the risk of damage, simply making loads into or out of these places less than desirable. That, combined with less than competitive rates make it unfavorable for carriers to justify the time involved with such loads.

In order to get a grip on unfriendly freight rates, step into the shoes of the motor carrier for a moment. You’re a one-truck owner-operator, you own and operate your own rig and you need a load. You’re in the truck stop scanning the board for freight and there are only 2 possible loads for your trailer type, both of which load in the same town just a few miles away so the deadhead mileage is about the same.

Load “A” pays $1.75 per mile, weights only 35,000 lbs, has one-pick one-drop and delivers to a suburb outside of the Chicago city limits. Load “B” pays $1.31 per mile, weights 48,000 lbs, has 2 extra stops and delivers deep into downtown Chicago at 5:00 PM during rush hour traffic. If you were the owner-operator, which load would you take?

It is sometimes necessary to offer the carrier more money to haul a load deep into these larger metropolitan areas. Try to make it worth their while. On the other hand, your customer may not be willing or able to pay more on that particular load. Regardless, somewhere there is a carrier looking to load a truck in that direction so it’s not completely hopeless, but be prepared to make a few more calls to find a carrier willing to haul it.

Another example of “unfriendly freight” is a low paying load delivering into rural America. These areas are often high-consumers and low-producers, meaning they have little or no industrial productivity to support the outbound freight needs of the carriers delivering to them. Therefore, carriers try to negotiate the best rate possible when traveling to these areas. They are aware of the possibility that they may have to leave empty and travel deadhead a great distance to reach their next dispatch.

As with any business, there are a few negative issues to deal with and obstacles to face. Simply try to get the job done and move onto better paying loads. A little extra effort on your part goes a long way in this business.

Obviously, you should not be too quick to discard a shipper because of one or two unfavorable shipments. Although a shipper with a lot of unfriendly freight may not be worth your time, use your discretion. Over time, you will be able to determine what is making you money, and what is costing you money. Again, time is money. With a little experience, you’ll begin to distinguish what works best for you.

Just remember, you can spend too much time negotiating over a few pennies, and the result is loss of dollars. Don’t allow yourself to fall victim to low paying freight repeatedly. Every once in a while, you’ll likely have to sacrifice, but not often if you can help it. Use the resources available to you, such as www.CarrierDepot.com, and focus on quality business, rather than quantity.

The negotiating process behind freight rates actually begins with a clear understanding of the operating expenses incurred by the motor carrier. Shippers pay in a variety of ways so it is essential that you understand both sides of the business prior to submitting rate proposals.

Keep in mind, the carrier side of the transportation industry is a business all of its own. The intention here is not to make you a trucking expert, but rather to make you aware of the operating expenses of the carrier. With this knowledge, you will certainly be more qualified to negotiate proficiently.

The best way to explain carrier expenses and negotiating is by way of examples. This section should enhance your comprehension of the basis in which rates are conceived.

If truth be told, motor carriers control industry freight rates. However, they too are victims of rising fuel costs, driver wages, registration fees and fuel taxes. Therefore, the ever increasing cost of operating controls the minimum per-mile rate they can afford to haul for.

For interstate motor carriers, virtually all of their expenses revolve around the axis of mileage. The means by which a carrier is paid is arbitrary, whether it’s hourly, per trip or by the hundredweight. Regardless of how they are paid, they must break down their earnings and convert those numbers into rates based on mileage. As a result, carrier expenses such as fuel mileage, driver wages, IFTA (International Fuel Tax Agreement) fuel taxes and toll roads play a critical role in the line haul rates you submit to your customers.

In the following paragraphs, we are going to discuss some of these expenses and how carriers convert line haul rates based on mileage. There are many factors that contribute to a carrier’s minimum line haul rate so it is essential that you have a solid understanding of where these minimum haul rates are established.

Your shipper will often try to dictate rates using their “shipping budget” as a guide. Unfortunately for them, they are not the one in control. The carrier is. The more you understand about carrier expenses, the better. Conveying this information to your shipper often eases the tension of negotiating by placing the blame of line haul rates where it is rightfully deserved, back into the hands of the economy.

Let’s examine the paradigm of carrier expenses.

If the line haul rate pays the carrier $2,500 on a 1,500 mile trip, the carrier already knows that load will earn them an average of $1.67 per mile. ($2500 divided by 1500 miles). If they can earn a profit at $1.67 per mile, they will most likely accept that load.

Now let’s add a few miscellaneous charges:

Unlike the line haul rate which is broken into mileage, additional costs need to be figured into the time involved. If that very same $2,500 load had two extra stops, you should add another $50 to $100 per stop to the gross line haul rate.

If it is a flatbed load and it requires a complete tarp by the driver, that driver should be compensated for doing that as well. For a full tarp load you should charge an additional $50 to $100. (These rates are for educational purposes and for example only. Please research the current market and adjust your rates accordingly).

$2,500 base line haul + $150 for 2 stops ($75 ea.) + $100 tarp pay = $2,750 total line haul.

Please note: The same principal applies to extra pick-ups as well. With that said, you should NOT charge them for the first pick-up or the last stop. This is a “given” in the transportation industry. The basic rate you submit should include picking up the load and delivering the load, also known as “one pick, one drop.” Therefore, additional compensation is only applicable for extra stops between the origin and destination.

A driver can get several hours involved with just one extra stop or with the added responsibility of a tarp requirement, so be sure you take this into consideration when submitting quotes to shippers. No one likes to work for free. And if you treat that driver fairly, he will get back to your area and most likely call you for another load.

So how is it that fuel costs rise to all time highs, yet the line haul rates stay the same? The answer is an additional charge known as a “fuel surcharge.” Before you can calculate a fuel surcharge, you must have a basic understanding of the transportation expenses incurred by the carriers.

If a truck averages 5 miles per gallon, and the current fuel price is $2.50 per gallon, it would cost that carrier approximately 50 cents per mile in fuel costs alone. Currently, driver wages range from 30 to 45 cents per mile depending on their level of experience.

Now, let’s break it down into a per-mile-rate. 50 cents for fuel and 40 cents for the driver is 90 cents per mile operating expense, not to mention tolls and other highway taxes, etc. This does not include fixed expenses such as truck and insurance payments. We are only talking about operating expenses.

Now let’s add some fixed expenses such as a truck lease payment of $2,500 a month, a trailer payment of $500 a month, and cargo liability insurance at $800 a month. As you can see, motor carriers have enormous fixed expenses before they even start the engine!

The average mileage target for most carriers is 10,000 miles per month. The total fixed expenses for the carrier in the above example totals $3,800 per month. When you divide that by their target mileage of 10,000 miles per month, you’ve just added an additional 38 cents per mile to their minimum line haul rate.

So far, we have established the operating and fixed expenses for this carrier. Operating expenses – $0.90 per mile, Fixed expenses – $0.38 per mile, for a total of $1.28 per mile.

The following metaphors may seem somewhat out of scope. On the contrary, it is very much in line with what you need to know. Obviously, fixed expenses can differ from one carrier to another. However, the window of fluctuation is minimal.

For instance, it costs approximately $5,000 to suit a tractor and trailer with tires. If the carrier is fortunate enough to run those tires for 250,000 miles, their tire cost alone is $0.02 cents per mile. The carrier’s minimum line haul rate just rose to $1.30 per mile. Add an additional 10% or $0.13 cents for maintenance and administrative help and you’ve just raised it again for a total of $1.43 per mile. With expenses like that, carriers should earn a minimum of $1.50 per mile to cover costs and realize a profit.

Dead-head miles are the empty, unpaid miles a carrier must travel to pick up their next load. One of the objectives for carriers is to keep their dead-head mileage down as much as possible between dispatches.

In the pre-computer era, a 15 to 25% dead-head was acceptable to most carriers, but today, carriers are becoming fiercely competitive. Computers, equipped with routing software and smart fuel technology, streamline the communication process between the shipper and the nearest available empty unit, maximizing the paid miles per truck.

Under normal circumstances, you would not compensate a carrier for dead-head miles. However, there are exceptions when it is not only appropriate, but necessary. Do so carefully and do not pay retail per mile rates for dead-head miles.

Non Use – When you dispatch a truck and something changes in the load plan.

Time Sensitive – The load must go and your customer is willing to pay extra.

Specialized – If no other truck is available or equipped to haul a specialized load, you may have to offer dead-head mileage compensation to close the deal.

Unfortunately, fuel rates have a direct impact on how much or how little carriers can afford to operate for. Whenever possible, negotiate a fuel surcharge and pass those funds to the carrier. Negotiating fuel surcharges is another skill which will certainly enhance your negotiation strategy. Working with motor carriers and understanding the expenses involved on their side of the transportation business is important to your ability to successfully and more accurately negotiate rates.

Rule # 1 – Everything is negotiable – Everything.

A man once told me that if I made an offer on something for sale and I was NOT ashamed of my own offer – I made the wrong offer. He also told me that if I spent too much time haggling over a few pennies, I could lose dollars. What he told me became transparent later in life.

Some of your customers will want a standard per-mile rate. Some of them will want to negotiate each load individually, and some of them will want a discount due to the volume of freight they ship.

All freight must be moved at some point, but you don’t want to take on a customer that only moves low paying freight. Trust me, low paying freight will only cause you headaches. This is where things get a little tricky.

When prospecting potential freight customers, it is customary to submit a written proposal. A proposal is a summary of what you have to offer and why the prospective customer should use your service.

A proposal can be as simple as one page or it can be detailed and lengthy depending on the type of customer it is. A proposal should include a brief explanation of your rates, terms and conditions. Before you begin quoting rates and prospecting customers, you should become familiar with the “going rate.” We’ll be going over that momentarily.

In the Real Estate world, Real Estate Brokers perform Broker Pricing Opinions (BPO) based on a Comparative Market Analysis (CMA) prior to listing a client’s home for sale. Clearly, they must establish the Current Market Value (CMV) for similar homes in the area before they can suggest a fair and comparable price for the home.

They locate comparable properties that have been sold in a particular area and how much they were sold for. This gives them a “ballpark” figure to work with. The realtor will then suggest a selling price for their client’s home based on their study. The same principal applies to the freight industry.

If you receive a call from a new shipper or manufacturer, one of the first things they want to know is “how much” it will cost them. You need to be prepared for this. There is only one way to answer that question and if you do it any other way, you may lose that customer.

An experienced negotiator would say, “Mr. Jones, in all fairness to you and your company, I’ll need more information about your shipping requirements to help you secure the best rate possible. What is your phone number? I’ll call you back in a few minutes so we can go over some of those things. Will you be available in 30 minutes or so?” And when you call Mr. Jones back within the specified time, he will then know you are a person of your word and a degree of trust has already been established.

From this phone call, you will want to collect information about the shipper/manufacturer requirements. There are seven basic questions to ask:

Once you have assessed their load requirements tell them you will prepare a proposal and have it ready for their review by the next day.

Take this time to do your homework and establish the comparative freight rates. These rates will become the foundation for the negotiating process. And since you are most likely inexperienced at this point, you may choose to utilize the the pricing utility at CarrierDepot.com. See freight shipping rates for more information.

If your customer makes you believe that he has several loads to move and will return for business, you may elect to cut him a deal and show the volume discount on the proposal. Not enough to damage your credibility with the carriers that will haul these loads, but as a way of saying “thank you” to him for doing business with you.

If you discount it too much, no one will want to haul your loads, so be careful with this. I recommend making a volume swap. Make him an offer that allows you more of his business, but he can only secure that rate if he moves, say 20 or more loads a month.

Now you have something to work with. You can afford to come down on your rate by 6 or 8% without jeopardizing your credibility and worth to those who haul your freight. This may not seem like much money but as a manufacturer, he understands the concept behind buying bulk and saving pennies.

If you move $40,000 a month in freight charges for Mr. Jones and give him a discount of 8%, he just saved $3,200 for that month. To him, that might be enough to cover an employees wage for an entire month. By now, he likes doing business with you. Now, you’re making him money and he is likely to reward you by giving you more freight to move.

If your customer is providing you with $40,000 in freight each month and you cut him an 8% discount just to maintain his business ($40,000 minus $3,200) you are still earning a commission on the difference ($36,800). If you are an agent earning a 7% commission, you would earn 7% of $36,800. That’s $2,576 every month. If you are a broker and opt to earn a 15% commission, you would earn $5,520 just from ONE customer! So, rather than focus on the commission you lost. Be thankful you have a good customer. You may find it helpful to think of that money as “a cost of doing business.”

It is important to establish that you are a broker with integrity. Integrity is what will sustain you and establish a solid foundation of trust with both shippers and carriers. Without them, you are out of business. Focus instead on the business you’re securing because you gave the discount.

Obviously, your customer’s objective is to move their freight at the lowest rate possible. Meanwhile, the carrier’s objective is to secure the highest rate possible.

As we mentioned previously, carriers calculate their costs down to just pennies. They figure what it will cost them to operate their equipment down to each mile. The carrier will then charge a rate based on mileage between the origin and the destination.

For example, if you called Smith Trucking and offered them a load from Nashville, TN to Chicago, IL, (which is around 475 miles) they would open their trusty mileage software and check the distance between the two cities. They will give you an estimate based on mileage and extra stops, if any. Carriers know their costs! In order to earn a profit on this load, the carrier knows they need to secure a rate of $1.55 per mile ($736.25).

Your main objective is to keep your customer happy. However, you must also earn a profit. Add your broker fee to the line haul rate and submit the total rate to your customer for review.

• $736.25 + 15 % ($110.44) = $846.69

PROBLEM: your customer may not be willing to pay $846.69 to move that load. They may need you to cut your rate by $100. If you agree without negotiating, that $100 just came out of your pocket, leaving you a lousy commission of $10.44. Not good.

SOLUTION: Keep in mind that your customer must answer to their customer too. The manufacturer is likely selling large quantities and competing against other manufacturers to keep their customer happy as well, kind of a snowball effect so to speak. Where you end up in the freight food chain is not always within your immediate control, no matter how well you negotiate.

Call the carrier back and ask them to come down on their line haul rate by $50 and ask the shipper to come up $50. Your objective is to find a “happy-medium” for both parties. Negotiating is not rocket science, but it is certainly strategic, and each negotiation will vary depending on the details and/or special needs. Try to uncover the most flexible party and mediate between both of them until everyone is content.

Please remember that you are the one who determines the freight charges. Most often, it should be what YOU are willing to pay the carrier to haul a load, NOT how much they will charge you for doing so. After all, YOU are the one with the freight.

Until recently, the prepay method was nearly impossible to negotiate. No shipper in their right mind would agree to pay for freight until it was delivered. They expected a line of credit from the broker. Times have changed.

Take a look at the monsters of prepayment. Two of which are UPS and FedEx. They move millions of parcel packages, both large and small, and they do it on a prepayment system. Try going to FedEx to ship a package and tell them to “just send you a bill.” They won’t move anything unless they have received payment in advance or have a solid payment structure in place such as credit card billing or automatic payment.

Some people might argue that we’re not comparing apples to apples because those companies operate parcel services, not freight services. Technically, they’re correct. But regardless of the shape of the logistics entity, the process of collecting unpaid receivables is identical.

Now we will take a closer look at how prepayments can affect your negotiating strategies. Let’s say you’re prospecting a customer, Mr. Jones, who moves a fair amount of freight from his manufacturing company. Let’s say this could be your “bread-n-butter” customer and you really want their business. How would you approach them?

First, see rule #1. Then ask them if they are a debt free company. When he says “No,we’re not a debt free company,” ask him if he would like to earn 5% on borrowed money.

His first reply will go something like this: “Are you out of your mind?” That’s when you say, “Absolutely. Now let me explain…”

More often than not, they are not a debt free company – simply because we live in a world of corporate financing. Commercial funding has become a common cost of doing business. Many businesses use “other peoples’ money” to earn more money. As a result, they pay interest on that borrowed money. So, when they are approached by someone that can offer them a resolution to eliminate some of those interest charges, they become somewhat more receptive to your offering.

“Mr. Jones, I can not only remove some of your interest charges, but I’m going to help you earn money on the money you borrow. Here’s how we’re going to do it.”

“I don’t know what you’re paying in interest charges, but I’ll take a guess that it’s around 5%. Well Mr. Jones, I’m a business man myself, and I don’t enjoy paying those unnecessary charges either.”

“In fact, we have to use factoring companies to keep a grip on a solid base of working capital. You know what Mr. Jones? I have to pass those fees onto your company in order to cover my collection and administrative costs.”

“And that’s really why I came to see you today. You see, I’ve been crunching some numbers – if you can find a way to pre-pay my brokerage, I’ll cut my rate by 10%.” If you are in fact paying 5% interest, that is like earning 5% on borrowed money!” You really can’t lose Mr. Jones.

“We don’t have to worry about collecting our money, and you’re getting 10% off every load we move for you. Don’t you agree that this is a sensible resolution for both of us?”

TIP: A critical ingredient to the “art of negotiating” is how you ask questions. It should be done in a manner that leaves the obvious answer in your favor – without patronizing the other party.

Then Mr. Jones will look at you strangely and say, “Let me think on it, and I’ll get back with you.” Never expect an immediate yes or no from an experienced negotiator. It could be that he is bewildered at the concept, partly because it is so simple, and partly because he’s trying to find “the catch.” Fortunately for both of you, there is no catch.

A few days later, he might call you and agree to your suggested terms. At which point, you will have to determine how much he is willing to prepay based on his volume of freight.

If Mr. Jones is averaging $2,500 per day in freight charges, you could have him pre-pay for a month (about 20 business days). This would require a $50,000 deposit to initiate the prepayment system.

Give him a copy of your broker authority, insurance certificate, and proof of bond so that he knows his money is safe with you. Now take his $50,000 pre-paid deposit and deposit it directly into your business checking account (or other interest bearing account).

Be advised: Misuse of this method is a federal offense and punishable by law. If either party terminates the agreement, you must return the funds, minus your fees for loads already brokered prior to the termination.

As you can see, by having several customers to agree to these terms, you are not only working smarter, you are also recovering a good portion of the rate you discounted.

Successful business entities use “other peoples’ money” to make money. This applies to any business. If you look at the prepayment example above, you’ll see that this practice carries over to the transportation industry quite well. Keep in mind that prepayments are not typical in the freight industry like they are with parcel services, but it can be done.

When you reverse the role of collecting accounts receivable by turning the table in your favor using pre-payments, your bottom line will increase while decreasing relentless ongoing collection efforts and factoring fees associated with traditonal invoicing.

