|
|
Freight Brokers
Freight Brokers use phrases such as "Third Party Logistics Company", "Freight Specialists" or even "Professional Freight Servicing Company" to describe their business. And their websites will be loaded with a variety of smooth phrases:
Sounds nice. Sometimes sounds like snake-oil being pedaled, but sounds nice never less. But regardless of the words used, these companies should be correctly identified as FREIGHT BROKERS. While the fundamental purpose of a freight broker is to match customers with freight companies, in reality the purpose of a freight broker is to sell Less Than Desirable Freight.
What is "Less Than Desirable Freight"? Think of Less than Desirable Freight as being very similar to the off-season travel package to Fairbanks Alaska with hotel accommodations in the '"luxury" 5-Star Hotel located somewhere between the foot of runway 51 of the Fairbanks International Airport and Blair Lake Air Force Bombing Range. Think I am joking? Right now, somewhere on the internet is a travel company trying to promote their Fairbanks at -40°F Tour Package. It may be a Dog, but it will be highly promoted because Dogs are profitable. Unfortunately each and every freight company has their equivalent of Fairbanks at -40°F Tour Package. For Freight Companies is a town, State, or, God forbid, an entire region. No matter what the Freight Company does there is just no way to fill the trailers that must travel from Point A to Point B. Maybe it is poor location of terminals, maybe their competition is just too strong in that market, or just maybe they have bitten off more than they can chew. Empty trailers cost Freight Companies a lot of money, thus even deeply discounted freight is better than zero revenue. And here come the FREIGHT BROKERS to the rescue. Now, let's be clear, FREIGHT BROKERS can serve a legitimate task of matching customers that want to ship goods to the freight equivalent of Fairbanks at -40°F Tour Package. But just like Travel Brokers, FREIGHT BROKERS perform their task expecting a profit, and hard luck, desperate freight companies should be willing to give up some bigger discounts to the FREIGHT BROKER than the freight company running at 99% capacity. Profits always are big motivators. Want to check the profit motivation of a company? Try this one. Call up your friendly internet travel agency and say you want to travel and have $500 to spend. Does the travel agency suggest a nice cruise to the scenic Bahamas during THE season or does the travel agency suggest Fairbanks at -40°F Tour Package? Let's see, make $5 on the Bahamas package, or make $495 on the Dog of all travel packages? Guarantee the Dog is being highly promoted. Think FREIGHT BROKERS are any different? No. Dogwood Ceramic Supply did some checking around. For a hypothetical shipment traveling between Gulfport MS and Mobile AL, a distance of 60 miles, one very nice online FREIGHT BROKER quoted a carrier that would require 4 business days for service between two points less than one hour travel time apart. There were "no" other service options, yet this online FREIGHT BROKER purportedly deals will all of the top carriers. Seems like Dogs are always highly promoted.
Over and over-again, Dogwood Ceramic Supply has seen such unusual actions by "leading" FREIGHT BROKERS: Need goods shipped from Dallas TX to Gulfport MS? In Dogwood Ceramic Supply's experience, if a FREIGHT BROKER chooses the carrier, the 5 pallets will sit in a New Orleans LA terminal for 7 business days while the Freight Company chosen by the FREIGHT BROKER tries to arrange for a rental truck to visit Gulfport. Very impressive. Need a shipment to travel from Chicago to Dogwood Ceramic Supply in Gulfport, MS? The best carrier according to several leading FREIGHT BROKERS will have their closest terminal to Gulfport located in Jackson MS (165 miles away). There are alternatives available but the company chosen by the FREIGHT BROKER is far less expensive and offers superior service.... or so they claim. Are there alternatives to the choose of carrier made by FREIGHT BROKERS? Absolutely. The ABF terminal is exactly 5 miles from Dogwood Ceramic Supply and the Roadway and Yellow Freight Terminals are less than 1 mile. One must wonder why the 3 largest freight companies in North America, all of whom have terminals in the immediate market, are not qualified to service the local market according to these leading FREIGHT BROKERS? Why all the poor service? Can one say "Profit Margins"? Seriously. The choose of freight company is not motivated by service standards or low damage rates, the choice always is based upon the most profitable carrier for the FREIGHT BROKER. If there is any doubt as to the motivation of the FREIGHT BROKERS, just check their websites. "20 freight carriers", "wide variety of qualified carriers", "extensive network of freight carriers" and "largest selection of freight carriers". Can anybody identify a trend? Large network of many freight carriers and the Freight Broker chooses the carrier based upon? Price. They said so. Oh sure the selection process was hidden in the slick phrases, but the emphasis was always on price. And how can a FREIGHT BROKER offer a better price? Buying power? Maybe. Highly motivated Freight Company eager or desperate to unload their Dogs? Oh yea. For a FREIGHT BROKER which is easier, working your butt off for a few pennies or shaking the Desperate Tree to find the carrier of the week willing to give up big discounts? The Desperate Tree is such easy pickins.
But, But, But.... the FREIGHT BROKER swears they can save me money. Oh really? How?
Let's assume for a moment that a particular load shipped via ABC Freight from Chicago to Gulfport MS will cost $1000 when shipped on Dogwood's deeply discounted tariff (excluding applicable fuel surcharges). Let's assume for a moment that Dogwood's tariff with ABC Freight is 75%. This means the standard list cost of this shipment would be approximately $4000. For giggles let's say ABC Freight gives the FREIGHT BROKER a rather substantial 75.5% discount across the board. The margin the FREIGHT BROKER has to play with on this hypothetical shipment is only $20 to capture Dogwood's business and still make a profit. Not very likely to happen, in fact most FREIGHT BROKERS are going to walk away at this point. BUT the "smart" FREIGHT BROKERS know they have an ace up their sleeve. Yep, just over the horizon is XYZ Freight Company. XYZ is desperate for business. The trucks of XYZ are running at only 25% capacity and XYZ is circling the drain as we speak. Remember, some revenue is better than zero revenue and XYZ is ready to deal. SO XYZ offers the FREIGHT BROKER an astounding 95% discount across the board and will cap fuel surcharges at 20% of revenue until 2011. Yep, XYZ is really desperate. Now, that hypothetical shipment from Chicago to Gulfport will cost the FREIGHT BROKER a low, low price of $200 plus $40 fuel surcharge. And remember, Dogwood's price via our selected carrier is $1000 plus fuel surcharge. Whatever the FREIGHT BROKER squeezes out of Dogwood in revenue is going to generate some rather substantial profits for the FREIGHT BROKER. And everybody knows there is a reason XYZ is so desperate for business. Damage rates are approaching 50% for shipments going through their Memphis, Dallas and Atlanta Hubs. The Chicago Hub is a wasteland of drunken zombies that have been known to loose trailers for weeks at a time. The New Orleans terminal is located in a flood zone and shuts down every time an afternoon thundershower appears on the horizon. XYZ's long haul drivers are threatening to strike and the company's bookkeeper, who was the wife of the CEO, is wanted on a Federal warrant for embezzlement of the employee health care and pension fund. And the FREIGHT BROKER is recommending XYZ because they offer superior service at lower costs than other carriers.
Yep, P.T. was correct, there is one born every day.
Do yourself a favor, just say no to FREIGHT BROKERS.
© 2008, Dogwood Ceramic Supply
Showroom Business Hours: Closed Wednesday and Sunday Web Page Last Updated: Dogwood Ceramic Supply, the complete source of ceramic and pottery equipment and supplies for professional and hobby ceramist and potter. |
