Month: October 2019

There’s quite a bit of information out there about freight brokers, load boards and freight marketplaces, so deciding which of these models fits your operation best can be a challenge. If you aren’t sure what the differences are between the three, make sure you read our previous post which explains what role each model plays. When making this important decision, both shippers and truckers have a few things to consider:

• Market Reach – How many shippers, loads and carriers are engaged with each model?
  
  
  1. Freight brokers tend to be on one end of the spectrum with a smaller network of carriers and shippers. While their networks tend to be relatively small, freight brokers build strong relationships over time with the shippers and carriers they work with.
  2. Load boards fall on the opposite end of the spectrum from brokers with large volumes of loads available and a large number of carriers looking at those loads. Load boards aggregate freight from many brokerages and shippers into one place and because there is little to no cost to access these load boards, there are often a very large number of participants involved.
  3. A freight marketplace is in a bit of a sweet spot since there are typically more loads available than a traditional broker, but fewer than a load board. The same tends to apply for the number of carriers engaged with a freight marketplace. As a relatively new model within an industry that tends to be slow to adopt new technologies, freight marketplaces will continue to grow in popularity but will likely remain smaller than load boards in coming years.

• Flexibility – What impact do spikes in supply and demand have on shippers and carriers?
  
  
  1. A potential downside of freight brokers’ more limited capacity and load volumes s is the lack of flexibility. When unusual spikes in volume occur, freight brokers may find it difficult to scale and cover shippers’ loads at a moment’s notice. On the other hand, if there are fewer loads than usual, brokers may not have freight for drivers to haul. In an industry where margins are razor thin, this can be the start of more headaches and difficulties ahead.
  2. While high-volume load boards provide greater flexibility and more opportunities for shippers and carriers to connect, the flexibility may come at the price of building long-standing, reliable relationships with shippers and carriers that may be beneficial in times of market uncertainty.
  3. Again, freight marketplaces fall between two extremes with less risk than that associated with using a freight broker but easier access to vetted, consistent relationships than load boards. 

• Resources & Level of Effort – What does each model require of shippers and carriers?
  
  
  1. In many ways, working through freight brokers requires the most resources. Limited market reach means they may not always have the capacity that’s needed and, as a result, shippers often need to work with multiple brokers at the same time. Matches between shipper and carrier are also time consuming since this is most often done manually through phone calls, e-mails and faxes.  Additionally, the settlement processes for the jobs are typically done through physical paperwork and traditional payment channels which require time and resources for everyone involved.
  2. Load boards require less effort and resource requirements than freight brokers to pair shippers and carriers. Aggregation of many loads from shippers and brokers translates to more load availability. Numerous carriers viewing the load boards mean the market reach is larger, which increases the likelihood that a load will fit well with available capacity. Matches are still negotiated manually like in the freight broker category which requires significant time and resources for both shippers and carriers.
  3. Freight marketplaces require the least amount of effort and resources among the three options. Shippers post loads as needed along with all the specifics a carrier would need to know to accept or pass on the job. When registering with the marketplace, carriers are fully vetted, capturing exact capacity configurations so only carriers with the right capacity are notified when a load is posted by a shipper. Once the carrier/shipper match is complete, the marketplace handles all documentation, paperwork and settlements making the entire process less resource intensive for everyone.

• Time – How much time does it take shippers and carriers to get connected? Time is money and while this may be the easiest consideration, it is possibly the most important. Establishing the connection between shippers and carriers runs the full spectrum from manual to automated among these three models.
  
  
  1. A freight broker typically requires the most time as a result of limited market reach and a high level of effort/resources to ‘get the deal done’.
  2. A load board is faster than a brokerage because of larger market reach, but still requires the heavy lifting in the back office to handle all of the paperwork and settlements. Also, when services are free like so many load boards are, you’ll always need to consider quality on both ends. You’re also often left to negotiate with multiple parties and finalize “the deal” on your own, which takes time and may not necessarily be successful.
  3. A marketplace is the fastest and most “touchless” of the three models because it instantly and automatically presents shippers’ posted loads to vetted, qualified carriers.  Carriers with the available capacity can simply tap “accept” on a load that a shipper has posted, go get it, deliver it, capture documents electronically and get paid.  All of the back and forth discussions and exchange of paperwork is automated and touchless for both sides of the job.

Pointing to the strengths of a freight marketplace over other options seems obvious, doesn’t it? Bringing technology forward to address some limitations of traditional freight brokerage while also fostering the speed and ease of a marketplace certainly has its advantages. While the freight marketplace seems to be the best option for most loads when a marketplace is available, be sure to do your research. You’ll have the flexibility of a load board but will need to place your trust in the right marketplace to make sure they’re negotiating fairly on both the shipper and trucker end. Only then does a freight marketplace truly excel.

Questions about how Cargomatic can help you succeed? Connect with us today!