Overdimensional loads will require more money and usually apply to Flatbed, Step Deck, and other open trailer freight. Due to permit fees and other additional costs associated with these loads, carriers simply cannot afford to haul them for standard rates.

Oversize loads require the motor carrier to purchase trip permits. State permit costs can really add up, especially if the load is crossing multiple state lines. Not to mention the additional administrative time it requires to prepare for these loads.

The motor carrier is responsible for ordering the appropriate permits from each state through which the load will be hauled. However, it is also your responsibility to know if the load requires permits. Your customer should know if the load needs permits. A load will need individual state permits if:

Due to the additional expense for the carrier, you should negotiate as much as possible for these loads. In many cases you can even take a cut in commission and pass the money to the carrier and still earn a great commission because of the higher rate.

The wider the load, the more it costs, the more it weights, the more it costs. You can bid these loads for much more (twice, even three or four times a standard rate) depending on just how big or heavy it is, and then add your fuel surcharge to that rate. Don’t be afraid to aim high. If you do not negotiate enough money for the load, you could spend a great deal of time locating a carrier to haul it.

If your customer asks you to bid on an EXCEPTIONALLY heavy or large load (in excess of 50,000 lbs) and you are unsure how to bid it. Either don’t take the load or try to co-broker the load with a more experienced broker/carrier. It is better to be honest with your customer, than to underbid a load that no carrier will haul.

There are carriers specializing in “super heavy hauling” who would be better equipped to handle such a load. Daily Express, ATS Sureway and Landstar Carrier Group, are considered specialists for oversize and over-dimensional freight. They have experienced people to handle this kind of freight so until you gain experience and/or become comfortable doing so, you might consider passing their information to your shipper. Your customer should feel that you’ve treated them justly and appreciate your honesty.

Refrigerated, also known as reefer loads, require increased rates because it costs the carrier more money to run a refrigeration unit on their trailer to keep the goods from spoiling. They need to be compensated for the extra fuel expenses incurred for hauling that load.

You should try to negotiate an additional 20 to 40 cents per mile above of your standard rate to help them cover the fuel and maintenance costs for that reefer unit. Reefer loads often have multiple stops so be sure to apply your stop-off pay as well.

Expedited loads are time sensitive, and require a “team operation” (two drivers in one truck can operate nearly non-stop 24 hrs a day). You should secure rates comparable to that of a reefer load. If it is both refrigerated and time sensitive, set your per-mile rate accordingly.

Time sensitive loads are sometimes handled by team drivers. The additional driver in that truck is yet another expense to the carrier so keep that in mind when quoting rates on time sensitive loads.

Mastering the art of negotiation in this industry will take time. But with a little creativity, you’ll begin to develop strategies that work for you. How you negotiate will have a profound impact on your profit margin in more ways than one. And always remember rule #1, everything is negotiable.

Dispatching is a procedure used to assign motor carriers to your loads. After you and your customer have agreed on a line haul rate, you’ll need to locate a motor carrier to haul that load. This can be accomplished a few different ways. Although prior to dispatching carriers, you need to perform a few preliminaries such as signing set-up contracts, rate sheets and checking motor carrier safety ratings. These things must be done to ensure legal and financial safety for yourself, as well as your customer.

When you “broker” a load, you are acting on the same premise as a contractor. When you arrange for goods to be transported by motor carriers, you’ll need to be “set-up” with that carrier. The term “set-up” is an industry term used to reference the contract agreement between you and the carrier. If you are not sure what your contracts should include entirely, have an attorney rewrite them for you using the sample contract forms as a model.

Before we get into dispatching, let’s have a look at the following forms and agreements. You will be using them regularly throughout the dispatch process, and they are in direct relationship with dispatching procedures, so it is important to become familiar with them. Understanding what these forms are used for can help you decide what steps to take, and when.

Proposal: The proposal form can be used (but not required) after verbal contact has been made with the shipper. It can be used for either formal or informal propositions.

Fuel Surcharge Chart: The fuel surcharge form can be used in conjunction with, or appended to, your proposal. This chart can virtually eliminate the need for future negotiations with a customer by somewhat standardizing the rate. This enables you to sometimes keep your standard rate the same and adjust only the fuel surcharge rate.

Broker/Shipper Agreement: The Broker/Shipper Agreement is a standard contract between you (the broker) and your customer (the shipper or manufacturer).

Credit Application: This is a credit application for extending credit to your customers. This is also an agreement for payment. As thefreight broker, you are responsible for getting paid and paying the motor carrier. This form is used after a Broker/Shipper Agreement has been signed.

Broker/Carrier Agreement: The Broker/Carrier Agreement is the “set-up” contract between you (the broker) and the motor carrier who will actually haul the load. This need only be done once with each carrier.

Load Rate Confirmation Agreement: The Rate Confirmation Agreement is an individual load agreement between you (the broker) and the carrier that will haul the load. This must be done for each load. This is also known as a “rate confirmation, load confirmation, or rate sheet”.

Invoice Statement: This is a standard billing invoice statement that you (the broker) will use to collect payment from your customer.

Prior to dispatching a truck, you must have a “set-up” contract signed by the motor carrier. This is done before the Load Confirmation Agreement. This is a business-to-business (B2B) contract between you and the motor carrier.

Note: A Broker/Carrier Agreement is signed only ONCE, to get “set-up.”
The Rate Confirmation Agreement (rate sheet) is signed for EACH load.

Most companies prefer to incorporate legal language into their “set-up” contracts to safeguard their prospecting efforts. Brokers should have a “back-end solicitation clause”, also known as a “non-compete” agreement included in their set-up contract. This is to prevent the carrier or company hauling the load from returning later to exclusively or directly haul for that customer. This provides some degree of protection for you as the freight broker stating the motor carrier cannot steal your customer. If they do, they will be forced to pay you a percentage of their earnings from that particular customer. You work hard for your customers – don’t give them away.

Once you and your customer have agreed on a line haul rate, the first thing you should do is login to your www.GetLoaded.com or other load board account. From here, you should perform a search for available trucks. Available trucks are units that have unloaded and are waiting for another load.

When you search for available trucks using the load boards, keep in mind that the miles they travel to secure your load may be too great for the motor carrier to justify. For instance, if you have a load paying $750 traveling just 400 miles – while the per mile rate remains fair at $1.88, the carrier cannot justify traveling a great distance to accept that load. If that carrier has to travel 200 miles to secure your 400 mile load, he must calculate those deadhead miles into his overall compensation. As a result, his per mile rate (after deadhead miles) would decrease to $1.25 based on a total of 600 miles (loaded and empty). Keep in mind that motor carriers generally like to keep their deadhead miles at or below an average benchmark of 10%.

Therefore, if you begin calling available carriers with trucks located 200 miles away from your 400 mile load – unless it pays enough to compensate them for their empty mileage, you will find yourself wasting a great deal of time. In cases such as this, you’ll need to do one of two things:

Note: If you are an agent, your brokerage may have their own web-based or in-house motor carrier database that will give you access to their truck availability. If your broker also has a motor carrier division, you should always use their company trucks first. If a company truck is not available, only then should you seek out other companies with available trucks in the area.

Another method of connecting with carriers is to post your available loads on the various load boards and wait for the phone to ring. Just remember, try to find a posted truck first. If you do not find anyone willing to haul it, then post your load. If you do this the other way around, you will most likely end up wasting valuable time answering unnecessary phone calls. Time management is the key here. If you see that there are no empty trucks posted in that area, go ahead and post the load. Someone, somewhere, has a truck heading in that direction or is looking for a backhaul.

Motor carriers use backhaul loads to get back into their home or to an area where they have direct shipper contacts. Obviously, motor carriers can secure better paying freight from their own customers. For this reason, carriers opt to pre-plan their trucks in a direction that will put them closer to their direct customer base.

The motor carrier’s objective is to keep their truck loaded. So in order to maximize their time, they use a dispatch procedure known as “pre-planning.” Pre-planning allows them to minimize downtime by immediately dispatching that truck on another load as soon as it is empty. Pre-planning saves the truck driver, the motor carrier, and you, unnecessary downtime. Time is money.

If you have posted a load and received a few calls on it, make notes of those inquiries and try to get their information. If later on that day you still have not moved that load, try calling the carrier back and ask them again. If you have enough profit in the load, you may offer additional money for incentive for them to take your load.

If your load is time sensitive, meaning it has to go “yesterday,” try to negotiate additional funding from your customer. Doing so will allow you the flexibility to give the motor carrier a better haul rate to transport that load.

You can also create backhaul loads for your carriers by connecting directly with shippers in areas your other customers ship to regularly. This works nicely because you can offer the carrier who just hauled a load into that area, a load out!

For example, if you arrange freight for one customer delivering to Chicago, IL, wouldn’t it make sense to seek direct shipper contacts in that area? Of course it would. And that is where some of your easy money is made, pre-planning and reloading carriers with backhauls. We’ll be talking about this more momentarily but before we get into that, let’s continue with the basic dispatch procedures.

After a carrier has committed to a load, there are a few steps that must be carried out before the driver can be dispatched to pick it up. These steps are critical to your legal foundation. They protect you and your customer from situations that can morph into financial despair.

If you are not “set-up” with a carrier and plan to dispatch them for the first time, you should take a look at their Motor Carrier Snapshot/Safety Rating. This gives you basic information about the carrier including the number of units on file with the FMCSA, how many drivers they have and most importantly, their overall safety snapshot. This also gives you their “Out of Service” percentage.

The USDOT may put a motor carrier “Out of Service” when the carrier fails to comply with the FMCSA regulations, driver Hours of Service rules, etc. However, this can be somewhat misleading. For example, if a carrier has only one truck and has a 100% Out of Service rating, it means that carrier is likely an owner-operator who owns and operates his own truck and was shut down, deemed Out of Service for one reason or another. It does not mean that he is a terrible carrier. It simply means that he only has one truck and was put out of service for failing to comply at one point.

Keep in mind, this could have been a result of simply “not knowing the law” in a particular state. Therefore, if the carrier had two trucks and one of them was charged “Out of Service,” he would have a 50% Out of Service rating, which is still appears negative. Likewise, a carrier with 100 trucks and 1 violation would result in a 1% Out of Service rating.

In the meantime, while you are checking the carrier’s snapshot, the carrier will most likely check your broker credit rating to ensure timely payments.

Your target is a carrier with low Out of Service percentages. With that said, in order to make a fair evaluation about a carrier’s snapshot, you must also consider the number of units they operate. In order to perform a carrier snapshot, ask them for their MC number and enter it into the FMCSA Safer System.

FMCSA Website: Carrier Snapshot

http://safer.fmcsa.dot.gov/CompanySnapshot.aspx

A load confirmation, also called a “Broker Confirmation Agreement,” is an agreement between you and the motor carrier who agreed to haul a load. Always be sure to have this form signed by a representative of the carrier prior to dispatching.

A load confirmation (rate sheet) is primarily used for billing purposes and can be done via fax. Once the driver delivers that load, either the driver or his/her company will send you an invoice for the amount you agreed upon in the Load Confirmation agreement. Along with the statement should be a copy of the following:

Load Confirmation Agreements are also used in court proceedings in the event there is a discrepancy about the rate agreed upon. It is a safe way to assure that you as the freight broker, will not be billed for charges in excess of the amount specified in the agreement. It also safeguards the carrier hauling the load. It acts as contractual evidence that you have agreed to pay the carrier a specified amount upon successful delivery of the freight. Moreover, if a freight claim should surface, you’ll need access to the confirmation agreement, Bill of Lading, and any other shipping documents to assist your customer in recovering the loss of damaged goods.

Ok, you’ve got your load, and now you have a motor carrier agreeing to haul it. Now all you have to do is fill out the “Load Confirmation Agreement” and fax/email it to the carrier. They will then sign it and fax/email it back to your office.

Now you’re ready to dispatch them on the load.

When you dispatch a driver to pick up freight, keep in mind that the driver has probably never been where you are about to send them. You should give them the shipper or manufacturer’s telephone number and a point of contact as well as the physical street address.

Some manufacturers will require the driver to have an appointment time for loading and unloading. Some shippers will require the driver to give them a “pick-up” number. A “pick-up number” is often (but not always) the Bill of Lading number. Shippers do this to ensure the driver picks up the correct load. Other shippers or receivers will only load or unload trucks between certain hours of the day.

Because you are the person in charge of arranging the transportation of this freight, it is your responsibility to know the hours of loading and unloading at the shipper’s place of business. Give the hours of operation to the trucking company so it will not be an inconvenience to the driver by showing up before or after their hours of operation.

You’ll need to get a rate confirmation signed before dispatching the truck. If you dispatch the truck to your shipper and do not have a rate sheet signed you risk losing that load and quite possibly, your customer. Why? Unfortunately, there are companies out there that will underhandedly make a “deal” with your shipper, to work directly with them, bypassing you and your commission.

There will be times when you are “up against the clock” and must hurry to dispatch the carrier, but please do yourself a favor and do things in the correct order. You not only risk losing that load, but you risk losing your customer as well. Get the “Load Confirmation Agreement” signed and faxed back to you – Then dispatch the carrier on the load.

After you dispatch the carrier, do not assume that everything is A-OK. You should maintain contact with either the truck driver directly, the agent or dispatch personnel responsible for that carrier. Typically, you would ask the carrier to contact you:

Have you ever heard the term GAP? It stands for Grab A Pen! Each time the carrier contacts you for a check call, Grab A Pen! Make a note of the following:

Your customer is depending on you to know where their freight is and whether or not it’s going to be on time for delivery. And if there is a change in plans, such as a mechanical failure or bad weather conditions, your customer may also need to notify their customer. If the motor carrier does not contact you, you should contact them each day while they are dispatched under your load. When contacting customers and carriers, consider the time zone in which they are located.

NOTE: Always speak professionally. Many truck drivers use recording devices to record their conversations with brokers/agents so they have access to a backup source of dispatch information. It is best to remain professional, even though it seems the language may be a bit lax at times in this industry. You never want to take any chances, getting into a situation that could potentially damage your credibility.

In addition to being a nuisance, motor carrier cancellations cost you time and money. A cancellation is when the carrier has already signed a rate confirmation agreement and agreed to transport your freight, then for whatever reason, chooses not to haul it.

The majority of them will contact you in the event of a mechanical failure or similar situation that might prevent them from fulfilling their obligation. These things can happen, however, you should make a note of these cancellations and append it to their profile in your carrier database. Clearly, if this occurs more than once or twice with the same carrier, you might consider refraining from future use of that carrier.

If a carrier fails to pick-up a load after agreeing to do so, you will have to find another truck to service your customer. If they are not making you money, it’s one thing, if they’re costing you money, it’s another.

Whether you’re booking a load, dispatching or doing carrier check calls, time zones play an important role in your day-to-day operations. When your customer calls you to book a load, ask them for the “local” pick-up time and the “local” delivery appointment time. Local time is the time in the area where the freight will be picked-up or delivered. Be sure to convey the “local time” to the carrier you dispatch on that load.

Time zones are not only critical to the pick-up and delivery appointment times, but also to you as the broker directly. Here’s why: If you are in North Carolina (EST) and your customer is located in Oregon (PST), there is a 3 hour time difference that must be considered when making calls. Just because you wake up “bright eyed and bushy tailed,” ready to go at 7:00AM Eastern Standard Time (EST), does not mean the rest of the country will wake up along with you. Therefore, your customer located in Oregon may not be ready to conduct business until 10:00AM your time. And likewise, brokers, agents and carriers working on the east coast (EST) will not want to take calls at 8:00PM, when it’s just quitting time at 5:00PM on the west coast. You will need to plan ahead for communication needs such as carrier check calls and customer freight inquiries.

Pacific Standard Time (PST) 12:00PM

Mountain Standard Time (MST) 1:00PM

Central Standard Time (CST) 2:00PM

Eastern Standard Time (EST) 3:00PM

Customer freight inquiries are another form of pre-planning used by brokers and agents to manage their time more effectively.

Many shippers find it beneficial to notify their freight broker about upcoming shipments. Some of them send out a fax or e-mail list of their current load requirements the day before. If your customer does not send you a list like this, contact them each day to inquire about loads for the following business day. This type of pre-planning on your end will allow you to post available loads the day before. The objective is to make your phone ring in the morning.

The first two to four hours of your day are the most critical. You can maximize your time by receiving calls and booking loads for the shipments you posted the previous day, rather than spending that time performing freight inquiries. Inquiries can be done in the afternoon when things begin to slow down. Customer freight inquiries should be looked at as another form of time management that can make you money.

As mentioned above, pre-planning is critical to maximizing effectiveness and minimizing costs for carriers but it is equally important for brokers. Similar to a carrier pre-planning loads which are already posted, you as the freight broker can pre-plan loads by matching them with trucks.

You can pre-plan freight by comparing your current carrier delivery locations with your customer freight inquiries. For instance, if Motor Carrier “A” is dispatched under a load for you that is scheduled for delivery in Oklahoma City on Wednesday, you should be cross referencing freight inquiries to see if one of your customers has a load leaving that area.

Search your list. If you discover that one of your customers has a load scheduled for shipment on Wednesday leaving the Oklahoma area, would it not make sense to contact Motor Carrier “A” and pre-plan them under another load? Absolutely, and besides, you’re already “set-up” with that carrier, therefore, most of the paperwork has already been done. In this case, the only form the carrier would need to sign is the Rate Sheet.

In an effort to keep things simple, we’ve compiled a step-by-step guideline to summarize your day-to-day tasks to move freight legally and effectively.

Customer Freight Inquiries: Review your load list or call your customer for load information. Find out where the load is going, how much it weights, and any extra stops, etc. If this is a new customer, check their credit to ensure timely payments.

Rate Quote: Check mileage routes and quote your customer a rate for each load and when they accept it, start looking for available trucks.

Find a Truck: Check the load boards to see if there are any available trucks in that area. Try keep your radius search with 10-15% of the total paid miles.

Post the Load: If no truck is available or willing to haul it, post your freight on the load boards.

Load inquiries: When someone calls on a load, be prepared to give them all of the details about that load (line haul rate, extra stops, etc.).

Load Accepted: When a motor carrier agrees to your rate and terms, you’ll need to get certain documents signed before dispatching a truck.

Motor Carrier Snapshot: Check the profile of the Motor Carrier if you have never worked with that company before. You can do this quickly via the internet.

