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.