The logistics industry is complex, with various roles contributing to the seamless movement of goods across the country. Two key roles in this sector are freight brokers and carriers. While these roles are distinct, some companies explore whether they can operate as both. But is it feasible or advisable to wear both hats?
Join us as we examine the ramifications of operating as both a broker and carrier.
Freight Brokers Explained
Freight brokers are intermediaries between shippers who need to move goods and carriers who transport them. They do not physically handle the freight but coordinate the logistics to move the cargo efficiently and cost-effectively. Freight brokers must have strong industry knowledge, negotiation skills, and the ability to manage relationships with both shippers and carriers. Their role is crucial in finding the best match for transportation needs, often helping to cut costs for shippers while maximizing profits for carriers.
Carriers Explained
Carriers, on the other hand, are the parties responsible for physically transporting goods. This role can be fulfilled by companies that own fleets of trucks or are independent owner-operators. Carriers are responsible for ensuring that goods are delivered safely and on time. They manage the operational aspects of transportation, including route planning, vehicle maintenance, and regulatory compliance. The success of a carrier’s business depends heavily on their ability to deliver reliable service and maintain a well-functioning fleet.
Can you be a broker and carrier?
The short answer is technically yes–a company can operate as both a freight broker and carrier. This practice is referred to as holding dual authority and typically entails a trucking company also holding brokerage authority.
In the past, it was more common for trucking companies to also broker loads, provided they had both Federal Motor Carrier Safety Administration (FMCSA) Motor Carrier (MC) and property brokerage authority. Dual authority often came about when a trucking company wanted to expand and chose to add on brokerage services.
Today, however, this practice is less common and often viewed cautiously due to its similarities with the fraudulent practice of double brokering. To adhere to evolving industry standards and expectations, many well-established, decades-old logistics companies split into two distinct businesses with separate authorities, operations, and staff.
The Downsides of Dual Authority
While possessing both authorities allows a company to be a one-stop-shop for customers, there are several challenges and potential downsides to this approach:
- Double Brokering Concerns: Double brokering, where a broker reassigns a load to another broker without the shipper’s knowledge, is a significant issue in the industry. Companies that operate as carriers and brokers under the same MC number might be perceived as double brokering, even if they aren’t. This perception can damage business relationships, as some companies have strict policies against working with entities that hold both authorities under the same MC number.
- Liability Issues: Managing both a carrier and broker business under one entity can expose both operations to greater risk. In the event of a lawsuit, both sides of the business could be jeopardized. To mitigate the risk, it is best to operate each business under separate legal entities and maintain clear distinctions between the two.
- Insurance Complications: Insurance companies often prefer or require that brokerage and carrier operations be conducted under separate businesses. Obtaining insurance can be more challenging or costly when the two are combined under a single MC number.
- Operational Demands: Brokering and carrying freight are demanding jobs that require significant time and resources. Running both operations simultaneously can stretch both resources thin, potentially leading to inefficiencies or reduced service quality in one or both areas.
In summary, while it is technically possible to operate as a freight broker and carrier, the complexities and risks often outweigh the potential benefits. Keeping these operations separate under distinct legal entities is a wiser and more sustainable approach for most businesses. This separation helps to protect both sides of the company and creates more efficient operations.
Apply for Freight Broker Jobs at First Star Logistics
At First Star Logistics, we believe in setting up our customers and employees for success. If you’re passionate about freight logistics and want to advance your career, consider joining our team. We offer competitive benefits and a supportive environment designed to help you thrive.
Here’s what you can expect when you join First Star Logistics:
- Highest commissions in the industry
- Weekly pay
- Proprietary software
- Potential sign-on bonus with book of business
- 24/7 agent support to allow you to be as productive as possible
- Low customer saturation
- A sports-loving company
- Welcoming and positive work environment
If you’re ready to take your career to the next level, apply today!