Broker/Carrier Agreement: If your company has never worked with this carrier you or your broker must fax them a “broker/carrier agreement.” (Remember, this is only done once per carrier)

Rate Confirmation: Once your carrier agreement is in place, you’ll need to fax them a rate confirmation sheet. This is done on EACH load to bind your agreement on THAT particular load.

Dispatch: Once the rate confirmation has been faxed back to you, call and dispatch the motor carrier to go and pick up that load.

Bill of Lading: After the shipment has been delivered, the carrier will send you the original bill of lading with a signature from the consignee. This proves that they received their freight in good repair.

Pay the Carrier: Along with the bill of lading, you will receive an invoice from the carrier as well. Their invoice should match the amount agreed upon in the rate confirmation, less any “quick pay” fees if you decide to offer that option to your carrier.

Invoicing: Now, your brokerage will send this signed bill of lading along with an invoice to your customer for payment, or use the next step and let the factoring company handle the invoicing. DO NOT send an invoice to your customer if you use a factoring service. The factoring company will usually handle all collections.

Factoring: Your carrier will expect a prompt payment (usually less than 30 days) so if you cannot afford to wait 30 – 60 days for your customer to pay you, you may consider paying a factoring company a small percentage of that invoice in order to give you the working capital required to pay the carrier in a timely manner.

Accounts Receivable: When you receive a payment, mark that load number as “received,” either manually using a filing system or using your broker software.

Accounts Payable: When you pay your carrier, log the amount “paid” to the carrier and append it to the appropriate PRO number (load number).

Build Carrier Database: Add the motor carrier to your “list” (your database of carriers). There will be occasions when there are only a few trucks posted on the boards and you’ll need to call down your list of carriers and ask them if they have a truck in the area. If you are using software, this will be done for you during the set-up process.

Many of the steps above can be eliminated. For instance, if you have a good relationship with your shipper and you charge them a flat ‘per mile’ rate, step 2 can be eliminated because they already know what you charge.

If you have a carrier that you’ve previously worked with and he is headed to your area, he may call you for a load, in which case steps 3, 4, 7 and 8 can be eliminated because you’ll already have their information on hand.

If you are an agent and not a broker, all of the steps above regarding contracts or billing may be eliminated because those are your broker’s responsibility. Some brokers may require their agents to handle faxing the “load confirmation” agreements. This is because the carrier is already in their system.

Please, consider using software to manage your records. However, if you choose to manage your records manually, you’ll need to create FIVE filing systems: Freight, Dispatch, Delivered, Invoiced and Paid.

We are aware that some of you may already be motor carriers with your own authority looking to expand your horizons through brokering freight. Combining your carrier business finances with your broker finances is unlawful. The Code of Federal Regulations clearly states:

“Each broker who engages in any other business shall maintain accounts so that the revenues and expenses relating to the brokerage portion of its business are segregated from its other activities.” 49 C.F.R. § 371.13.

Be sure to keep these files separate from business that does not pertain to your brokerage.

Dispatching is a means of customer service. Try to work proficiently using methods such as pre-planning and posting loads the day beforehand. Your objectives should be customer service, time management, and then growth.

Remember, time management is the key, but customer service comes first. Therefore, if you do not manage your time efficiently, you cannot service your customer properly. These objectives should be executed in harmony so that you do not find yourself asking “which one is most important?”

As you begin to build a relationship with your shippers and carriers, your task load will decrease giving you more time to move more freight, establish more customers and ultimately earn more money.

What is a fuel surcharge? A fuel surcharge is intended to compensate carriers and offset the rapidly rising cost of fuel. If fuel prices soared to $7.50 a gallon, it would be extremely difficult for a carrier to haul a load for $1.50 per mile. We’re able to work around this problem by negotiating a fuel surcharge from our customer and passing that money directly to the trucking company to help them cover inflated fuel costs.

How to calculate a fuel surcharge? Trucks average around 5 mpg. Your base fuel price should be between $1.10 and $1.20 (no matter what the current price of fuel is). For this example, we’ll use $1.20 for our base fuel price. Fuel costs over $1.20 per gallon should be divided by 5 (the average mpg for most trucks).

If the current fuel price is $2.50 per gallon, subtract the base price $1.20 and you’re left with $1.30. Now, divide that by the average MPG (5 MPG avg for most trucks) and you’re left with a $0.26 cent fuel surcharge.

Now let’s apply what we’ve learned using a line haul rate of $1.50 per mile.

In this particular case, you would take your line haul rate and append your broker fee of 15% ($1.50 + 15%) for a base rate of $1.73. Then add your fuel surcharge of $0.26 cents per mile for a total rate of $1.99 per mile.

That carrier is now earning $1.76 per mile ($1.50 + $0.26), versus the previous $1.50. While twenty-six cents may not seem like much, to the carrier it means an additional $100 a day to cover fuel costs. Every cent counts in the trucking business, especially to the carrier.

First, calculate your broker fee by adding it to the line haul rate as follows:

Then, calculate the fuel surcharge using the current fuel price where the load originates:

Finally, add the two results together:

If this was part of a double load, multi-stop, or LTL shipment, you would only charge your customer for thier portion of purchased transportation services. Therefore, if load A and load B are loaded onto the same truck and load A is to be transported 500 miles and load B is to be transported an additional 300 miles for a total of 800 miles – you would calculate the fuel surcharge rate proportionately for each portion of the load. Load A would incur a fuel surcharge for 500 miles and load B would incur a fuel surcharge for 800 miles.

A fuel surcharge is based on the national average retail price of diesel fuel for a particular region where the load originates. This average retail price information is collected by the Federal Government’s Energy Information Administration and it is updated every Wednesday.

This information is available by phone: (202)586-6966 or visit their website for current diesel fuel prices at: https://www.eia.gov/petroleum/gasdiesel/

Many freight brokers put their customers on a floating fuel surcharge which is negotiated every 30 days or so. You should try to maintain a flexible relationship with your customer and negotiate fuel charges once a month for the next month’s business.

If you’re able to negotiate a fuel surcharge from your customer, be sure to pass this money onto the carrier. READ THAT AGAIN! Being greedy in this industry can quickly make your business self destruct.

BE SURE TO SEPARATE THIS MONEY ON THE RATE CONFIRMATION SHEET. You are NOT supposed to keep a portion of this money! List the line haul rate, paid miles, tarp pay, extra stops, and fuel surcharge. These things should be itemized on the rate confirmation sheet to avoid any questions about fund disbursement.There is no need to document the fuel surcharge on other shipping documents such as the Bill of Lading. However, it should be clearly defined on the load rate confirmation agreement and the invoice to your customer.

This section should help to clarify exactly what freight factoring is and answer a number of questions regarding how to access enough working capital to get your business off the ground, and do it without a lot of out-of-pocket expense. Before we continue, let’s review the roles of responsibility to ensure your full understanding of the process.

Freight agents coordinate freight and earn a commission on the amount of freight they move. They are not responsible for paying the carriers who haul their loads, nor are they responsible for invoicing or collecting payments from their customers. The financial responsibilities lie in the hands of the broker under which the agent works.

You must understand how important it is for the broker to pay their carriers as soon as possible. This creates a slight complication for many brokers because the carrier who hauled their load expects a prompt payment, usually within 15 – 21 days, 30 days at the very most. The agent who arranged the load also expects to be paid quickly, usually the following week for all loads tendered the previous week.

The problem is, as the broker, you yourself may have to wait 30 days or more (depending on the agreement you have with your customer) before you collect on those invoices. You need the money to pay the carriers and agents before you receive a payment on tendered loads. Where are you going to obtain the necessary working capital?

The most common source of working capital for the transportation industry is by the use of a special financing method known as “factoring.”

Factoring is also called “freight bill factoring,” “invoice factoring,” or “receivables financing.” Freight bill factoring allows brokers and carriers a means by which to “sell” their invoices to a freight bill factoring company for a fee. In return for this service, the factoring company accepts the credit risk of your customer and will advance you the working capital necessary to pay your carriers and agents in a timely manner.

Typically, factoring companies handle all invoicing and collection of payments from your customers and they usually set forth fee schedules based on the amount of volume you factor with them. Generally, the more you factor, the more you save.

When the carrier delivers your load, they will have the consignee (the person/company receiving the freight) sign the bill of lading as “received.” The carrier will then make a copy of the bill of lading for their records and mail you the original copy along with an invoice for the amount in which they agreed to haul the load.

When you receive the original signed bill of lading you will make a copy for your records and then fax or mail the original bill of lading to the factoring company. The factoring company will then advance you a portion of your receivables. They can either pay you directly by loading funds to a Comdata Card (they will issue to you), or they may prefer to wire the funds directly into your checking account via Electronic Funds Transfer EFT, usually within 24 hours from the time they receive a clean (signed) bill of lading.

Factoring is convenient because it reduces your administrative workload, such as invoicing, collection, etc. However, there are two types of factoring contracts and a few things you should be aware of when shopping for freight bill factoring services.

Some freight factoring companies will hold back a portion of your pay until they get paid. This is usually the case with “recourse” factoring agreements. For example: their fee may be 10% of the invoice amount, but they may only advance you 80%, keep their 10% fee and hold the remaining 10% of your money until your customer pays them. In the meantime, they’re charging you interest until your customer pays them.

The longer it takes for your customer to pay up, the more they’ll cut into your 10% holding. Once your customer pays the bill, they will release your remaining 10%, less any finance charges incurred while waiting for your customer to pay.

Non-Recourse factoring contracts usually operate on a fixed-rate commission percentage and DO NOT hold a portion of your money. “Non-recourse” simply means that if your customer fails to pay them, the factoring company agrees not to take any recourse against you. For example: a non-recourse factoring company may advance up to 95% of your invoice and keep 5% for doing so.

Non-Recourse factoring is the only way to go! I would never recommend signing a “recourse” factoring agreement. You’re already paying them a fee for their service. Non-Recourse factoring fees typically range between 5 and 10%. If you use non-recourse factoring for all of your invoices, you can easily calculate your net profit on each load without dealing with the problematic issue of an escrow holding account.

It may seem ludicrous to give up 5% to 10% of your invoice amount but you must remember – it is a cost of doing business. Also, non-recourse means YOU ARE PAID, weather or not your customer pays!

One way to recover the cost of freight bill factoring is to offer a “quick pay” option to your carriers. If they signed your broker/carrier agreement, they are aware it could take up to 30 days before they receive a check from you. Motor carriers usually cannot afford to wait 30 days for their money unless it is a financially strong and sizable carrier relying on their own assets or line of credit in which to operate from.

Smaller carriers on the other hand (which make up most of the industry) will often agree to a nominal fee if you pay them quickly (within 7 days or so). Usually 2% to 5% of the invoice amount is fair and affordable for most carriers. The faster you pay them, the more you can charge. And likewise, the slower your “quick pay” is, the less you should charge. Remember, they are paying for the convenience of fast settlements.

Once you receive a signed bill of lading, mail or fax the original copy to the factoring company and send the carrier a check for the invoice amount, less the fee you keep for offering them the convenience of “quick pay”. You can also (at your discretion) charge them the cost of overnight mail, FedEx, or UPS in addition to their quick pay discount rate. This is usually between $10 and $15.

I would not recommend charging more than 5% for quick pay. If your factoring service is charging you a flat fee of 5% and your carrier agreed to a quick pay settlement fee of 3%, you are actually paying just 2% to get your money without waiting 30 days or more for your customer to pay you! Not bad. Most carriers will agree to 3 or 4 % but they’re likely to hesitate at 5%. So unless it’s an expensive invoice, commonly found with overdimensional loads, try to keep your quick pay fee below 5%.

Factoring Fee Example: you accept a load from your customer and plan to bill them $2,172 for this particular load traveling 1200 miles @ $1.81 per mile.

The factoring fee comes out of your profit – your broker fee! If you do not recover some of this expense, your profit would be reduced by $108.60, leaving you a commission of $217.20.

IMPORTANT: You may be able to recover a portion of that fee by charging the carrier a 3% quick pay fee. You are charging them 3% of what you pay them, NOT 3% of the amount you’ll be invoicing your customer. In this case, 3% of the carrier’s pay ($1,846.20) is $55.39. Simply deduct this amount and make a note of the quick pay fee when you mail them a check. Similar to a fuel surcharge, you should make a note of this fee. If you do not, they may not understand why the amount you paid them differs from the amount you agreed upon in your rate confirmation agreement when they agreed to haul the load.

Your fee: $325.80 – Factoring fee $108.60 + Quick pay charge $55.39 = $272.59

On this particular load, you ended up with approximately 12.5% of the total line haul rate, after expenses and miscellaneous charges. Try to maintain a standard of at least 10%, after factoring fees. Not all carries will pay for quick pay. But those that do can certainly help you reach for that 10% benchmark.

Factoring companies and lenders are required by law to perform a UCC Filing (Uniform Commercial Code Filings) when you sign their contract. This basically tells other factoring companies and financial institutions that you have a financial contract with them.

It is intended to prevent money laundering and fraud. For example, it could be used to keep you honest so that you won’t be tempted to factor the same invoice with 10 companies, only to take your money and run.

Experian offers UCC filing reports and has provided a sample of what a UCC filing looks like located http://www.experian.com/business/ucc_uniform_commercial_code_sample.html.

IMPORTANT: As with any financial agreement, please review your factoring contract carefully! Once a UCC is filed, no other factoring companies will touch you until it is released! The duration is deemed by your contract agreement or a letter of release.

Factoring is the obvious choice for new freight brokers with limited working capital. However, there will be times when you choose to extend a line of credit for a select customer, one that pays quickly, or one who pays well regardless of the rate. Although these customers are few and far between, it would not make sense to give a factoring company 5% to 10% of the invoice for a customer who pays within 10-14 days.

Factoring some or all of your customers’ invoices not only allows you to obtain the working capital necessary to pay carriers quickly but it also helps to maintain a good broker credit rating. Some brokers have argued that the cost of factoring is nominal compared to the possible consequences of extending credit to poor paying customers.

Advanced Business Capital specializes in factoring services tailored for brokers and carriers. You’ll enjoy same-day funding and an easy online application process.

www.cash4truckers.com

The freight broker business requires you to move money in and out of your accounts regularly. It is critical that you know how and when to move that money, how to retain as much of your commission as possible, and how to recover some of the fees you’ll incur while moving these funds around. There are numerous ways to send and receive money but before we get into how you’ll do this, let’s discuss how the current system came into action and why it’s important to play along like everyone else.

This is not simply a matter of “doing what everyone else is doing.” It’s a matter of why you should, and what might happen if you don’t.

With the United States experiencing phenomenal growth, the transportation industry, and more specifically the freight broker business cannot afford to lag behind technology and innovative ideas. In addition, with fuel prices elevating to ridiculous levels and motor carrier’s operating on marginal profit lines, a 120 day wait to collect receivables is simply not an option for small carriers today, which by the way, make up the majority of our nations carrier base. Such spikes in fuel prices paralleled with inflation have created a corresponding necessity to move funds faster and more efficiently than ever before.

Just a few short years ago, carriers would enter into a load agreement with you and were forced to wait several weeks or months to collect their money. That’s not the case today. Back then, financial organizations began to recognize the time lag in the transportation’s economic system. They also saw this time lag as an opportunity to earn enormous returns on their technological ability to move funds quickly.

Following the construction of our interstate highway system, the transportation industry became vast by the mid 1970’s, and was projected to become a colossal economic vein by the new millennium. Their projection was dead on! Financial groups could see this coming over 30 years ago, projected its growth, and had the ability to solve a major industry problem. As a result of federal trade and banking technology, freight brokers and motor carriers today enjoy streamlined communication, electronic funds transfer, and all-purpose credit cards designed specifically around the logistics model. Without the intervention from these banking systems, our transportation infrastructure could not be where it is today.

While some freight brokers still “snail-mail” checks the conventional way, an increasing number of them are taking advantage of moving money the new way, the electronic way. In some cases, technological advancements that take place in the rest of the industry can virtually force you into doing business differently than you would prefer to. However, these changes are typically seen industry-wide so it only makes sense to “do what everyone else is doing.” More importantly, why should you do so? Because the speed in which you move your money directly affects other aspects of your freight broker business such as factoring receivables, paying carriers on time, and maintaining a positive credit rating.

The synopsis here is that if you cannot move money quickly in today’s transportation game, you won’t be in the freight broker business for very long. We would like to introduce these systems to you, touch base on how they work and explain software integration which can save you a lot of time and put more profit in your pocket.

While EFS and T-Check are primarily geared to the needs of motor carrier fleet fueling technology and driver payments, Comdata’s “Comchek” system provides a slightly broader range of tools found more appealing by most freight brokers and owner-operators.

Truck drivers, owner-operators, motor carriers, and freight brokers all need the ability to move money to and from one another quickly. Drivers need fuel and toll money and motor carriers need the ability to supply them with it. Motor carriers may also need to give the truck driver a cash advance or payroll settlement. Freight brokers may choose to offer a cash advance to motor carriers to help them cover the cost of fuel while under their dispatch. And now, factoring companies have jumped aboard these payment systems by offering speedy access to settlement funds via payment cards which can be extremely beneficial to you as the broker.

Funds are typically transferred two ways using these payment systems:

Truck drivers generally refer to their payment card as a “fuel card” because that is primarily how most of them use it. Although to the company they work for, it is considered the “life blood” of their business. These cards act much like a fuel credit card, only the motor carrier has greater financial control including the freedom to debit or credit each cardholders account.

While payment cards are not the only way to transfer funds using these systems, the card with the widest fuel network is often the card of choice. Why? Because, in order for a payment system to market its services it must trench its way into the hands of the truck driver who is in control of transporting the freight. That means convincing the fuel supply chain that it can meet the needs of today’s driver, carrier and the fuel network to whom it is trying to market services. This is important because company truck drivers can only fuel where their card is accepted. This is known as their “fuel network.”

Fuel networks are not only important to carriers, but also to you as the freight broker. Here’s why: If you offer quick pay settlements to your carriers for say, 3% of the gross line haul rate, you can eliminate the process of cutting paper checks and simply login to your payment system, obtain an “express code” for a specified amount of money (minus your 3% quick-pay fee) and give the carrier the express code number over the phone.

Express codes are unique and lengthy numerical codes issued by your payment system and assigned to your payment account upon issuance. The dollar amount you enter is appended to the express code within the system, however, the amount is not revealed to anyone other than the recipient. With this code, the driver can walk into any truck stop in your payment system network, give the clerk the express code and receive cash based on the balance proportionate to that code. Very convenient.

