Smart Shippers use one broker only.

By Juan Ariztmendy

When a shipper gives the same load to multiple freight brokers thinking he/she might get better coverage or even a better price they are mistaken. This only generates a distortion in the market that ends up costing the shipper more money in the end.

For years I have been explaining this simple concept to our customers and friends but after seeing what has happened with rates in certain lanes during this past few months I feel that I need to write about it, maybe this way some shippers might keep this information in mind the next time they find themselves in a tight truck market.

To clarify the concept, I must explain some of the basics of truck brokerage.

1)      We all hunt for trucks in the same ways, from CHR and TQL to the small mom and pop broker.2)       We all use the same trucks, big or small brokers we all share the trucks available in a market.3)       Even asset based brokers (very few are and those have very little equipment), will not have their equipment available most of the time and will go out in the market looking for trucks.

All Freight Brokers use the same methods to attract trucks. Once a Shipper calls a broker with a load, the broker starts to move all these methods in order to cover the load, the load might go into truck stop screens, load boards, emails to truck lines, phone calls, broker’s web site, etc.

As the shipper calls the second broker with that same load, the second broker will do exactly the same as the first one. Now we have 2 loads in the market when in reality there’s only 1. If the shipper calls 15 brokers he generates a fake market with 15 loads when in reality it is still only 1 load.

Now, what do you think happens when a trucker realizes there’s 15 loads on a lane and he’s the only available truck to cover any of those loads? He reacts based on “supply and demand” economics, he will immediately raise his price to move a load in that lane and will start calling brokers offering the truck at a higher price, and he will continue to call all brokers offering the same truck but each time at a higher rate. Each broker will in turn call the shipper and will tell him “I found a truck but they want more money than usual”. At this point, even if the customer tells the broker to secure that truck at the higher price we cannot forget there’s more broker looking for the same truck so the truck might get a higher price offering from another broker that might “steal” the truck away from the deal, only to call the customer back with an even higher rate. When the customer goes back to broker 1 he already lost the truck to broker 2 who offered more of the shipper’s own money to the trucker. The process repeats itself until the shipper pays maximum possible price for the truck.

Through his own market distortion the shipper has now spent much more than he would have if he had trusted one broker with the mission of finding that truck in the first place. If this same shipper had given the load to only one broker, that broker will eventually have found the truck that was available to do that load and the shipper would have paid a price much more in tune with the reality of the market on the specific day.

My advice to Shippers, using multiple brokers will only generate higher prices for yourself by creating a fake market. Find a broker you can trust, one that will be by your side year round regardless of market conditions and one that has the level of customer service you like. That way you will always enjoy better results.

When a broker tells you there’s no trucks in an area, he’s not lying or has less resources than other brokers, chances are there might be one available in a few hours, patience is key to avoid creating a fake demand when that truck does become available.

Interesting facts about trucks part

• A standard automobile weighs about 5000 lbs. A standard truck loaded can weight up to 80.000 lbs within legal limits in the USA and permits can be obtained for extra weight if needed. 
• 36287 kg is the legal weight allowed in Canadian roads.
• Legal weight per axle in the USA is: Steer 12000 lbs, Drives 34000 lbs and trailer 34000 lbs
• Did you know a trailer's price is somewhere between $30.000 and $80.000? and that a tractor/truck is around $130.000 to $250.000? This means that a combination Tractor - Trailer may easily be close to $300.000? suddenly flashing the Kenworth keys at the bar seems more impressive. (little joke for the super car owners, no pun intended, well maybe a little)
• Did you know a refrigerated trailer can be used as a stand alone refrigeration unit as it has it's own power?

The Difference Between a Freight Forwarder and a Broker: Why It Matters

by Tim Taylor, Executive Chairman N+FOB

 

Network FOB, Inc.  Is A Freight Forwarder, not a transportation broker; there is an important distinction between the two. A Forwarder Is A Common Carrier (not to be confused with a Motor Common Carrier) under the law and, as such, a Forwarder Must Adhere To Carmack Amendment Liability Set forth in USC code §14706 (2005) setting forth the proper handling of freight loss and damage claims. Under federal regulations a forwarder has the same cargo claims responsibility as a motor carrier.
 

