In the vast world of the logistics industry, it’s crucial to have well-organized coordination and smooth transportation. Right at the center of this complex system are two important roles: freight brokers and dispatchers. These experts have vital jobs in making sure that products get to where they need to go quickly and without any hiccups. To succeed in the world of freight transportation and logistics, it’s really important to understand what a freight broker business does, what a dispatcher’s job involves, and how these two roles are different.
What is a Freight Broker?
Freight brokering is when a broker agent serves as a middle man with excellent communication skills between shipping companies and carriers. Many freight brokers pick up their profit by negotiating rates with shippers and negotiating a different rate with owner-operators. In other words, sourcing you available loads for the best rates. Brokers work hard to keep truckers in business because it keeps them in business as well. The main difference between the two rates is the freight broker’s commission. As a result, freight brokers are motivated to encourage shippers to pay high rates while offering carriers a rate that helps them make a profit. If you do not have good negotiation skills, knowledge of pay rates in certain lanes, and know your operating cost when dealing with a freight broker, it is easy to accept loads that can sink your business. It is important to be very selective when choosing a broker (some are more motivated by profit than others). If the freight broker also offers quick pay, they take another percentage from the carrier’s agreed-upon rate.
X Shipper has an open load and reaches out to Y Broker to find them a carrier. X Shipper and Y Broker agree on a rate of $2,000. Y Broker then reaches out to ABC Trucking about the open load. Y Broker is not required to disclose the originally negotiated amount to ABC Trucking. As a result, ABC Trucking agrees to haul the load for $1,600. Y Broker keeps the $400 difference as commission.
ABC Trucking also uses Y Broker’s Quick Pay option, which takes 2% out of the $1,600. The end result is ABC Trucking receives $1,568 for a load originally negotiated for $2,000. Y Broker makes $432.
What is a Truck Dispatcher?
Independent dispatchers or a truck dispatch service represent the carrier when negotiating freight. They take a percentage off the carrier’s negotiated rate, so a dispatch service is motivated to find carriers higher paying freight. The higher the rate they can find for the carrier, the more money they make. Good dispatchers will keep portfolios with their carrier’s lane preferences, desired freight rates, and equipment specifications. Using this information, the dispatcher then contacts the shippers or freight broker on the carrier’s behalf to negotiate loads that meet the carrier’s requirements. Only after a load is agreed upon does the dispatcher charge the carrier a fee for the service. Also note, if the carrier uses factoring, many dispatchers will create and submit invoices to the factor on the carrier’s behalf. However, all dispatchers are not created equal, as some will charge additional fees or make you book a monthly minimum. As always, be sure to ask those questions before hiring a dispatcher or signing a contract.
Let’s continue with the example above. X Shipper agreed on a rate of $2,000 with Y Broker. However, this time instead of using Y Broker directly, ABC Trucking is using Z Dispatcher to find freight. Z Dispatcher knows ABC Trucking needs to make at least $1,600 on the load to stay in business, and also has knowledge of what each load should pay. Z Dispatcher contacts Y Broker about the open load. Y Broker offers the load at $1,600, but Z Dispatcher declines the offer. The two negotiate until Y Broker agrees to a $1,800 rate. Z Dispatcher contacts ABC Trucking about the load and ABC Trucking agrees to haul it. Z Dispatcher charges ABC Trucking a 5% fee. When everything is done, ABC Trucking pockets $1,710, Z freight Dispatcher makes $90, and Y Broker receives $200.
What is the Difference?
When it comes to finding freight in the trucking industry, motor carriers have several key differences such as load boards, freight brokers, and dispatchers. These services dominate the industry offering their services to truck drivers. If you do not have time to search through the load boards yourself then you are probably thinking of using a freight brokerage to sometimes call a broker or a dispatcher. Both work as intermediaries between shippers and the trucking company, but which one is best for your business?
They Work for Different Stakeholders
One of the fundamental distinctions between freight brokers and dispatchers lies in the stakeholders they primarily serve. Freight brokers act as intermediaries that serve the interests of both shippers and motor carriers. They bridge the gap, connecting shippers with suitable carriers, and ensure that the transportation process runs smoothly. This dual focus makes freight broker training important for these versatile professionals who negotiate contracts and terms beneficial to both parties.
Dispatchers are typically employed directly by the motor carrier or trucking company. They are dedicated to the carrier’s interests, ensuring that the company’s trucks and drivers are efficiently scheduled, monitored, and coordinated. Dispatchers are the linchpin of the in-house logistics operations, focusing on optimizing routes and schedules to maximize efficiency.
They Have Different Priorities
Freight brokers and dispatchers have distinct priorities in their daily operations. Freight brokers are primarily concerned with ensuring that the interests of both shippers and carriers are met. They negotiate favorable terms, rates, and contracts to benefit both sides, creating a balanced and mutually beneficial arrangement. Their goal is to match shippers with carriers and oversee the contractual and logistical aspects of the transportation process.
On the other hand, dispatchers are focused on the day-to-day operations of the motor carrier they work for. Their priority is to manage the fleet’s movements in real-time, ensuring that cargo is delivered punctually, routes are optimized, and drivers adhere to schedules. Dispatchers are instrumental in addressing unforeseen challenges, such as traffic disruptions or vehicle breakdowns, to minimize delivery delays and operational hiccups.
They Have Different Skillsets
Freight brokers and dispatchers also bring distinct skillsets to the table. Freight brokers excel in negotiation, client interaction, and contractual expertise. They are adept at building and maintaining relationships with shippers and carriers, skillfully negotiating contracts, and identifying the most suitable carriers for specific cargo needs.
Dispatchers are logistical experts with strong organizational and multitasking skills. They possess a keen ability to manage a complex web of tasks, such as route planning, driver coordination, and real-time problem-solving. Dispatchers are agile in adapting to the dynamic challenges of day-to-day trucking operations.
Which One Should You Use?
The choice between employing a freight broker or a dispatcher depends on the specific needs and goals of your trucking business. Both options have their advantages and disadvantages, and the decision may vary based on factors such as the size of your fleet, the extent of your logistics operations, and your preferences for client interaction.
Ultimately, it’s essential to weigh the positives and negatives of each option and align them with your business’s unique requirements. Whether you opt for the versatile negotiation and matchmaking skills of a freight broker or the on-the-ground operational expertise of a dispatcher, the decision should enhance your business’s efficiency and profitability in the competitive world of trucking.
Freight Brokers – Convenient and Easy to Use, But Motivated to Offer Lower Rates.
Freight brokers tend to have close relationships with shippers, so they are convenient to use. However, they make more money by offering carriers lower rates. Their goal is to find the fine balance between offering carriers lower rates while also enticing carriers to continue taking supply chain loads directly from them. Some brokers are better to work with than others. Learn how to find a freight broker.
Dispatchers – Motivated to Find You the Best Paying Freight, But Usually Works Through Intermediaries As Well.
Dispatchers work closely with carriers to find them the best freight rates. However, most dispatchers work with freight brokers or load boards to find freight; if you find one that works directly with a shipper, that’s great! Remember, dispatchers do not make money unless you do, so a dispatcher’s goal is to negotiate the highest paying freight possible.
Developing good relationships with shippers is the ideal scenario, but is likely not a viable option until your company is large enough. You will almost always have to deal with load boards, freight brokers, or dispatchers in some capacity. Arm yourself with rate knowledge, work on your negotiation skills, know your costs, and be selective. If you need help, TAFS is here for you. Give us a call at 913.393.6100