Express code: 69736293859487378932459

Amount: $2,500.00

If you issue an express code to a driver/carrier and he/she chooses not to cash the entire amount, the balance will remain attached to their express code. Therefore, the recipient can use the same express code multiple times until the funds are extinguished.

What good is a paper check going to do a “solo” motor carrier if it is sitting in their mailbox 2000 miles away? Sure, that’s fine if you’re dealing with a large carrier with an administrative staff who can make deposits and transfer funds for them, but for a solo owner-operator, quick pay settlements will keep them happy and coming back for more of your freight.

Utilizing such financial pragmatism will make your freight brokerage more appealing to carriers because they know you will pay them fast and conveniently in a manner which is accessible to them while they’re on the road. If you can pay them fast, they’ll probably remember you. If you pay them slow, they’ll definitely remember you!

Another approach to eliminate the hassle of handling paper and mailing checks is to offer settlements via Automated Clearing House. ACH processing is most commonly known for direct-deposit payroll payments, but it can also be used for compensating motor carriers and other vendors with whom you do business.

ACH will enable you to initiate debit transfers to collect invoices from your customer. This gives your customer another convenient payment option to ensure that you receive your money quickly, but more importantly, as agreed!

ACH credits and debits are handled in batch and processed by Federal Reserve software known as the FedACH. The ACH utilizes the Federal Reserve Banking system to transfer money to and from checking and savings accounts within the U.S. only. Therefore, whether you process an ACH transaction or an electronic check (e-check), funds are generally transferred smoothly into your checking account within 3-4 days using the highest encryption available.

Each banking institution is issued a routing number by the Federal Reserve Banking system. When you process an ACH transaction, either debit or credit, you’ll need the routing number and the checking/savings account number of the other party. The routing number is the first set of numbers at the bottom of the check. The second set of numbers on the bottom of the check is the account number. To ensure accurate transactions, have your customer and carriers send you a voided check when setting them up for ACH.

If you can negotiate your customer into funding your services using ACH, you can initiate payments for invoices and have them deposited directly into your business checking account. This is a fantastic time-saver that will allow you to focus your priorities on arranging freight, rather than collecting unpaid invoices.

Another benefit of using ACH is that you do not need to factor invoices for customers who agree to ACH payments. There is no need to pay a factoring company 5% of your receivables invoice if you can be paid electronically within a few days.

If you would like to explore the possibility of applying the ACH payment method to your business, we would like to recommend the following reputable resources:

www.PayByCheck.com

800-436-1710

www.PaySimple.com

800-466-0992

A merchant is a business owner who accepts credit card payments for their goods or services. A merchant account is a special bank account tailored specifically for this process. Merchant accounts must be applied for through a merchant processing bank capable of handling credit card transactions. In this case, you, the freight broker, would be the merchant applying for the merchant bank account so that you may process credit card transactions for your broker services.

When you apply for a merchant account, the merchant processing bank will categorize your business. Merchants providing services such as freight broker services are typically referred to as “high-risk” accounts. High-risk accounts may have a cap on the allowable amount per transaction. Such accounts may also be required to raise their monetary limits in succession. Therefore, the merchant processor bank may require you to process a certain number of less expensive transactions before they raise your monetary limit. For example, you might only be able to process up to $500 per transaction for say, 3 months, then you may need to request a monetary limit increase to $1,500 or more so that you may process more costly freight.

When you initiate a transaction, the consumer’s card is processed through your merchant processing bank (this is different from your regular bank) where the funds are debited immediately from the consumers account. Then, your merchant processing bank will transfer these funds into your business checking account electronically. Typically, it takes 3-5 business days for your checking account to reflect the credit card transaction.

Each time a transaction is made, your merchant bank (the bank processing the credit card payment) will charge you a discount rate and a standard transaction fee. Discount rates vary in cost and are based on a percentage of the sale. Generally, it is less than 2% of the sale. Standard transaction fees are consistent, such as $0.20 per transaction.

If your customer uses a credit card to pay for a $1,500 load you brokered for them, you’ll pay the merchant bank a discount rate, such as 2%, plus a $0.20 transaction fee. In this case, the cost you would incur to make this transaction would be $30.20. That’s a small price to pay for the piece of mind and security of knowing you won’t have to chase your money!

With the exception of Visa and MasterCard, each credit card mogul has their own set of fees and progression rates. This is in addition to merchant processing bank fees. For example, American Express may charge you a small monthly fee, where as, Discover Card applies their own fee which is based on the sale percentage as well. As a rule, most of them will decrease their discount rate according to the volume of transactions you process.

Additionally, each credit card company will require a separate merchant account number. Most merchant banks will supply you with one merchant account number for both Visa and MasterCard. Other cards such as American Express and Discover require a separate merchant account number which is issued from them directly upon approval of your application.

As you can see, choosing which cards you’ll accept requires careful consideration on your part, especially when you’re dealing with such large amounts of money. For instance if your merchant bank processor charges you a discount rate of 2.5%, plus a $0.20 transaction fee, and the card issuer charges you 1.5% plus a $0.10 transaction fee, your combined fees now total 4%, plus $0.30 per transaction!

Again, you must take into consideration what it will cost you to collect invoices conventionally using paper checks and financing the working capital necessary to operate. More often than not, the expense of operating conventionally will cost you more money, and certainly take more time.

When you setup your merchant account, your merchant processing bank will provide you with a couple of different options for making transactions. One of your options will be a POS (Point of Sale) card terminal and the other will be a Virtual Terminal.

POS terminals are debit and credit card readers where the card must be physically present at the time of the sale (like the ones you would use in stores such as Walmart, etc). A virtual terminal is a web-based credit card processing terminal whereby you can login to your merchant account online and enter the customer’s name, credit card type, card number, expiration date and CVV code.

CVV (Credit card Validation Value) codes are 3 or 4 digit codes used as an additional security measure to ensure that the payee has physical possession of the card at the time of the transaction. CVV codes are printed on the rear of Visa, MasterCard and Discover Cards, and on the front of American Express Cards. If the card is not being physically scanned using a POS terminal, the CVV code will be required when using a web-based Virtual Terminal online.

The beauty of today’s software and programming languages are that they allow us to take advantage of the ability to pass data and other information from one computer system to another. Passing is when a string of data is queried from one system by another, using hard code parameters to transfer alpha, numeric and code values. This allows each system to operate independently using its own server, software, and programming language, only it has the flexibility to render data from other independent computer systems. Passing, is basically a communication bridge between two computer systems.

Why is this important? Because when you begin brokering freight on a more intense level, you will not have the time to enter and re-enter data repeatedly. It eliminates the redundancy of re-entering the same information. You’ll be too busy for that.

If you decide (and it is recommended that you do) to create an account with one of the various payment systems such as EFS, T-Check or ComChek, you should have a software system capable of passing data. This way, if for whatever reason you need to approve a cash advance to a motor carrier, your payment system can pass that information to your freight broker software, eliminating the chance for mistakes or failure to enter data manually.

This way, when you open your software and approve a cash advance, your broker software will automatically login to your payment system account and log the transaction for you. The payment system’s computer will then pass the express code back to your software system where it is easily accessible to convey to the carrier. Additionally, your software will make a note of this “cash advance” (depending on your software) and automatically deduct the advanced amount from the load number associated with the carrier’s pay. As a result, when you initiate a payment to the motor carrier for that load, the cash advance amount will have already been deducted from the carrier’s settlement.

You should now see that passing data from your payment system to your software system can save you a lot of work and double data entries. Freight broker software is an essential, core management piece of your business. Simply managing and dispatching your freight is one thing, managing your accounts payable (A/P) and accounts receivable (A/R) is another, however, they must be managed in harmony to synchronize your records. When you choose your software, be sure it can be integrated with your payment system. It’s an excellent time saving utility to take advantage of!

On your end, the setup procedure should be very simple and strait forward. It is likely that your software system will have the option for you to simply enter your payment system user ID and password so that the software can access your payment account on your behalf. You should only be required to enter that information into the software once. Important: If you change your user ID and password in your payment system, you’ll need to also change it in your broker management software.

Freight brokers planning to hire and leverage the use of independent agents should consider payment cards and ACH as the most convenient methods for agent compensation. While ACH is fantastic for collecting funds from customers and compensating motor carriers quickly, payment cards provide a more all-in-one system.

Payment systems such as Comdata’s ComChek system offer the account holder (you) the ability to order multiple payment cards. Therefore, if you hire a new agent, you can easily login to your ComCheck account and order a payment card for that agent. If you pay your agents weekly, you can tally their commission for that week, log into your ComCheck account and transfer funds from your account to their account. Funds are made available to your agent immediately.

Once funds have been transferred, agents can leave the balance on their card or call the number on the back of their card and transfer that money into their personal checking account. This type of flexibility and fast pay will keep your agents happy.

If you have carriers who haul for you regularly, you should consider offering this option to them as well. Simply contact your payment system and order a pay card for each carrier. Doing so makes it fast and easy to pay your carriers. It also makes it easy for them to agree to quick pay settlements so that you can recover your transfer fees.

In order to capture a larger piece of the factoring pie, some factoring companies have also adopted the payment card system. While the original intention was aimed at convenience for motor carriers, some freight brokers who factor invoices have also expressed interest in receiving settlements via cards.

This works well for small carriers who factor their loads but it creates an additional step for brokers. Motor carriers can factor a Bill of Lading, have the money credited to their payment card and use it for purchasing fuel, etc. This method acts as a stand-alone, all-in-one card for them.

For brokers on the other hand, if your factoring company issues you a ComChek card for factoring settlements, you’ll still need to transfer those funds into your bank account and then into your primary ComChek account so that you can disperse payments to your freight agents and select carriers. That is an unnecessary step that can be avoided by having the factoring company deposit your settlements directly into your checking account. The time frame for receiving settlements should be about the same, and should you decide to fund your primary ComChek account, you’ll only need to transfer that money once.

Another benefit to having the factoring company deposit settlements into your business checking account is that all debits and credits are accounted for neatly in one place. This is not only advantageous for bookkeeping, but also in instances where you must quickly produce profit and loss statements.

If you deposit and withdraw funds using multiple systems, you’ll have to keep records in multiple places. Doing so will create a lot of confusion when trying to synchronize your financial data. However, if you always deposit receivables into the same account, you can easily withdraw, record, and track your expenses. This way, whether you factor your receivables, process credit card transactions or receive payments via ACH, all of your income can be easily accounted for using your monthly bank statement.

Financial organizations earn their money by moving money from one place to another. Each time you move money or make a transaction, it will probably cost you. So whether you factor an invoice or collect a customer payment via credit card, you’re going to pay a fee for that convenience. You can offset some of those fees by passing them onto your carriers by offering them “quick pay settlements.”

You cannot always recover all of your fees and other times you can recover more than what you spent. The key is to equalize the overall average of the fees you incur.

For example: You factor a $2,000 invoice for load “A” and incur a $100 (5%) fee from the factoring company. If you offer your carrier quick pay for 3% ($60) you would have recovered over half of the fee you incurred from the factoring company, leaving you an expense of just $40.00.

On the other hand, if your customer is able to pay you for that $2,000 load using their credit card and your merchant charges you a discount rate of 2% ($40) you can still charge your carrier 3% ($60) for quick pay and you profit $20.

Payment options for collecting receivables from your customer:

Payment options for paying motor carriers:

Payment options for paying your agents:

There are numerous ways to transfer funds electronically. Taking advantage of these systems will make your job easier and build credibility with the motor carriers that transport your freight. The end result is that your business credit rating will rise, making it easier to arrange freight with carriers whom you’ve never worked with before. When they realize you pay quickly and conveniently as agreed, they’ll enjoy working with you. This will eventually lead to an ever growing database of dependable motor carriers.

A vital part of your success as a freight broker depends on your broker credit rating and the credit worthiness of your customers. No one wants to invest time and/or money, and not be paid or receive services. Agents on the other hand, are at the mercy of their parent broker (the entity under contractual agreement with the agent’s customers).

Both brokers and agents share a common interest in that they both need customers who pay their bills. But even when a customer faithfully meets their obligations, there are underlying issues that may sometimes create discord within the broker-agent relationship.

As an agent, you are at the mercy of the line of credit issued to your customer by your broker. You must be sure that you do not exceed that amount in freight charges. If you do, and then your customer defaults, that broker may look to you for compensation.

When you have a customer with a lot of freight and your broker has not issued that customer enough credit to fulfill their shipping needs, you should do one of two things:

Brokers are charged with the responsibility of carefully deciding the credit worthiness of potential customers. This is extremely important because you, the broker, are often required to pay the motor carrier before collecting from your customer. By doing so, you can put a lot of money at risk in a short period of time.

You cannot afford to get burned by some “here-today-gone-tomorrow” operation. Therefore, freight brokers should only extend credit to established businesses with whom they feel comfortable. Failure to exercise diligence in this decision can have a negative impact on your business credit rating, especially if you do are not paid soon enough to pay your carriers in a timely fashion.

A negative broker credit rating will affect your ability to move loads. And if you cannot move loads due to a poor credit rating, it will affect all of your customers, not just the one who fails to pay you as agreed. For this reason, many brokers choose to use non-recourse factoring services to compliment the credit they extend to their customers.

Prior to extending a line of credit to any customer, no matter how big, established, or professional they appear, you still need to be sure they are able to meet their financial obligations. You should begin by checking their obligatory history from two angles:

Once you have performed a credit inquiry (sources listed in the next section), the amount of credit you extend is up to you. Most brokers try to find a balance based on the customer’s needs, load availability and the credit worthiness of that customer.

For example: Shipper “A” might supply you with 100 loads a month but has an unfavorable credit rating and mediocre references while shipper “B” might only supply you with 30 loads per month, yet has an outstanding credit rating and great references. After all, what good will a hundred loads do for you if you’re unable to collect the freight charges? The options must be carefully weighed out with respect to each potential customer.

You should not start off with a large customer by accepting all of their freight. Allow other brokers to share in the risk of extending credit to that company. Typically, you would ask what their monthly volume requirement is and accept only 25-30% of their freight. Though it’s not desirable to turn down freight, it is important to be careful and not over-extend yourself by putting too much faith in a customer you know little about.

If possible, start out with a percentage of their freight, and take on more as you feel comfortable, and if you experience difficulty collecting on invoices, you will likely need to re-examine your business relationship. In the rare case of those accounts which are extremely difficult to collect on, you may need to demand prepayments as a condition before moving loads for them in the future. Prepayments should not just be considered a last resort. Anytime you can collect in advance, it is advisable.

Similar to consumer credit ratings, business credit ratings are compiled from many resources including D&B, Experian Business, TransUnion, BusinessCreditUSA, and Equifax Business. D&B differs in that it prides itself on being tailored specifically for businesses.

As a new broker, you may consider applying for a DUNS number (Data Universal Numbering System) at the D&B website below. They will issue you a DUNS number for free, however, you will not have a credit rating with them until someone reports your credit to them or you purchase Credit Builder.

Credit Builder is a service offered by D&B that allows new and existing businesses to establish a credit rating with them. This is a “fee service” accomplished by your supplying business credit references. Once they validate your credit references, they will update/establish your D&B credit rating. The references you supply are up to you but remember, they must be in your business name.

A DUNS number is also required to do business with the U.S. Government. Therefore, if you plan to seek military freight, now or in the future, you will need to obtain a DUNS number. Also, if you plan to target large accounts, you should consider taking advantage of D&B’s Credit Builder.

http://www.dnb.com/us/

D&B caters to a variety of small businesses and while their service is preferred by the U.S.Government, it is not geared specifically for the transportation industry. When you post a load on a load board, your broker credit rating shows next to your post. If that score is too low, carriers may be reluctant to call you, making it difficult to move your loads. Your rating may appear as N/A (not applicable) until you establish a credit rating.

Motor carriers often rely on the credit ratings supplied by the load boards. However, the load boards merely parse that information from third party servers such as TransCredit. As of this writing, TransCredit supplies most of the online freight matching load boards with broker credit ratings. They pull this data from various resources, integrate their own grade scheme and supply the load boards with the most accurate information possible. It is likely that one of those resources is D&B. You should now be able to see the benefit of utilizing D&B’s Credit Builder to establish a business credit rating.

Please keep in mind that TransCredit is not designed to supply brokers with credit ratings on shippers, manufacturers or other business entities. They cater to the needs of the carriers who will be researching your credit worthiness prior to hauling your freight.

Learn More About TransCredit Services.

www.TransCredit.com

To inquire about the credit rating of a potential customer, you can establish accounts with most of the major credit bureaus.

TransUnion – http://www.transunion.com/corporate/business/business.page

Experian Business – http://www.experian.com/business/bcr.html

Equifax Biz Solution – http://www.equifax.com/commercial/en_us

Dun & Bradstreet – http://www.dnb.com/us/

Unlike consumer credit ratings, business credit is not always reported. In fact, depending on whom you do business with, and as long as you pay your bills, there is no need for them to report your credit and likewise for other businesses as well. For this reason, reports you receive about potential customers may be out of date or simply inaccurate due to the fact that not all businesses report to the bureaus. In fact, most industrial organizations do not. As a result, you must rely partly on the references supplied by your customer.

As a general rule of thumb, the business references you call should have at least 12 months of activity. It would be extremely difficult to measure the consistency of a potential customer based on 2 months of service. If your customer has a 12 month history with the reference they supplied to you, chances are they pay their bills on time. If they supply you with one or two short-term references, there’s no need to necessarily discard their credibility, but it is better if most of their references come from seasoned accounts with a minimum of 12 months.

When inquiring about the credit worthiness of large or corporate customer accounts with the intention of extending credit, it is advisable to secure a financial statement or letter of credit from their bank. It is not likely that your customer can obtain a letter of credit from their bank without first providing that institution with the proper documentation and IRS Tax returns to support its ability to meet their obligations. Therefore, a letter of credit is the preferred method used to research these accounts.

Using a progressive format, you may set limits based on your review. However, remember that if you do not extend enough credit, your customer may become irritated and dissolve your relationship entirely. Extend enough to service them, but not enough to disservice yourself. This can usually be resolved with “terms” rather than “credit limits.”

