Most companies that hire a third-party freight broker do so thinking they’ll get access to better discounts. This is seldom true and usually a mistake. Any company, with the right approach, can negotiate rates that are more competitive directly with carriers. And, keeping freight contracts between you and your carriers comes with a lot of other benefits.
You Keep the Margin
Of course, most business decisions come down primarily to cost. If you rely on a 3PL or broker to handle load booking and freight payment, you may never know exactly what you are paying. But you will know you are paying something extra. A shipment might cost $1,000 if it’s booked directly with the trucking company. However, a broker or 3PL could charge you $2,000 or more by adding in extra margins and fees. Cutting out the middle man ensures these extra costs and surcharges are eliminated. These companies are not in the business of doing anything for free and the ‘value’ they add usually doesn’t justify that additional cost.
Keep the Control, Too
When you use a third-party freight broker you are trusting that the broker will make the right decisions on your behalf. The reality is they want to do what is best for them. Keeping logistics management in-house means decisions are made with your interests in mind. A second benefit is you maintain control of your own shipping data which is very useful in its own right. Having this information, and building it over time, enables smart shippers to become better negotiators and improve their logistics operations with good, data-driven decision making. Working directly with a trucking company gives you better visibility over your shipments and carrier performance data as well.
Reliability & Accountability
Just finding a reliable freight broker is a challenge. Brokers need to be licensed through a branch of the Department of Transportation, however, the only requirements are a small application fee and evidence of a surety bond. It’s a sticky business in many ways, with no regulations or rules regarding training. This means just about anyone can call themselves a freight broker, allowing for pretty much anybody to enter the industry.
Freight claims due to damages and loss can be big and be too much for many small brokers to handle. This can expose everyone involved to a lot of unexpected risk when problems come up. Shippers can also take on accountability for unpaid carrier invoices that their own brokers may skip out on – even if they’ve already paid the broker themselves.
Negotiating freight rates directly with your carriers is in your best interest not only from a cost perspective but from an overall business strategy. Your shipping operation is vital to the service level you provide to your customers. Trusting this responsibility to a 3PL should not be a decision made lightly.