Use this link to access a study of cargo liability by The US Bureau of Transportation Statistics (BTS)

http://ntl.bts.gov/lib/22000/22900/22922/cargolivab.pdfLink
 

To ensure our ability to perform on Cargo Freight claims Network FOB maintains primary cargo coverage in the amount of $250,000.00 a certificate offering evidence of such is available on our website. Brokers typically forward freight claims onto the carrier for handling.  Many brokers carry contingent cargo insurance not the more comprehensive primary cargo coverage as recommended for forwarders.

 

Brokers do not have a statutory freight claims liability under Carmack. Brokers typically have contingent cargo insurance coverage because unless the shipper has a contract with the broker specifically accepting such liability, they’re not liable in the event of a loss, (absent provable negligence) on the broker’s part.

A broker is not a carrier (common or otherwise) they are a broker.  Brokers arrange transportation with a carrier, either on behalf of the shipper or behalf of the carrier.  Under the law, brokers are not statutorily responsible for loss or damage and cannot issue bills of in their own name and should not be named in the carrier field of a bill of lading. Network FOB by virtue of its standing under the law is required to and does issue a bill of lading for the shipments they carry.

It’s important to appreciate the difference between contingent and primary cargo insurance coverage:  You can never simply assume a broker’s policy will cover the goods in the event of a mishap.

 

Contingent Cargo Insurance is for the protection of the broker, not you, the shipper.  If a carrier, through tariff or intransigence, determines an otherwise valid claim to be invalid, or simply ignores it which many do, would the contingent cargo insurance that the broker might carry step into the breach and fulfill the carrier’s obligation? The answer is maybe, not absolutely.

 

In most cases, Contingent Coverage kicks in only if the carrier’s insurance coverage is defunct.  If a motor carrier simply refuses to accept the claim, often the shipper’s only remedy is to hire counsel and attempt to prosecute the claim and trucker in court.  Prosecuting the broker would have no effect due to their lack of liability under statute. They can be named in a suit but most courts would rule against a recovery from the broker unless the broker’s negligence caused the claim.

 

The important part of the process here is responsibility and the approach to the application of that responsibility. A shipper using a trucker through a broker, is not the carrier’s (trucker’s) bread-and-butter customer.  Whether a trucker responsibly processes and pays a claim without being forced by a court of law sometimes is a matter of customer relations and, absent a true customer relationship, the outcome is not assured.

A Forwarder, on the other hand, is not only more comprehensively covered by cargo insurance, but also willingly stands up for the customer and works diligently to resolve the issue with the motor carrier on the customer’s behalf. If the motor carrier reneges their obligation, a forwarder is still responsible for valid freight claims to the shipper, under federal regulations as a requirement of the license they hold.

Nkargo is specialized in refrigerated transportation but they can also help you with your dry freight needs and any flat bed or specialized cargo you need to ship anywhere in the United States and Canada

Refrigerated Transportation Specialists

Next week, FMCSA will publish a final rule extending the requirement for interstate commercial drivers to have paper copies of their medical examiner’s certifications with them when operating a commercial motor vehicle. An advance copy of the rule has been posted to FMCSA’s website. This requirement will stay in effect until January 30, 2015. This requirement applies to any drivers with either a commercial driver’s license (CDL) or the commercial learner’s permit (CLP) who must be medically certified under 49 CFR part 391. Please note that drivers are still required to certify their status (e.g., interstate or intrastate, exempt or non-exempt) with the State Driver License Agency (SDLA) agency before January 30, 2014 and to provide the SDLA a copy of any new medical certificate received after January 30, 2012.

FMCSA also extended the requirement for interstate motor carriers to retain copies of their drivers’ medical certificates in their driver qualification files. This extension of the requirement to carry a medical certificate card was needed to ensure that all SDLAs are prepared to accept and transmit the medical qualification of CDL and CLP holders on the Commercial Driver’s License Information System (CDLIS) driver record.

Please go to FMCSA’s webpage at: http://www.fmcsa.dot.gov/rules-regulations/administration/rulemakings/rule-programs/rule_making_details.aspx?ruleid=468 for more information. 

Nkargo is a refrigerated transportation specialist that services all the United Staes, please visit us for Freight Rates at any time.