For example, you can extend $XXXX.xx amount of credit providing you are paid within 14 days from the date of your invoice. The customer is able to achieve the limit they desire while you achieve the terms you need. The only inconvenience here is that the customer will have to pay you sooner in the beginning. As time goes on, and after they prove themselves, you can either increase their credit limit or increase their terms to 21 days but no more than 30.

Keep in mind, non-recourse factoring allows you to skirt the issue of extending credit. The only provision most factoring companies have is that once you begin factoring with a company, you continue to do so rather than factoring “sometimes” and invoicing other times. The reason for this is not to bind you to factoring all of your loads but to eliminate confusion when they proceed to invoice your customer. This helps keep the process consistent and reduces the risk of error. If you have a customer who pays quickly and you choose not to factor their freight, it is recommended that you continue to invoice them yourself.

It only takes a few minutes of your time and a few dollars to inquire about a potential customer’s credit rating, and trust me, it’s not only worth it, but it’s imperative to find out who you’re really doing business with before you invest a LOT of time and many more dollars. Just imagine paying a carrier $2,500 in a timely manner, yet you’re unable to collect the $3,000 in freight charges from your customer. Ouch.

Result: You not only lose your $500 profit, but you’ve already paid the carrier who hauled the load! Be smart! Check the credit of new and potential customers and pay your carriers on time to prevent an unfavorable credit rating from hindering your brokerage and your ability to move freight. Again, it is a cost of doing business, and one that is absolutely well worth it.

In essence, there are four types of brokering, and although they are executed similarly, it is “how” they are employed that may distinguish “when” there is a difference between them. The four types of brokering are as follows:

Standard brokering is the norm for today’s motor freight property broker. This form of brokering is simply a form of mediation where the broker (you) arrange shipments directly for your own customers. Your customer pays you. You then pay the motor carrier who hauls the load and earn a commission for doing so.

Double Brokering is initiated when the original broker enters into an agreement with a second broker to coordinate the transportation of a shipment.

Surprisingly, yes. However, double brokering opens the door to immeasurable legal complexities that are extremely difficult to unravel, even for the most experienced transportation attorneys.

The first form of Double Brokering has become common practice for new brokers. Some new brokers find it difficult to build a customer base on their own. As a result, they scour the Internet load boards and accept loads from other brokers, and then they find a carrier to transport it. Although new brokers are not the only ones doing this, it is becoming an increasingly popular practice among them.

Another form of double brokering resides at the carrier level. Many motor carriers also have broker authority. This can present a problem if their Motor Carrier Authority and Broker Authority are issued to the same MC number.

Setbacks can arise when something goes wrong in the paperwork chain, such as when someone chooses not to pay or is forced to file a claim. Let’s take a look at a couple of major setbacks you might encounter while double brokering.

Example I: You are a broker and you accept a load from another broker who accepted a load from ABC Shipping. ABC Shipping defaulted and became unable to pay the broker you received the load from. Naturally, that broker cannot afford to pay you if the shipper does not pay them. Consequentially, you cannot afford to pay the carrier you hired to haul the load.

Review I: You have no binding relationship with that shipper. Remember, your agreement/contract is with the original broker. His contract is with ABC Shipping. However, you do have a contract and financial obligation to pay the motor carrier who transported that load regardless if you are paid or not.

Example II: You accept a load directly from your shipper. You double brokered that load to another broker. That broker hired Lazy Trucking, inc. to haul that load. During transit, Lazy Trucking was involved in an accident destroying the entire shipment. Unfortunately, Lazy Trucking failed to mail off his insurance payment. As a result, their policy lapsed and to make matters even more interesting, the broker you hired to coordinate the load did not have a Contingent Cargo Liability policy, which left your shipper completely unprotected.

Review II: The broker you hired to find a carrier failed to check for an updated insurance certificate on Lazy Trucking, Inc. You were completely out of touch with the carrier who was contracted to haul that load. Naturally, your customer needs a settlement for their loss. But neither the broker or the carrier was insured at the time of the accident. Since the customer’s shipping agreement was with you, they will expect you to cover their loss.

By now, you understand the degree of risk involved with double brokering. Believe it or not, things can get even worse, especially if you factored the load!

Unlike the scenario in Example II, the shipment in Example I was safely delivered to the consignee. The motor carrier then mailed you a clean Bill of Lading signed by the consignee stating the load arrived in good repair. You need the working capital to pay the carrier so you decide to factor this invoice. The factoring company deposits the money into your account and you immediately pay the carrier who transported the load.

That was easy money, right? Not so fast! The factoring company had a small detail located in the “fine print” where you agreed to pay them back if your customer (the primary broker) failed to pay them. Likewise, how can he pay your factoring company when his customer failed to pay him? Not only did you lose the money to the carrier, YOU NOW OWE THE FACTORING COMPANY AS WELL.

Another risk associated with double brokering is Back-end Solicitations. As a broker, you work hard to build and maintain a solid customer base. By double brokering your loads, you open the gates for other brokers to solicit your customers.

Whether or not they agreed to your Back-end Solicitation Agreement (which should be part of your setup packet), some brokers will still try to steel your customers hope you do not find out about it. Back-end Solicitation violations are rarely discovered. This violation, gone undetected, could mean thousands of dollars in lost revenue.

Co-Brokering and Cross Border Brokering are also forms of double brokering. However, they are actually terms adopted by freight brokers who preferred not to use terminology such as “double brokering” which might hinder their objectives.

Co-Brokering and Cross Border Brokering is often initiated due to the “authority” of another broker to accomplish a specific task. It has been argued that the only issue separating these from “double brokering” is the awareness of the parties involved.

While the majority of your business should be standard brokering, occasionally, your customer may have a unique requirement that you are unable to broker without the proper authority. Such requirements might include warehousing or shipments to Mexico.

In the case of warehousing, you would need to establish a contractual relationship with a Freight Forwarder (FF) who has the “authority” to broker and take physical possession of that shipment. You would not use a common or contract carrier because a carrier does not have the authority to take physical possession of freight. However, you could hire a carrier to transport the load to the Freight Forwarder’s warehouse facility.

The same would hold true if your customer had a shipment being transported to Mexico. If you decided to accept the load, you would need to establish a contractual relationship with a Mexico or U.S. based carrier with the authority to operate beyond authorized commercial zones on the U.S. Mexico Border. Mexican importation requirements are few and are typically handled by transporting the load to the border, where it is dropped at a holding facility and then transported to the destination by Mexican carriers.

The best way to eradicate the issue of double brokering is to prevent it. Whether you are the primary broker or the secondary broker, the risks are apparent (as mentioned in the examples above) and certainly not worth the loss of time, money and valuable customers.

You should prevent yourself from becoming a secondary broker by building your own customer base. This way, your business exists independently by working directly with shippers. Another way to protect yourself is to clarify, both verbally and in your written agreement, that a CARRIER may only accept loads from you under the status of “Motor Carrier.”

If you find yourself in a position where Co-Brokering or Cross Border Brokering is eminent, you will have to make a choice whether or not to accept that load. If you are uncomfortable with it, the obvious choice would be to decline it. However, if you ever need to decline a load due to authority restrictions, be sure to make your customer aware of your reason so it is not misinterpreted as a “service” issue on your part.

One final consideration that should be addressed is contingent cargo liability insurance. If you have it or feel the need to obtain it, be sure to review your policy carefully. Some insurance underwriters have found it too expensive and time consuming to investigate WHO is liable. Therefore, co-brokering, double brokering or similar act may not be covered in the language of your policy.

Regardless of how you choose to run your business, absolute 100% protection from liability cannot be guaranteed. However, you can operate your business in a manner that will eliminate unnecessary “middle men” from the equation. Over the long term, you will decrease room for error and increase room for profit.

Double loads become possible when there are two or more small loads that must be transported to the same place or proximity, either near or in route to the destination. Booking a double load is not really a matter of necessity, but rather a chance for you to earn greater returns. Capturing the opportunity to book a double load is rare, and in most cases, they become available with open freight trailers such as a flatbed, stepdeck, etc.

It has been argued that a double load is nothing more than booking two Less Than Truckload (LTL) shipments transported on the same truck. However, what it really comes down to is the ability to identify an opportunity.

A “Double Load” should not be confused with “Double Brokering.” Although they sound similar, they remain unrelated in terms of definition. Double brokering occurs when two brokers enter into a contract. A “Double Load” occurs when one broker moves two loads on one truck or some other load variation such as three loads on two trucks.

In order to identify an opportunity to book a double load you should have ample knowledge about the commodity being shipped. You’ll need to be familiar with the freight in order to identify small, partial and irregular loads that would otherwise be shipped as a Full Truck Load (FTL). The recognition process requires familiarity with the weight, dimensions and trailer requirements of the loads being considered.

As long as each piece of freight is within the standard legal dimensions, the weight of a shipment is the primary concern. The second challenge you’ll have is locating a truck with a trailer capable of hauling the combined shipment as one load. The third thing you would consider is the handling requirements of the shipment.

Obviously, you would not try to load a 15,000 pound, 30′ steel beam into a dry van or refrigerated trailer when the only access is at the rear of the trailer. Clearly, the beam must be loaded from the side, onto a fladbed, stepdeck or other open trailer.

You will also need to confirm that the shipment you intend to merge does not have a combined weight in excess of the motor carrier’s hauling capacity. Remember, most trucks have a load capacity of 45,000 to 48,000 lbs depending on the tare weight (empty weight) of their unit.

Another issue likely to surface is the length of the combined shipment. While many flatbed trailers are 48′ long, the number of 53′ flatbeds and 53′ stepdecks available is increasing daily. Similar to the weight issues, you cannot expect to load a truck with a combined length in excess of the motor carrier’s hauling capacity. A 20 foot load and a 30 foot load would total 50 feet of deck space on the trailer. However, two 30 foot shipments would total 60 feet, which would exceed the legal length of virtually all carriers. In some cases, carriers may allow a slight overhang (12-18 inches or so) at the front or rear of the trailer.

Distinguishing a double load from an LTL load begins first with origin, destination, and timeline similarities. Does the load pick up or deliver to points close to the other load? Are loading times flexible enough to make room for the other loads delivery times? If so, the next things to examine are weight and load dimension.

If you have a flatbed load such as a steel plate 40 feet long, 8 feet wide and 1/4″ thick that weighs 9,500 lbs – the weight is light enough to allow for additional freight and the dimensions allow for additional pieces to be loaded onto the truck, directly on top of the flat plate of steel. This would only work if the flat steel could be loaded first, and unloaded last. Therefore, if you had another shipment such as a 35 foot flagpole, the driver could load the flagpole on top of the steel plate. The only reason this becomes a double load is because all pieces of the equasion can be managed including origin, destination, dimension, time and weight. But what solidifies this as a double load is the simple fact that neither shipment would work well with other types of freight.

Conversely, if you only accepted the flagpole load and the second load was an automobile, this would not work because their is no way to configure the shipment to fit on the truck. As a result, under normal circumstances, the flagpole would be a load of its own requiring a full trailer to transport it. Therefore the flat pate of steel becomes the part of the equasion that makes this double load possible. In any other case, you would have to hire the full trailer for the plate of steel and try to ship the automobile as an LTL load.

Ultimately, the deciding factor determining whether a double load can be booked is the carriers ability to handle the job, with respect to trailer, size, type, etc. That is why it is so important to make notes of your carriers’ equipment. If you maintain a good carrier equipment list, the chances you’ll have to swiftly recognize when a double load is possible will greatly increase.

Does your freight consist of two LTL loads or a double load? If your customer has two shipments going to the same area or en route to the same area, they would prefer to ship them as a Full Truck Load if possible. If that is not feasible, their next approach will be to have you move them as an LTL to save on freight charges. In the examples above, these shipments are slightly long to be booked as LTL loads, yet just large enough to be considered Full Truck Loads.

Your negotiating strategy should be to convince your customer to ship the two loads individually. You can justify your request because of the hauling capacities of most carriers. This way, if you are unable to find a truck capable of hauling both shipments simultaneously, you can still hire two trucks if necessary.

However, if you are fortunate enough to locate one truck capable of hauling both loads, simply compensate that truck fairly based on one load. So instead of paying the carrier based on two loads, you would compensate the truck on the usual “per mile” basis, plus fair compensation for the additional stops required to complete the job. This way, you are not being unfair to the carrier and you are able to profit nicely and recover from loads you may not have done so well on.

In the following example we’re going to calculate two loads individually. Then we’ll articulate them as one load with an extra stop to illustrate the difference in revenue.

As you can see, these loads look like any other load you would broker on a given day. If you ship them as two loads, you stand to earn a commission of $384.75. Nonetheless, you are aware of the load requirements, and if you can find a truck to haul them both, you’ll stand to be rewarded with an even healthier commission. Here’s how you do it:

Post the load on the load boards as one load. Whether or not it has two BOL’s (bill of lading) is irrelevant to the carrier. They just want to earn a fair per mile rate, which is what you’re going to allow them do.

Post the load:
Origin: Atlanta, GA
Destination: Milwaukee, WI
STOP OFF: Chicago, IL
Weight: 26,000 lbs
Length: 52 feet
Miles: 825
Shipping rate: $1,365
Carrier pay: $1,160.25 + $100 stop off pay = $1,260.25

By utilizing the “stop off,” you executed a second delivery for $100 opposed to $1,020 as forecasted in the load 1 example. Now add your total receivables and deduct your total pay out to calculate your commission.

Invoice amount to your customer: Load 1 ($1,200) + Load 2 ($1,365) = $2,565.00
Payable to the motor carrier: $1260.25
Your earnings on this double load $1304.75

Double loads require a fine balance of weight, dimensions and a truck capable of transporting them. If you were unsuccessful in locating the proper equipment, your next approach would be to post load #1 as a Full Load and load #2 as a Partial. Why? Because load #2 is 24 feet long and light enough so that a carrier would have enough space to include another LTL load, whereas Load #1 is 28 feet long. Remember, most flatbed trailers are 48′ long. When your load exceeds half of their trailer in either length or weight, it should be considered a Full Load.

When you book a double load, you’ll need to issue the motor carrier two pro#’s instead of one. For this reason, it is a good idea to create an invoicing system that will help you recognize them. For instance, if you hired one carrier to haul both shipments outlined above, you might append an “A” or “B” at the end of the pro#. This way, you’ll know immediately, that the load is in fact, a double load. For the loads above, your Pro#’s may look something like this:

Load 1 – Pro# SC011505-001-A
Load 2 – Pro# SC011505-002-B

The purpose of this is to help you simplify your invoicing system. In the event you need to “decode” your invoice, you can do so quickly and go directly to the file in question. The pro#’s above are for illustration but for the sake of reiteration, let’s break them down.

Carriers use a similar invoicing system that allows them to identify the shipper/broker for which the load was hauled. It also allows them to identify the truck# and driver responsible for that load. For this reason, you’ll find that your Bill of Lading forms will have two pro#s on them: The one you gave the motor carrier and the carrier’s pro#, both of which are conveyed to the driver during dispatch.

Important: When booking a double load, be sure to instruct the motor carrier to have the driver get both Bill of Lading forms signed. And NEVER, ever pay a carrier until you have proof, beyond a reasonable doubt that the shipment was delivered safely. Drivers are human and like the rest of us, they get fatigued and occasionally forget to have the Bill of Lading signed. However, if the driver has only one Bill of Lading signed, you may need to verify a piece count, serial #, VIN # or similar form of verification to make absolute sure that the carrier delivered both shipments prior to making a payment.

A freight lumper is a driver assistant or dockworker who loads or unloads trucks and typically works independently, for hire. Most shippers and receivers hire employees to load and unload inbound and outbound trucks. Other companies have found it beneficial to outsource this task to lumpers. These lumpers cater primarily to inbound carriers making deliveries that the driver would otherwise have to unload themselves.

Truck drivers usually operate on a tight schedule and rarely have time off. By hiring a lumper service to unload their trailer, it allows them to use that time to take a break, get some rest or prepare for their next dispatch. This works particularly well for driver’s transporting loads which must be broken down, split, palletized or reconfigured to accommodate the consignee’s (party receiving the shipment) warehouse facility and storage capabilities.

For insurance liability reasons, drivers are not usually permitted to operate forklifts or other motorized equipment to unload their trailers. In the case of dry van or refrigerated freight, the consignee may sometimes offer the driver a pallet jack to manually unload their trailer should he/she decide to unload it themselves.

Why is this important to you?

Three reasons: Money, communication and common courtesy.

If you plan to coordinate dry van or refrigerated freight, there are two terms you should familiarize yourself with:

A Driver Unload is when the driver is required to unload the trailer and when necessary, break it down for storage. A Driver Assist is when the driver is required to assist in the loading or unloading of the freight. Both of which, the carrier must be compensated for.

Some carriers allow their truck drivers to act as the lumper or driver assistant by participating in a Driver Unload or Driver Assist loads to earn extra money. Some will not. Some carriers are owner operators who own and operate their own trucks and simply refuse to unload their own trailers. In such cases, the owner operator becomes responsible for hiring and compensating the lumper or driver assistant.

If your customer does not tell you if the load is a Driver Unload or Driver Assist, be sure to ask them and pass on this information to the carrier. Otherwise, the driver may arrive at the destination thinking he/she has a chance to grab a nap, only to find out they have to unload a 53′ trailer and break down 2400 boxes of baby food. A situation like this is not good and will not reflect well on your reputation. Truck drivers are known to get very upset when things go wrong in the communication chain. They need to know what to expect, and it’s your job to ask the necessary questions and be sure to pass the information on to the carrier/driver.

The use of a lumper or driver assistant is rather common in Dry Van and Refrigerated shipments. So if this is your freight target, be sure to ask your customer if a lumper service is required.

Lumper service rates vary and like any other business, the more work involved in loading or unloading, the more they charge. The negotiation process is out of your hands so it will be up to the carrier or driver to negotiate the lumper’s rate when they arrive at the destination.

However, once you have determined whether the load requires a Driver Unload or a Driver Assist, you should ask your customer to pay an additional $50-$100 for that shipment. Doing so will enable you to compensate the carrier to cover the motor carrier’s expense that they will incur by using the lumper service to unload their truck.

Lumper fees should be handled like a stop-off fee, tarp fee, or fuel surcharge. These costs are calculated “in addition” to the line haul rate and should be specified separately in your rate confirmation agreement.

For example: Your customer offers you a refrigerated load of palletized bacon from Kansas City, KS to Ontario, CA with a stop off in Denver, CO.

Origin: Kansas City, KS
Destination: Ontario, CA
Extra Stop: Denver, CO
DU/DA: Yes – Driver Unload
Mileage: 1588

Let’s say the standard linehaul rate for dry goods is $1.40 per mile, and since this is a refrigerated load, you secure another $0.20 per mile for a total of $1.60 per mile. Then, you charge another $100 for the extra stop in Denver, CO and another $150 for the Driver Unload. If this load requires a lumper or driver assistant, you could charge an additional $75 and make a note on the invoice for either Driver Unload or Driver Assist.

Linehaul Rate: $2540.80 (1588 miles x $1.60)
Extra Stop: $100
Driver Unload: $150
————————————————–
Total: $2,790.80

IMPORTANT: When you negotiate additional compensation for lumper fees, be sure to pass this money onto the carrier. Whether or not you keep a portion of these extra charges is your choice. But keep in mind, if you do not compensate the carrier fairly, they may choose to put a BIG FAT “X” next to your name in their database and may not work with you when you need them most. Be fair, be courteous, operate with integrity, and it will come back to you. Be unfair, and that too will come back to you.

Automobile transport is considered a specialized transportation market. This is partly due to the handling and equipment required for the safe transportation of automobiles. Automobile shipping rates are also calculated differently than other freight charges. This creates some distinguishing characteristics which separate automobile transport from other non-household goods commodities.

Most full size auto carriers are far more expensive than the average truck and trailer. Not only is the equipment more expensive, but motor carriers who transport vehicles on a regular basis are forced to pay higher cargo liability premiums. Motor carrier and freight broker insurance underwriters experience inflated freight claim rates from automobile transporters and of course, pass on those expenses to the carrier.

Farm tractors, small dump trucks and other construction equipment are normally transported on flatbed and stepdeck trailers. Heavy vehicles like class 7 and 8 trucks are usually hauled with a semi-tow truck, tow bar, low boy or double-drop trailer.

IMPORTANT: If you do book a load of tractors or any other diesel equipment with a vertical exhaust, such as front-end loaders, bulldozers, etc., be sure to have the driver cover the exhaust pipe with plastic or duct tape to block the air-flow. During transit, the wind being forced into the exhaust pipe will rotate the engine’s turbo. Without the engine running, it cannot lubricate the turbo and possible damage may occur within just a few hours of running that piece of equipment.

Motor carriers who specialize in automobile transport must also run irregular traffic lanes to deliver automobiles deep into rural American towns. One drawback to such door-to-door rural delivery is that while a town may have enough “demand” to support the community economically, it may not have enough “supply” to offer that carrier an automobile load OUT of the area. If the motor carrier designates the destination as a bad freight area, they will not enter that region without first securing a better line haul rate going INTO the area. This compensates them for the unpaid miles they might incur to LEAVE that area without a full or partial reload.

It has been argued that the length of a vehicle is more important than the weight. This is not always the case. As with all freight, both are equally important. Therefore, quoting competitive rates for automobile transport shipments can become complicated. For the most part, they are determined by five main factors: The origin, destination, size, weight, and level of service.

Full size automobile transporters can weight upwards of 48,000 – 50,000 lbs empty. This permits them to haul 30,000 – 32,000 lbs without exceeding their maximum Gross Vehicle Weight (GVW) of 80,000 lbs. Remember, the tare weight (empty weight) of each truck will vary. Below are two examples of how these size/weight variations apply to loads of nearly the same traveling distance.

Load #1 was based on $0.50 per mile, per vehicle, for a total of $1.50 per loaded mile. Load #2 was based on $0.75 per mile, per vehicle, also for a total of $1.50 per loaded mile.

Why did we charge the customer more per vehicle for load #2? Because even though load #1 has more vehicles, load #2 consumes nearly the same footage and weight as load #1. Remember, the motor carrier is limited to the number of vehicles they can haul based on size and weight.

If either load #1 or #2 had a rural destination such as “No-Man’s-Land,” USA, you should do your best to secure another 15-20% from your customer to pass on to the carrier. This helps to compensate them for traveling into an area that does not offer a great deal of automobile freight LEAVING the area. They must have some incentive, otherwise why would they choose to accept a load with almost certain dead head miles? They wouldn’t, because that costs them time and money. With fuel costs at record highs, motor carriers are certain to be more selective about their destinations.

If you do not secure a better rate from your customer, here’s what may happen:
You post the load. A carrier will call and is willing to take the load but they would like more money before doing so. In an effort to quickly move the load and satisfy your customer, you’ll throw in another $100 to lock in the deal. Guess what? You just lost $100. Do that 10 times a week and you’ll be filing bankruptcy.

It is very important to bid each load with enough room for negotiation. If you plan to broker automobile transport shipments, be prepared to bid a little higher when the destination is located in a rural location. In fact, your customer should expect to pay a little more for rural delivery. That is a good rule to follow for any type of freight but it applies especially well to vehicle shipments.

Many motor carriers haul for dealers, transporting vehicles to and from auctions. Some carriers even sit outside on auction day and wait eagerly for someone to hand them a load. You may find that your local new & used car dealers could benefit from your brokerage. Working with your local dealers can generate freight for you traveling both to and from automobile auctions.

Experienced used car dealers frequent the auctions to rid themselves of vehicles that haven’t sold in a specific time frame. Naturally, they’ll want to return with different vehicles to replace what was auctioned off. Depending on their location and distance from the auction it might actually save them money by hiring you to find them a truck to haul their vehicles.

If they do not hire you or a motor carrier directly, they must either haul the vehicles themselves or pay several people to drive those vehicles to and from the auction which can be very costly, not to mention putting unnecessary miles and wear and tear on the vehicles they want to sell. When you negotiate with dealers, remind them of the time and money they could save by outsourcing this task to you.

Open and enclosed transport trailers range in size and capacity. And although most automobile carriers today have open trailers, many of them are transitioning to enclosed trailer models. Open transport trailers are subjected to inclement weather and road conditions. Obviously, if your customer is shipping a custom or exotic automobile, you’ll want to suggest they pay extra for an enclosed trailer.

Depending on the carrier’s equipment, a full size automotive car carrier with an open trailer may carry up to nine Honda Civics, which weight around 2900 lbs each. Meanwhile, an enclosed auto carrier may only haul seven. Obviously, the enclosed transport trailer is providing additional protection and should be compensated equal to the first truck and possibly more for the added service.

New car dealers typically request open trailers to keep transportion expenses to a minimum. This is certainly understandable since they can transport more vehicles for the same money. New car dealers often receive several vehicles of the same make and model which is nice because it simplifies the bidding process.

Some auto carriers haul “exclusively” meaning that your vehicle will be the ONLY vehicle they transport. Exclusive auto carriers usually feature an enclosed transport trailer pulled behind a class 7, mid-size truck or one-ton dually. Some of them are now offering temperature controlled transportation services tailored for unusually expensive classic and vintage automobiles. Exclusive automobile transport is much more expensive. Be prepared to pay double, even triple the rate of an open trailer shipment.

Vehicle Appraisal: If the vehicle is extremely rare or of unique value, you should ask your customer to have the vehicle appraised and fax you a copy of the appraisal. When you choose a truck for dispatch, be sure their motor carrier cargo liability insurance coverage meets the value of that vehicle prior to the truck load dispatch. Their cargo liability amount should be clearly marked on their insurance form. Look for this when you perform a carrier set-up agreement.

This is where some of the rate variations come into play. Our objective in the following examples is to clear up any “rate” questions you may have. For simplicity, we will not be adding a fuel surcharge to either example. If you have not already viewed the section on fuel surcharge rates, you should do so after viewing this topic.

If you are booking an LTL (Less than Truckload) shipment, you would calculate the shipping rate proportionately on a “per vehicle” basis as we outlined in load examples #1 and #2. Typically, LTL loads have a greater “per vehicle” rate.

If you are booking a FL (Full Load) shipment being delivered to a dealer whereby the carrier can make ONE pick up and ONE drop with NO stops in between, you should decrease your “per vehicle” rate. This is what drivers call a “strait shot.” This type of load is less difficult for the carrier and the driver and generally, they’ll haul it for a lesser rate. Below are two examples of loads going to and from the same origin and destination. Only one has additional stops and the other does not.

Load #3 was calculated at $0.40 cents per vehicle, per mile. Load #4 was calculated at $0.30 cents per vehicle, per mile. Why? Because load #4 was a Full Load with no stops so we gave our customer a discount of $0.10 per vehicle, per mile.

The examples above are extremely close in mileage because the stops in Load #3 are in route to the destination and do not require the carrier to go “out of route” to make the deliveries. Each town in load #3 requiring a delivery was en route with the original destination. Obviously, if the additional stops required additional “out of the way” mileage, you would add that “per mile” rate to that vehicle only (the vehicle being delivered out of the way).

Transit time is one area of automobile transport shipments that have a much greater variance than other commodities which often require a specific delivery appointment. Dealers or customers who use your broker service on a regular basis may be aware of this variance. But, if your customer is an individual, be sure to make them aware of unexpected delays such as traffic and weather conditions as well as rare mechanical failures. The number of stops the driver will have to make can also play a major role in the delivery time. If you hire a truck to haul anything less than a FL (Full Load), you’ll need to be somewhat flexible for delivery.

The best way to handle this is by contacting the motor carrier daily for an ETA (Estimated Time of Arrival). Ask them where the truck is and the approximate time they expect to make the delivery. Generally, auto shipments do not require a specific HOUR of delivery as with other freight such as refrigerated goods and manufacturing material. However, you should have an idea what DAY the vehicle(s) will be delivered. For planning purposes, notify your customer of the carriers ETA. This allows them to coordinate any last minute delivery arrangements they may need to make prior to delivery.

NOTE: If you are hired by an individual for a one-time shipment, it is recommended that you collect your entire fee in advance. You never want to put your freight broker business in a position where you’re unable to collect receivables. At a minimum, collect half of the payment in advance and the other half when the vehicle(s) is delivered.

Federal and State Department of Transportation (DOT) regulations prohibit the transport of household goods in vehicles being transported by automotive carriers.

If you are shipping to or from Alaska, Hawaii or internationally, shipping ports will not accept your vehicle with personal items inside. In fact, Customs Agents will not even inspect vehicles with items that weren’t attached from the factory. They make no exceptions to this policy. Failing to comply will result in a delayed shipment and you may incur daily storage fees until the vehicle is shipped.

Personal belongings left inside the vehicle are subject to theft and are not covered by insurance. Be sure to make your customer aware of this policy.

You should ALWAYS require auto carriers to perform a pre-transit and post-transit vehicle inspection for each vehicle. Inspections should be done BEFORE the vehicle is loaded and signed by the shipper noting anything out of the ordinary such as scratches, dings or blemishes in the paint.

Upon delivery, both the driver and the person receiving the vehicle (the consignee) should perform a post-transit inspection to verify that the vehicle arrived in good repair.

If the driver has a breakdown or for some reason must transfer the automobile to another truck to complete the delivery, each driver will inspect the vehicle when it is unloaded and reloaded to the other truck. Drivers are usually held liable for vehicles they carry so this helps to keep everyone honest without “passing the blame” to the next person in line.

Hundredweight is a unit of measure that has been adopted by the freight industry to calculate shipping charges. There are times when a “per mile” rate is incalculable due to factors such as weight, density and value. The primary issue is value, which is based on the “per unit” value of a shipment. A unit is the hundredweight of a commodity.

There are two types of hundredweight, standard and metric (also known as short and long). The long hundredweight is used in the metric Imperial system of the United Kingdom and abroad. A hundredweight in the Imperial system is equal to 112 pounds. The United States utilizes the Standard system and recognizes the short hundredweight (100 lbs), also known as a “central.” For that reason, the UK utilizes the metric long ton of 2240 pounds, where the U.S. utilizes the standard short ton of 2000 lbs. Therefore, as a freight broker in the U.S., you’ll most likely use the “central” system. However, both measuring systems are abbreviated as CWT.

This is important for you to know because some shippers and manufacturers often tender heavy commodities such as bricks and mulch. These commodities often have a lesser profit margin so their objective is to load as much weight legally possible onto that truck. So, rather than paying by the mile, they prefer to pay by the Hundredweight.

Most interstate motor carriers register their trucks for a maximum GVW (Gross Vehicle Weight) of 80,000 lbs. That includes the truck, the trailer, and the load combined. Some states override Federal highway standards and allow motor carriers to register commercial vehicles up to 100,000 lbs but is often dependent on the number of axles the truck is equipped with. However, if the load you book must be transported to or through a state that does not honor such registration, you should comply with the International Registration Plan (IRP commercial vehicle registration plan of 80,000 lbs). If you’re not sure, keep it simple and dispatch truck loads based on the most common assumption of maximum gross vehicle weight of 80,000 lbs.

The shipper will need to know the “tare weight” of the truck. The tare weight is how much the truck and trailer weighs before it is loaded, known as the “empty weight.” The tare weight differs from one truck to another for varying reasons. For instance, an aluminum flatbed trailer can weight 2,000 to 6,000 lbs less than a steel flatbed trailer depending on the manufacturer. Also, the weight of the diesel fuel is important to consider.

Diesel fuel weights approximately 7 lbs per gallon. If a driver has his truck loaded while he’s low on fuel, then goes to fuel up and adds 200 gallons of fuel into his tanks, he just added over 1400 lbs to his maximum Gross Vehicle Weight (GVW) and he could be cited for being overweight by the Department of Transportation.

Most drivers know how much their trucks weight empty, and they have a good idea how much weight they can load onto their truck without being cited as “overweight.” Owner-operators sometimes have extra long and heavy trucks. For them, transporting a load based on hundredweight is less than appealing. This is because they cannot haul enough weight to bring their “per mile” rate up to par.

If a truck and trailer have a combined tare weight of 32,000 lbs, the driver can legally carry a load weighing up to 48,000 lbs (Remember, he can only weight a maximum of 80,000lbs), and if he’s hauling by the “hundredweight” he wants to put ALL he can legally get onto his truck. Even though the shipper is paying the broker by the hundredweight, the carrier has to recalculate the line haul rate into a per mile basis.

For example: If that truck can carry 48,000 lbs of freight, and the shipper is paying $850 for a 500 mile trip. That translates to a $1.70 per mile for that load. However, if that truck can only scale 45,000 lbs, they must decrease the rate.

In the example above, the shipper was offering $850 for a full load weighing 48,000 lbs. That easily translates to $1.77 per hundredweight. Therefore, if the carrier can only scale 45,000 lbs (450 units) the rate would be decreased proportionately.

At this point, the carrier must recalculate the total pay rate into a per mile format to uncover the “mileage” rate. Clearly, this is done by dividing the total rate (based on how many units of hundredweight they can haul) by the miles.

Important: Be advised that hundredweight rates differ from one destination to another. Clearly, the shipper cannot expect you to move a 2000 mile load for the same hundredweight rate used for the 500 mile trip. This shipper may be willing to pay upwards of $7.00 per hundred on a 2000 mile load.

In the case of hundredweight, you will want to ask the carrier how much weight can they haul and give them a rate according to their reply. The question you would use is this: “How much can you scale?”

As the freight broker or agent, it is your job to negotiate a fair rate for both the customer and the carrier. Please keep in mind that these big trucks get horrible fuel mileage, usually between 5 and 7 miles per gallon, and with fuel prices soaring to all time highs, fuel is their greatest expense.

These big rigs travel an average of 500 miles per day so it is common for a truck to burn $150 to $300 or more per day in fuel. With a fuel bill like that, they cannot afford to operate for low linehaul rates. Fuel and driver wages are the greatest expense for both owner-operators and motor carriers.

Hundredweight shipments are not more difficult, yet they do require a few basic additional mathematical steps to reach the bottom line. In order to negotiate these rates, you should first understand the basics of motor carrier expenses and how to compute per mile rates. Only then will it make sense to you why you need to convert hundredweight rates into mileage rates based on how much the average truck can scale (approximately 48,000 lbs).

Dump trucks make up an enormous part of our supply industry. In fact, they have more flexible work areas than freight carriers. They are used for numerous applications such as supplying sand and gravel, paving, waste management, farming, excavation, construction, highway maintenance, demolition and debris removal.

Similar to brokering freight, your focal objective is to earn a small commission from every ton moved and every hour worked from each truck you hire. When brokering dump trucks, it is critical that you understand some basic equipment requirements and mathematical conversion formulas. Hiring the wrong truck for the wrong job can be costly.

One distinguishing difference between brokering freight trucks and brokering dump trucks is the amount of commission you earn. At first glance, it may appear that brokering dump trucks isn’t as rewarding as coordinating freight. And although the income per load may be less in percentage, it actually balances out nicely by requiring less of your time.

Hiring dump trucks for construction, excavation and paving jobs may also seem rather seasonal depending on location, but it does offer consistent business throughout most of the year. One challenge you are likely to face is deciding which role you need to assume, broker or sub-contractor.

The reasons behind this role assumption are many, but the majority of this decision is based on the type of commodities being transported and the destination to which the loads are being carried, primarily in-state or out of state. So, before you can decide which role to assume, you’ll need to understand some basics concerning commercial vehicle registration. The role you assume will likely be determined by the licensing requirements of the trucks you hire.

Dump trucks are required to obtain a US DOT number from the Department of Transportation but they usually operate locally in-state. For this reason, many do not obtain a “motor carrier authority” which is required by all carriers who transport goods across state lines. Since many of them do not cross state lines, they have no need to secure an interstate operating authority which would lead to unnecessary insurance premiums and administrative workload. The importance of this will become clear as you read through this section but before we move along, we should also discuss the basics of contracting.

A general contractor, also known as the prime contractor, is an individual or company that enters into a contract with another individual or organization for the service or construction of a building, road or other facility. The contractor is responsible for all means and methods used in the project details of the contract such as tools, materials, engineering, excavation and construction.

General contractors who are awarded bids are not always local contractors. They may be based in or out of state. If it is a construction job such as a shopping mall or apartment complex, it is common for for them to be based out-of-state. This is often because the person(s) hiring the contractor is an individual or group of investors with little to no community involvement other than financial gain.

In order to accomplish projects more efficiently, it is common for contractors to hire subcontractors who specialize in various trades. A subcontractor is an individual or company who assumes all or part of the obligations for a general contractor.

For Example: A general contractor is the low bidder and enters into a contract with a state to expand a highway. The contractor hires one subcontractor to handle the engineering and another for the excavation, earth moving and drainage. They hire another subcontractor for paving and yet another for landscaping and erosion control. Each subcontractor may also hire subcontractors to handle even smaller jobs within their agreement. This is usually not an issue with the prime contractor because they have an agreement with the first subcontractor to fulfill their obligations regardless of who actually does the work.