More interesting facts about trucks

Did you know a new trailer cost is between $30.000 and $80.000?
Did you know a new tractor truck cost is between $130.000 and $270.000?

This means that a new combination tractor trailer can be on average between $160.000 and $300.000, I guess now Bob the driver looks a little more appealing to some... lol

No pun intended, just a little morning humor. Enjoy the rest of the week.

#TransportationBrokers

Facts about trucks:

Engine differences with your car:

• A semi transportation truck engine is about 5 to 6 times larger than a regular car's engine both in size and in weight.
• A regular car produces about 100 to 200 Horsepower and around the 100 to 200 FT.LB. of torque, a semi truck will go produce about 600 horsepower and about 2000 FT.LB. of torque.
• While a car engine is designed to last about 150k to 200k miles a semi engine is designed to go over 1'000.000 miles before even an overhaul or rebuilt, and they are designed to run nonstop, they used to be shut down only for repairs or maintenance until states started adopting anti-idle laws to help the environment. 
• Your car takes about 4 quarts of oil, max 6 if you have a big SUV or Pick Up, a semi's motor holds about 15 gallons of oil.
• Your car has about 4-5 speeds, a semi has about 12 and up.
• A turbo charger is a standard component on a semi truck engine, not on a regular car.
• A semi truck's engine has an air-brake system to aid in the breaking process. 

News from our friends at DAT for Reefer availability in the US.

The USDA came out with their weekly market report today and indicated tight conditions for refrigerated trucks & equipment in SW Indiana, SE Illinois, Southern Michigan (melons), Nebraska, and the Columbia Basin in Washington state. It looks like they missed a few hot spots that brokers and carriers may wish to update:

Grapes in California - The California grape harvest has been hitting record levels for nearly three weeks. The grape harvest started in May and can extend into January. DAT sees strong evidence of constrained truck capacity in the Fresno market, where well over a thousand reefer loads were chasing fewer than 200 trucks yesterday, boosting the load-to-truck ratio to 6.5. The Fresno market includes Bakersfield and Santa Maria near the Pacific Coast, and much of the San Joaquin Valley. Further up the coast, Salinas and Watsonville are also stretched for equipment. Trucks are not nearly as tight in the southern part of the state, where the Santa Ana market continues to produce avocados and citrus with seemingly adequate truck supplies.

Apples Everywhere - Last year’s apple production was 2.7 million bushels in Michigan, and this year is projected at 30 million bushels, more than a 10X increase. Michigan's load-to-truck ratio leaped to an average of 18 yesterday with strong load volume. The entire state looks tight for trucks, especially towards the western part of the state. Reefers in the Grand Rapids market faced a load-to-truck ratio of 36 yesterday. New York will also be back at or near full production this season. Last year, the Empire State produced 17.1 million bushels and is expecting a whopping 30.5 million bushels this year. Washington State is likely to be the top apple producer again at 143.9 million bushels, a decline of 7% compared to last year's 154.8 million bushels.

Potatoes in Wisconsin - A shortage of both reefers and vans is plaguing growers in central Wisconsin -- including Marshfield, Appleton and Green Bay. Yesterday’s load-to-truck ratio for reefers was 37 for the state, and the van ratio was 6.5, with well over a thousand load posts for each of the two trailer types. Bumper crops include cabbages and potatoes. Idaho also grows fall potatoes, of course, and volume is building in that state, as well, with more to come.

Bountiful Harvests - Crops are coming in strong all across the country. Favorable growing conditions have been reported in locations from Delaware, eastern Virginia, and New Jersey, to the Upper Midwest for Michigan, Minnesota, and Wisconsin, out to the West Coast where San Diego is seeing a strong tomato crop, and Oregon is producing grapes as well as tree fruit.

Timing May Lead to Labor Shortage - The only sour note found was a concern that the timing of the seasons could result in labor shortages for some California crops. If growers must compete for skilled labor, the end result could be lower yields, higher prices, or both.

Nkargo Logistics strives to keep our customers moving year round no matter the conditions, check with your transportation specialist at 713-623-1434 to get your transportation needs covered or visit us at www.nkargo.com

Sources: DAT RateView, DAT Hot Market Maps, USDA Fruit & Vegetable report for 9/4/2013, The Produce News and The Packer.