With that being said, the contractor or subcontractor may require your freight broker services to coordinate their transportation needs. This may be coordinating equipment moves such as dozers, scrapers, compactors and steamrollers which would be moved via tractor trailer. It may be to transport fill dirt and supply material such as gravel for the highway base which would be transported via dump trucks.

State contracts such as paving and building highways, are typically awarded to in-state contractors and paving companies. One reason for this is to keep taxation within arms reach for that state. Think about it: They hire a company based within their state, they pay the contractor for the paving job, then tax that corporation based on their income (where state income tax is applicable). Another reason states try to use in-state companies is to decrease unemployment rates by creating jobs within the local community.

Dump trucks are usually hired to haul material by the ton, by the hour, and by the job for a flat rate. You should always pay dump trucks based on the same terms in which you are paid. For instance, you would not hire trucks by the ton if you are getting paid by the hour. Similarly, you would not hire a truck by the hour if you are getting paid a flat rate. Furthermore, to be sure we’re on the same page, when you are hired based on an hourly rate, pay your trucks an hourly rate and likewise for flat rate jobs and those by the ton. Doing so will ensure a profit.

If you choose to complicate hiring trucks by combining compensation terms, be absolutely sure you will net a profit! It is not recommended to do so until you have a brokered a few jobs and understand the market more clearly. Until then, pay your trucks based on the terms you are getting paid on. The primary reason for this is to simplify the process of calculating your earnings. Let’s review the most commonly used methods.

By the Hour: Hiring trucks by the hour is common for most paving jobs. This is because there may be extended wait times for dump trucks to unload at the paving site. Hourly pay also works well for debris removal and excavation where the exact tonnage cannot be determined because the truck is traveling from one site to another without access to commercial vehicle scales.

By the Ton: Hiring trucks to haul by the ton is common for aggregate deliveries such as sand, gravel and coal. These materials are mined and processed from rock quarry’s and strip mines which are required by law to scale each load before they leave to ensure that each truck is within the legal weight limitations for that vehicle.

By the Job: Typically, general contractors bid jobs using a flat rate basis. They do so using calculated estimates which allow them to convert their outsourcing pay to hourly or by-the-ton when hiring subcontractors to carry these loads. Part of this equation is based on cubic tonnage. Of course, contractors are familiar and understand the hauling capacities of different dump trucks, and they take that into consideration when determining “how many loads” it will take to add or remove material from an area based on volume.

A cubic ton is a mass-derived unit of volume referenced by density. Consequently, there are different cubic tons for different materials. For example, a cubic ton of large limestone rock would be significantly larger than a cubic ton of sand which is more dense by volume and weights more per cubic foot.

Now that we’ve touched base on the fundamentals of the dump truck industry, let’s see how all of this actually applies in the real world. Let’s say for instance that a local contractor agreed to erect a large shopping mall. The contractor needs to excavate approximately 3300 tri-axle dump truck loads of rock and dirt to prepare for the foundation and parking lot. The contractor can use this rock and dirt to fill and level a lot for another job he has in progress across town.

The contractor has determined that he must have fifteen dump trucks moving 15 loads each per day to run both operations efficiently. The contractor has access to only 5 dump trucks so he will need 10 more to complete his daily requirement.

Since these loads are being transported locally across town, there is no need to hire dump trucks licensed with interstate authority. For this reason, it only makes sense to assume the role of sub-contractor. In this case you will need to hire 10 independent dump truck owner-operators. Keep in mind that some owner-operators have multiple dump trucks, which requires even less coordination on your part, providing they commit more than one truck to that job.

The contractor has agreed to pay you $60 per hour, per truck, for 10 trucks. You agreed to pay each truck you hire $55 per hour. This leaves you with a positive cash flow of $5 per hour, per truck for a total of $50 per hour. More often than not, dump trucks work over 40 hours a week during the construction season. For the sake of simplicity, assuming each dump truck worked only 40 hours, your earning potential for that week would be $2000. Keep in mind, many operations (especially excavation) must work around the weather and results will vary.

The beauty here is that these dump trucks are operating on a dedicated run from point A to point B and returning empty for another load. After their initial dispatch, you have virtually NO involvement with them other than collecting their time sheets, load cards, etc., and even that can be done for you by delegating one of the owner operators as the “lead truck.” Pay all of your dump trucks equally! Truckers like to talk. Don’t get caught paying one truck more than the other. If you want to compensate your lead truck for picking up your tickets, add a few bucks onto his check or slip him a $50 bill but do not pay him more per hour.

Regardless of how you’re getting paid, it is a good policy to have each driver complete a time sheet stating the hours and loads hauled for each day. At the end of each day, the contractor or his foreman should sign these forms for each driver. Most contractors will require this anyway but even if they don’t, you should. A load or time sheet system helps to keep everyone honest and reduces the risk of argument and delayed compensation. If you’re a stickler for organization, you may also opt to have them use one of your company forms to keep your records uniform.

Dump truck owners thrive on fair weather conditions. Rain, sleet and snow can ruin several working days for a dump truck. Paving jobs are not as vulnerable as excavation work because asphalt dries much faster than bare ground. Dump trucks only have to wait until the road is dry and temperatures remain above freezing to apply the asphalt. Excavation, farm use and residential deliveries must wait until the ground is dry enough to handle the weight of a loaded truck. If the soil in your area is dense, it may take several days of dry weather before your trucks can commence operations. As a result, contractors may ask your trucks to work long days, including weekends, to make up for lost time due to wet weather conditions. Don’t be scared to ask owner-operators to work on weekends. Chances are, if they have been out of work due to bad weather, they’ll gladly accept the opportunity to make up for lost time.

A Tandem Dump Truck is a strait dump truck consisting of 3 axles, the steer axle and a set of 2 drive axles in the rear known as tandems. Over the years, the laws regulating the Gross Vehicle Weight Rating (GVWR) have forced the dump truck industry to become adaptive by adding more axles to handle the weight. But it’s not simply a matter of “handling the weight.” It is equally a matter of “safe stopping distance,” which leads us to the tri-axle dump truck.

Tri-Axle Dump Trucks consists of one steer axle, a set of tandem drive axles, and one tag (dummy) axle which is air operated. When loaded, the driver can flip a switch and lower the tag axle, therefore increasing the hauling and stopping capability. Gross Vehicle Weight (GVW) limitations range from state to state, typically between 64,000 and 74,500 lbs when loaded. Some states allow tri-axle units to gross 80,000 lbs loaded when using “float” tires on the steer (front) axle. Float tires are much wider, 20 ply tires able to withstand additional weight on the front axle.

Quad-Axle Dump Trucks are designed just like a tri-axle dump truck, only they are equipped with two tag axles. Quad-axle dump trucks are a prime example of how the industry was forced to adapt to the laws that regulate Gross Vehicle Weight. Most states allow quad-axle trucks to gross 80,000 lbs when loaded. Since dump trucks are often paid by the ton, many companies are switching to quad-axle trucks. Clearly, the advantage is the ability to haul more weight. However, the disadvantage lies in the turning radius, which in congested areas, may leave residential deliveries to smaller tandem and tri-axle dump trucks.

Dump Trailers are ideal for long range construction job sites or hazardous earth removal. They are also frequently needed for farm use, debris cleanup and demolition when the debris is less dense and requires more space than would be available in a strait dump truck.

Live Bottom Trailers are typically used in paving jobs and deliver material horizontally to the rear of the trailer rather than using a “dumping” action. These are great for applications where a dump truck would be unsafe or would be unable to deliver due to the height required to raise a dump bed, such as paving in tunnels or on steep grades.

Belly Dump Trailers are also used in paving applications but deliver aggregate through the bottom of the trailer. Belly dumps are the least popular of all dump trucks although they are the truck of choice for paving companies in the Midwest and western United States.

Back hauls in the dump truck circuit are a fairly rare occurrence but when this opportunity presents itself, you should be able to recognize it and take advantage of it. This does not apply to hourly rates.

In the example above, we used one contractor who was coordinating two jobs simultaneously. Now, let’s say the first contractor was not the prime contractor for the job requiring fill material. In this case, one contractor needs material removed and another contractor needs material hauled in.

Since you have access to this material, you can work with both contractors by the load instead of by the hour. Obviously, neither contractor will want to pay you an hourly rate if your dump trucks are spending half of their time loading or unloading at the other contractor’s job site. Remember, you must pay your trucks the same way in which you are getting paid, and in this case, it would be by the load.

At this point, there are several things to consider. You already know your dump trucks need to earn an average of $50+ per hour (rates will vary). They will not stay with you for long if they aren’t able to do so. That could result in losing the entire job on both ends. Because of this, your trucks need to earn a comparable wage “by the load” to what they would earn “by the hour.” How is this done?

To calculate this, check how long it takes to drive your vehicle conservatively from job site #1 to job site #2 and back. Of course, dump trucks will take more time to reach these points than it does in your personal vehicle so be prepared to add some time to compensate for that. The distance between the two jobs is irrelevant. Add 15-20 minutes on each end to allow for loading and unloading. If it takes you 30 minutes to make it from job site #1 to job site #2 and back, add 30 minutes for loading and unloading and you have a 1 hour “turnaround” time. You would pay each truck $50 per load. Now you have something to work with.

Although you have established a pay rate for your trucks, you need to establish a load rate for each contractor. Typically, the contractor who needs the fill material will pay more than the one trying to get rid of it. Either way, they are accustomed to paying $55-$75 per hour for dump trucks depending on which type of truck they need. However, if they know you are working on another job simultaneously, they may ask for a discount.

The objective is to take advantage of the back haul opportunity, compensate your trucks fairly and maximize profit. In order to establish a “per load” rate that will do this, discount each contractor to a rate of say, $45 per load. If one contractor is paying $45 to have material removed and another is paying you $45 to bring it in, your gross “per load” earnings jump to $90 per load. Your pay rate for each dump truck is $50 per load, leaving you a commission of $40 per load, per truck.

Remember: Your first contractor needs each dump truck to move 15 loads each day! If they are only working 10 hours each day with a 1 hour turnaround time, you won’t be able to meet his requirement. In this case, you’ll need to talk with both contractors to determine whether or not you need to hire more dump trucks or see if he/she is willing to accept a slight discount in lieu of the truck shortage. A slight discount on your end is proof that you can communicate on “their level”. If they lose money because their loaders aren’t busy loading your trucks, you are essentially costing him money and your negotiations should reflect the fact that you understand this.

The type of bed a dump truck is equipped with plays a role in the dispatch process. Aluminum and composite beds are great for cutting the Gross Vehicle Weight (GVW) of the truck which allows them to haul more tonnage.

Aluminum beds are fine for sand, paving and small rock under 2 inches. Dump trucks with steel beds can haul any size rock, even large boulders measuring several inches in diameter. As you begin to build a relationship with your dump truck owners, make a note of their equipment. Dispatch your trucks according to the best application for their equipment.

IMPORTANT: If you assume the role of “subcontractor” on an in-state job, essentially, you are conducting business that is not affiliated with your freight broker business. These funds must be kept separate from your brokerage funds.

If you plan to use your freight broker authority to coordinate long distance loads across state lines, you would treat them no different than any other freight load which requires a licensed motor carrier to transport such loads. You will need a signed broker/carrier agreement and load confirmation sheet before dispatching. You must also retain a copy of the carrier’s Motor Carrier Authority and insurance certificate. Funds collected and distributed from these loads must be maintained within the brokerage portion of your business.

“Each broker who engages in any other business shall maintain accounts so that the revenues and expenses relating to the brokerage portion of its business are segregated from its other activities.” 49 C.F.R. § 371.13.You should always ask contractors about payment terms but chances are, they pay Net 10th, meaning they’ll pay you in full by the 10th of the following month. Unlike collecting money on motor carrier freight bills using a clean bill of lading, many factoring companies will not release funds to you if you attempt to collect payments from a general contractor. Because of this, factoring your receivables may not be an option so you should allow yourself time to collect funds from the contractor and pay your trucks by moving your pay date to the 15th of the following month.

It is usually not necessary to send a copy of every signed ticket along with your invoice however it is advisable to keep them. When you send an invoice to a contractor, be sure to include:

By now, you can see that dump trucks offer a profitable niche. If the job requires transport to and from locations within the state, you may find it easier to enter into an agreement as a subcontractor, rather than a broker. The reason for this is because often, the loads are repetitious and they may haul for days or weeks on the same route. It would be senseless for you to assume the role of a broker and have them sign a rate confirmation sheet for each load. Neither you nor the contractor have time for that kind of redundancy. As you can see, the need for your service goes beyond the freight industry. A major benefit is that this can be executed locally without disrupting your brokerage.

Hazardous Materials, also known as HAZMAT and Dangerous Goods, is any liquid, solid, or gas which can create an imminent hazard to public health, property, or the environment. In an effort to promote public safety and homeland security, hazardous materials are regulated by various Federal agencies including the Department of Transportation (DOT), The Occupational Safety and Health Administration (OSHA), and The Environmental Protection Agency (EPA).

The combined efforts of these agencies regulate all aspects of hazardous materials, including those who transport or cause them to be transported, those who design, manufacture, recondition, test and package them, and those who prepare or accept them for transportation.

The U.S. Department of Transportation has categorized hazardous materials into a scheme of 9 classes and subclasses. The reasons behind this categorization structure are many, but one is to identify vehicles carrying dangerous goods by marking them with diamond-shaped placards. While some materials always require the vehicle to be placarded, others may only require it under certain quantities or particular circumstances.

Any motor carrier transporting hazardous materials must have a Safety Certification on file with the FMCSA. This is accomplished with FMCSA forms MCS-150A and MCS-150B depending on which substance and quantities they transport. Highly dangerous substances (as outlined below) require carriers to have on file, a form MCS-150B (Hazardous Materials Safety Permit).

Before you dispatch a carrier to transport a load of hazardous materials, there are two things to double check. First, you should ALWAYS check to make sure the carrier has the proper “rights” to transport HAZMAT. You can do so quickly by entering the carrier’s information into the SAFER system (Safety and Fitness Electronic Records System). This allows you to perform a “snapshot” of the potential motor carrier to be sure they are properly registered with the FMCSA. There are three methods in which to locate carriers in the SAFER database: USDOT number, MC/MX number or Company Name. Typically, you would ask the carrier for their MC number.

Once you have arrived at the carrier’s “snapshot,” you will be looking for confirmation that the carrier has on file either MCS-150A or MCS-150B, depending on the shipment. Do NOT confuse these forms with the standard form MCS-150 which is a Motor Carrier Identification Report (Application for USDOT Number).

FMCSA Website: Carrier Snapshot

http://safer.fmcsa.dot.gov/CompanySnapshot.aspx

The second thing to do is double-check the amount of coverage on the motor carrier’s insurance certificate. This will help keep you out of trouble with the FMCSA. Do not hire a carrier to transport hazardous materials unless they have the proper coverage! If you do not know what class the HAZMAT is, ask your customer. If they are shipping class A & B explosives, they will know. You will also need to know in order to hire a carrier with sufficient coverage. Always double-check the carrier’s insurance to ensure they meet the following premiums:

Drivers who transport hazardous materials are considered qualified after passing a state examination in the same state in which their driver’s license was issued. Proof of this HAZMAT qualification is affixed as an endorsement on their driver’s license. Additionally, the motor carrier who hires a driver with the intent of transporting hazardous materials must also reaffirm the driver’s knowledge through further education.

The U.S Department of Transportation enforces restricted driving routes prohibiting the transportation of particular hazardous materials in certain areas such as underwater tunnels, etc. You must keep in mind that not all drivers know where they’re going or may not be familiar with where they are about to go. Restricted routes are clearly marked, and as a result, drivers typically find themselves seeking alternative routes to reach their destination. When this happens, delays are likely to occur. Drivers may get lost, disoriented or simply caught in traffic.

As the broker, you get paid for mediation in the event of unexpected delays. When you broker HAZMAT loads, be prepared to make additional phone calls to the motor carrier. Find out the status of delivery so you can convey that information to your customer.

You’ll probably find that your freight customers are generally understanding about travel issues, especially if you explain the situation to them. When you broker HAZMAT freight, and subsequent delays occur, you can eliminate a lot of headaches by utilizing good communication skills.

Obviously, as a broker or agent, you don’t have to concern yourself with placarding a commercial vehicle for HAZMAT. Although the more you understand about the handling of these substances, the better prepared you will be to service your customer.

If you would like to further your knowledge by researching the rules and regulations governing the transportation of hazardous materials, you can do so by following the link below. Bear in mind the majority of this information pertains to shippers and carriers who transport hazardous materials.

How to Comply with Federal Hazardous Material Regulations
http://www.fmcsa.dot.gov/safety-security/hazmat/complyhmregs.htm

Oversized Loads: Oversized loads, also called “Over Dimensional” or “OD,” are shipments exceeding the standard legal length, width, or height limits for commercial vehicles. Oversize loads are nearly always transported on an open trailer such as a flatbed, stepdeck, double drop, lowboy, RGN and multi-axle trailers. Brokering over dimensional freight may take a little extra coordination on your part, but the profit yield makes it all worth while.

Overweight Loads: Overweight loads are shipments which exceed a commercial vehicle’s Gross Vehicle Weight (GVW) licensing and registration limitations. The Federal gross vehicle weight limit for commercial vehicles on interstate highways is limited to a GVW of 80,000 lbs when loaded. Although some carriers may license their trucks to carry up to 100,000 lbs, they may still be required to obtain individual state permits to travel through states which do not recognize their 100,000 lb vehicle registration.

Until 1982, the US Department of Transportation (USDOT) enforced an overall length limitation of 75 feet for commercial vehicles, including the truck and trailer. Since then, they have developed bridge laws which determine the allowable weight per axle as well as the distance between axles. Correct axle spacing is crucial to the safety of our bridges. On a typical tractor trailer, the distance between the center of the front trailer axle and the kingpin (where the truck and trailer connect) must be no more than 40 feet.

If a truck does not have an adequate number of axles to carry and stop the additional weight of an overweight load, you will need to search for a truck and trailer capable of doing so. In order to do that, you’ll need to familiarize yourself with the types of trailers commonly used to transport oversized and overweight shipments.

(FAK=Freight All Kinds, OD= Over Dimensional, OH= Over Height, OW= Over Weight, OL= Over Length)

The average dimensions in the chart above reference trailers under normal use. If they have the ability to extend their trailer and have the axles to support the weight and stopping distance, these trailers can become extremely versatile.

NOTE: Due to the various manufacturers and applications of open commodity trailers, they come in a variety of combinations, such as an extendable flatbed, stepdeck or RGN. Some may also be built with a spread axle, tri-axle or quad-axle setup, or possibly one of a combination of features such as a double drop, extendable, tri-axle trailer. All of these combinations and features drastically affect the hauling capacity of trailer, which directly impacts your ability to effectively coordinate a shipment.

Oversized and Overweight loads require the motor carrier to retain a temporary permit from each state in which the load is transported. This can become somewhat cumbersome for the carrier because, in addition to the federal laws, each state has different regulations regarding over dimensional loads. Temporary permits are issued by each individual state, therefore, the driver under no circumstances should pass into a state with an oversize/overweight load unless he or she has physical possession of their temporary permit.

Some states will issue the driver a specified driving route based on the dimensions of his/her load. Some states do not. But nearly all states enforce a curfew on certain highways, primarily thruways or beltways around metropolitan cities and other heavily populated areas. A curfew is a restriction that allows the driver to pass through a particular area only during certain hours of the day, typically when traffic is not so heavy. Most states do not allow oversized loads to be transported in the dark. This includes before the sun rises in the morning and after is sets in the evening.

It is the motor carrier’s responsibility to obtain their own permits. State transportation permit fees vary so it is nearly impossible to estimate what the charges will be. Even though the carrier must order and pay for permits, it is customary for the broker to “cover” or “assist” in the cost. Since permit rates cannot be easily calculated, you might consider adding $50 per state or a specific flat rate to assist the carrier in covering permit costs. You may also choose to use a percentage of the line haul rate, such as 10%. If your line haul rate totals $3,000, add $300 for permits. However, you should not derive a commission from the permit funds. If you choose to offer the carrier an 80% payout, the formula you would use would look like this: (3000 x .80) + 300 = $2,700.

After the load has been delivered successfully and you have received a clean Bill of Lading, you or your factoring company will then invoice your customer for the total line haul rate, plus any permit fees. In this case, the invoice amount would be $3,300. The amount payable to the motor carrier is $2,700 ($2,400 for the line haul + $300 for permits = $2,700).

Truck escorts are used in collaboration with oversize loads to assist truck drivers in all areas of maneuverability. They communicate with the driver via CB or other two way radio. Many state permits require the motor carrier to travel with an escort in the front, rear or both. It is up to the state whether or not an escort is required. The dimensions of the shipment are the determining factor on how, when and where escorts must travel with these shipments.

For example: The standard legal width in all states is 102 inches wide, or 8.5 feet. This includes the width of the truck and the shipment. Once loaded, if the load hangs out beyond the sides of the trailer 3″ on each side, the carrier will be required to obtain an oversize permit to travel in each state. Most states will not require the carrier to have an escort on load widths of 10 feet or less. However, it may be required if the shipment is also over weight, over length, over height or any combination thereof. Typically, truck escorts are used on shipments over 12 feet wide.

Truck escort services are also used for over length shipments to assist in securing traffic lanes during difficult turns and other maneuvers. Over length loads are particularly dangerous for two reasons, tail swing and turning radius. If the load is secured to the trailer in a way that it must hang over the rear of the trailer, when the driver makes a turn he cannot see the “tail swing” 85 feet behind him. It is his responsibility to know where the rear of that load is at all times, so in a sense, the escort becomes a second set of eyes for the driver.

The “turning radius” of a tractor-trailer is decreased significantly when the driver must stretch his trailer (when applicable) to accommodate the dimensions of the item(s) being transported. Sadly, drivers in personal vehicles are unaware of the turning radius required to maneuver a truck under normal conditions, not to mention adding 15 – 20 feet to the overall length of the truck.

Over height loads in excess of 13 feet 6 inches tall, must also be escorted under permit. Over height loads are equally dangerous and subject to low underpasses, electrical wires, etc. Escorts assisting in the transportation of over height loads must be equipped with a “feeler,” which is usually located on the front of the leading escort vehicle. The escort will measure the distance from the ground to the highest point on the load. He will then calibrate his feeler to that distance. The feeler acts as a warning mechanism for the escort which will allow him to notify the truck driver behind him that the load will not clear the obstruction ahead.

There is no particular formula to use when brokering OD freight. Quite honestly, it all boils down to what someone is willing to pay to have it shipped, and what the carrier is willing to ship it for. The more sophisticated the equipment requirements are, the more it will cost.

It is not uncommon for super heavy haul and Oversized loads to reach $3, $4, even $5 per mile or more. If you have no idea what to bid, give the weight, dimensions and distance to a few carriers and ask them to submit an estimate. Experienced carriers who specialize in heavy haul and oversize freight will have a general idea what temporary permits and truck escorts will cost them.

The motor carrier is responsible for paying the escort company. However, it is your responsibility to collect those funds from the shipper so be sure to include the escort fee with the bid you submit to your customer. Escort and permit fees vary which makes it difficult for us to discuss rates. If you agree to pay $350 for permits and escort fees and the carrier expenses turn out to be $750, that carrier may think twice before working with you again. Motor carriers don’t expect you to know every aspect of their business, although they do appreciate it when you are familiar with it (which is why we’re discussing it now).

Oversize, overweight and over height loads will put your mediation skills to the ultimate test. Have the driver contact you first thing in the morning and in the evening. If they fail to contact you, you should contact them. Be sure to make a note of the check call including the time, their current location (or the closest town to them) and if they are on schedule. One check call per day is sufficient for normal shipments.

Oversize loads nearly always require special equipment for unloading. In fact, the equipment required to unload them, such as a large crane, can take several days advance notice to arrange for in order to be on site when the truck arrives. If anything goes wrong along the way, you should immediately contact the receiving party. You should do so on any load you broker but due to the money at stake, it is critically important that these shipments take priority when it comes to coordinating. Cranes are not cheap to hire. If you are the party who failed to communicate, your customer may ask you to pick up the tab. If you communicate well and give them plenty of notice, they have no case.

In the following example, we’re going to cover a “real life” situation concerning everything we have discussed so far. This should tie things together nicely and give you a better understanding about what to do, what can go wrong and how to eliminate financial repercussion.

You receive a call from Jerry, the superintendent at A+Plus Construction, Inc. They’re rebuilding the framework in a manufacturing plant. The Occupational Health and Safety Administration (OSHA) has given the plant manager 120 days to make the repairs or they will be forced to shut them down until the repairs are made. A forced shutdown would cost them hundreds of thousands of dollars each day. They also risk losing hundreds of employees who will be forced to find work elsewhere. In a race against time, Jerry, the superintendent, outsources the fabrication work to a welding company located 350 miles away.

Jerry asks you to submit an estimate based on the following load requirements:

Listen to the needs of your customer. He has already expressed that his operation is critical! Do not confuse this with price gouging but when time is of the essence, you should be prepared to negotiate, as should your customer.

Explain to Jerry that you don’t have enough specialized carriers standing by. Even if you did, they can usually only supply you with one truck, and coordinating 3 oversized and overweight loads per day out of that area will be rather difficult. In order to meet his load requirements, he should be prepared to pay for dedicated trucks. This means compensating them for going back empty to grab another load.

Under normal circumstances, he would not be willing to pay for empty miles. But he is in a position that he absolutely “must have” this material and you have the means to make it happen. But before you can submit a bid to him, you need to know what the carriers will charge to haul these loads on a round trip basis.

You already know that these loads require special equipment because of their weight. In addition, they are 10 feet wide. They will require permits for both, overweight and over width, however, escorts are not required.

Under normal circumstances, motor carriers equipped to haul these loads would have a slight advantage in the negotiating process. On the other hand, you’ve got several loads to move which somewhat neutralizes that leverage.

IMPORTANT: These loads cannot be hauled on just any flatbed or stepdeck trailer. They are unusually heavy and must be transported on trailers capable of hauling the weight. The proper choice would be be a double-drop, tri-axle trailer. Quad-axle units are more difficult to locate and will likely try to negotiate more per trip whereas tri-axle trailers are more common and although they’re equipped to haul heavy freight, they often make due hauling general commodities.

You now have the load requirements and you’re ready to begin making arrangements. But since you have no idea what to bid, you will need to secure estimates. You can do this in two different ways:

One: Post your freight on the load boards and patiently wait for the phone to ring.
Two: Check the load boards for available trucks. If you have access to carriers capable of heavy hauling, now would be a great time to call them to see if they have empty trucks in the area.

For the sake of this example, let’s say you have located an empty truck on the load board. Since the carrier is more experienced with this type of freight than you are, ask what they would charge to haul your load. Make a note of the carrier’s phone number and politely tell them you will call them back shortly. In the meantime, gather estimates from a couple of other carriers.

Now you have 2-3 estimates. Simply add them up and divide by the number of estimates you have to find an average rate.

The magic number is likely $875 but you’re still challenged with compensating them for deadhead miles (empty miles). $1.00 per mile is usually sufficient for deadhead mileage, especially since there is another load waiting for them when they return to the shipper. In this case, the deadhead mileage rate would total $350 and you’re willing to offer $100 toward the permits.

Line haul rate: $875
Deadhead rate: $350
Permits: $100
——————————
Carrier pay: $1325 round trip.

You have established what the carrier must earn, but what is your commission? I admit, we’re doing this in reverse order, but until you’ve had more experience calculating specialized shipments, this is the safest way to do it.

From here, whatever you can squeeze from your customer is pure profit. And since he has already expressed urgency, you are positioned well for healthy commissions.

Choose a fair commission percentage and negotiate with your customer from there. If you choose to use 15%, the formula you would use is 1325 x 115% = $1523.75. Now, pick up the phone and call your customer, Jerry. Give him a verbal estimate of $1523.75. Otherwise, if you prefer nice round numbers, round it up to $1550 for simplicity and give yourself some negotiating room.

Jerry doesn’t care for the rate but he’s in a race against time to complete his job. He asks if you can broker the freight for $1,450. At this point, you should remind Jerry that his equipment requirements alone will be tough to meet but you’ll split the difference with him for $1,500.

Jerry agrees to $1500 per load. Now what? Lock it in on paper using your Broker/Shipper Agreement and immediately call the carriers you spoke with previously. Tell the carriers each load pays $1325 round trip or round it down to $1300 for simplicity. They’re not likely to squabble over $25 and besides, you have enough work to keep them busy for a few days.

If you’ve never worked with Jerry, have him fill out your Broker/Shipper Agreement. Likewise, if you’ve never worked with the carriers, you will need to get setup with them as well. Have your carriers sign a Broker/Carrier Agreement. Then, have your carriers sign a rate confirmation agreement for each load they haul prior to dispatching them.

Your 3 carriers are loaded and on their way but due to the permit curfews and “Hours of Service” laws governing the amount of hours a driver can legally drive, they cannot make it back for another load until late tomorrow afternoon. You will need to find 3 more trucks and keep them in rotation. This way, you can load 3 trucks each day to keep up with your customer’s job requirement.

On the 6th day, one of your trucks has a minor breakdown. The driver is busy with the truck repair and fails to contact you. So, you call the driver and he explains the situation but he also says it will be the next day before he can make it to the destination. This freight is “must have” and the crane charge is $250 per hour. What now? Call your customer immediately and notify them of the breakdown!

Luckily, your customer (Jerry) has a positive working relationship with the crane company and was able to promptly notify them of the breakdown. The crane company informed Jerry that although they could not allow their crane sit there free of charge, they would only charge him a detention fee of $50 per hour.

So how did you make out through all of this?

NOTE: If you paid close attention, we rounded up on your end and down on the carrier end. This is not to undermine anyone but rather to give you plenty of room for negotiating. If the carrier beats you out of $50 and your customer also beats you out of $50, you’ve just slashed your commission in half! In this case, Jerry beat you out of $50. However, you were successful in maintaining your ground with the carriers for $1,300 per load.

Good communication on your part is paramount. As you can see, not everyone always does what is required of them. And when you’re brokering oversize/overweight loads, you simply cannot afford to rely on others to communicate.

In the example above, you immediately called your customer to notify them of the shipping delay. By exercising proficient communication, you prevented your customer from paying $1200 in unnecessary crane charges. Although, if you had failed in both areas, communication and negotiation, your commission would have been just enough to cover the crane charges you would have likely incurred by not doing your job.

The only time these loads become risky is when you fail to communicate swiftly and clearly. Other than a few extra telephone calls, Overdimensional loads are no different than any other load. The fact that they offer more room for negotiation and fairly healthy commissions, in addition to a certain challenge is why some brokers are drawn to specialize in this area of transportation.

The U.S. Department of Defense outsources its military freight requirements to approved military carriers and freight brokers. They justify utilization of the civilian sector through their massive military transportation demands. And with Federal security being the primary concern, they have carefully designed this collaboration with extreme caution. So far, it has proven beneficial for both civilians and the military, particularly during mass deployment operations.

The U.S. military transportation infrastructure was designed with heightened efficiency in both, day to day operations and major deployments. As a result, military freight ships only to select locations.

Each military base employs various units ranging from Field Artillery to Aviation, Support Units, Special Operations and so forth. However, each base is known for specializing in a particular area of military tactics. As a result, they often ship to and from other installations which share tactical specialties. This creates a semi-consistent set of traffic lanes that can become invaluable to you as a freight broker, but we will discuss more about that in a moment.

These military installations can be found all over the world. When shipments are scheduled to be transported overseas, they are first prepared for transit and approved for transportation by the Non Commissioned Officer (NCO) responsible for that equipment. The shipment is then marked “ready” and sent to base ops for processing. During processing, Base Ops confirms the load contents and notifies the Military Surface Deployment and Distribution Command, (SDDC).

Once the shipment is processed, it is loaded onto a truck and shipped to various sea ports, known as marine terminals. From marine terminals, they are loaded onto vessels and shipped to marine terminals located overseas. Shipments are then unloaded from the vessel and transported via truck to either an inland terminal port or directly to the military installation where the shipment can be inspected, received and distributed to the appropriate unit.

Whether military freight is to be shipped within the United States or sent abroad, it is all shipped via truck at some point. The most common exception to that is when a Military Aviation Division has the means to transport their equipment independently using Cargo airplanes such as the C130, C141 or the C5 which by the way has a maximum cargo weight capacity of 270,000 lbs. That is equivalent to the combined hauling capacity of six commercial vehicles! On the other hand, Aviation Divisions make up only part of our defense system which leaves a tremendous amount of freight available to the commercial trucking industry.

This can become a partcularly profitable niche market for approved military carriers and freight brokers who specialize in overdimensional military freight. Another niche market for carriers is transporting household goods for military families but in order to do so, they must have a published freight mover tariff. The tariff defines freight rate classification to itemize charges for various itmes to be transported.

While military freight rates may seem quite fruitful, the setup process is fairly challenging and rather expensive, particularly if you are just starting out. So, before you decide to do business with the Department of Defense (DOD), there are a number of things to consider. One of these considerations is the performance bond. The performance bond for DOD freight is separate from and in addition to the surety bond necessary to obtain your freight broker authority. These are two completely different bonds.

LISTEN CLOSELY: The only way to circumvent the performance bond requirement is to become an agent for an approved broker who is already established with the DOD. Yes, you can be an agent and a broker. In fact, many brokers become agents for DOD approved brokers and carriers. Doing so allows them to bid on military freight that would otherwise be out of reach. The important thing to remember is that when you are acting as an “agent” you are just that. YOU ARE AN AGENT.

You cannot use your freight broker authority to “broker” a load to a carrier when you assume the role of an agent for another firm. This is because your parent broker is the entity under contract with the DOD and you are now the agent. Therefore, these loads must be tendered under the authority of that broker.

When the military has freight to move, they begin working down a list of approved carriers and freight brokers. We will be going over the approval process momentarily but for now, the point of interest is “how far down that list will you be once you’re approved?” Besides the performance bond, the bidding process is yet another reason you might consider pursuing an agent position with a carrier/brokerage already established with them.

Why? Like any other business, the DOD has a list of business partners. In this case, it is a list of approved carriers and brokers. And while that list is supposed to be worked in numerical order, you must realize that the people issuing these shipments are human beings. Like the rest of us, they have the ability to make human decisions.

Although it would appear suspicious for them to continually issue freight to carrier #147 on their list, occasionally skipping carrier #7 and broker #13 would likely go unnoticed. Moreover, if someone on that list is skipped from time to time, it may not be because no one answered the phone. It might have something to do with attitude and relationship.

When you become an agent for an approved DOD carrier/broker, you almost instantly have a relationship with the shipping personnel. You have half of the battle won before you even get started. Whether it is right or wrong, your attitude may decide how often you are called. Although one setback you might run into from there is that some carriers/brokers use only designated agents for their military freight so be sure to ask before you choosing a parent company.

Sadly, the viewpoint of some brokers, agents, and carriers can become blurred working with military freight. This leaves the “big picture” unfinished and even worse, unsuccessful. They tend to get so caught up in military freight that they actually miss vast opportunities which trail behind their own work. The brokers, agents, and carriers who understand this common sense concept can virtually feed their business off of the ignorance and lack of experience of other companies.

The freight opportunities trailing behind these semi-consistent military traffic lanes can be just as fruitful as the military freight itself. Where opportunity may lack in the area of freight rates, it may prosper in another. One example of that is truck availability. Another is that military communities tend to flourish, which helps stabilize the local economy in that area. With that being said, your obvious course of action would be to solicit your freight services within proximity of those communities.

The government uses abbreviations to reference particular departments and publications. Below is a short list of military and public terms you’ll see throughout the application process.

In order to broker or transport freight for the Department of Defense, you must comply with the following:

You will need to have the following in place prior to the approval process and they should be obtained in the order they are displayed.

If you would like to pursue business relations with the Department of Defense, you can review the registration details in the links provided below. These links will take you directly to the SDDC registration instruction forms which will ensure the most recent updates and accurate procedures for getting approved with the DOD.

Please be aware that you cannot conduct business with the government if you or your company is on the Excluded Parties List (EPL). The EPL is a list of contractors who have been debarred, suspended or declared ineligible by ANY government agency. If you or your company is on that list, you will be ineligible to work with the Department of Defense.

https://www.sddc.army.mil/fcrp/Pages/fcrp.aspx