Pros and cons: Brokered vs. direct shipper freight

Posted: 08 Mar, 2019 by Chad Boblett


19 Comments

Categories: Best Practices and Benchmarks

Tags: CarrierOwner-Operator


The kind of freight you choose to haul, whether it's through a broker or direct from a shipper, is an individual decision that is determined by a person's wants, needs and goals. I choose to work just with brokers, and February marked my seventh year pulling only spot market loads.

Every month I compare my average loaded rate per mile with the national average contract rate. I have always been able to outperform this rate just running the spot market. If my rates started to drop below that number, then I would be more inclined to do direct shipper contract loads, but that has not happened yet for me in the area I live.

DAT load boards provide the largest and most trusted digital freight marketplace in the trucking industry, with more than 256 million loads and trucks posted annually, plus insights into current spot market and contract rates based on $60 billion in real transactions.

Obviously, some months on the spot market are more challenging than others – it’s easier to beat the average contract rate in June than it is in February. The trade-off is that I will usually run fewer miles with more home time. Most days start with a new adventure, and since I have no long-term business commitments, I’m able to take time off when I want.

That’s why the spot market works for me.

If an owner-operator or carrier wants to build a fleet, start a brokerage, get paid the same rate during good and bad times, go to the same shippers and receivers and a set schedule, then working with direct shippers should be the goal. I love the positives that come with working directly with shippers, but that has its own challenges.

Ongoing relationships are critical with direct shippers, and these relationships will be challenged the most when the spot market demand for trucks is at its lowest. That creates extra competition for the shipper's business, with many brokers and carriers racing to the bottom in terms of price in order to win the shipper's business.

Ever wondered why we still have a problem getting paid detention in this industry? It is often because of fear of losing the customer to another carrier or broker that will not charge for waiting.

My direct shipper hack

The hardest part of getting my foot in the door with shippers is that I am a one-truck operation. That limits my ability to service all the needs of a shipper adequately. I have made deals with brokers that I have great relationships with. When I refer a shipper customer to them, I get to pick the loads from that customer that I want, and I get the same negotiated rate that the broker receives.

My broker friends are better at negotiating a long term deal than I am, and I am better at recommending an excellent service to shippers, so it’s a win-win for all parties involved.

 

Chad Boblett is the owner and driver at Boblett Brothers Trucking of Lexington, KY. Chad also founded the Rate Per Mile Masters group on Facebook, a communications hub for more than 23,000 members, including owner-operators, truck drivers, and other transportation and logistics pros.

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  • profile

    TERRY STEVENS

    • 3/9/2019 10:03:31 AM

    IM AONE WOMAN TEAM IVE BEEN TRYING TO FIND GOOD BROKERS THAT GIVE YOU A FAIR SHAKE I WOULD LIKE TO KNOW YOUR BROKERS!!!!!

    Reply 1 comment
  • profile

    Nezam

    • 3/9/2019 8:29:05 PM

    the down fall of our industry is simply brokers! They all try to undercut one another and sell their service to customer by taking away from the carrier. For example getting paid detention or a driver unload is almost unheard of now a days. Not because it does not exist but because brokers sold there service with that left out to be more appealing so carriers are left eating the loss. Most brokers often do not understand a carriers HOS and expect them to deliver loads while driver is in violation. These little things brokers do to sell there service are running our industry as a whole. Brokers need to either stand there ground and be firm with customers and provide them excellent customer service but remembering everything comes with a price, or move to the side and allow carriers to work directly with customers.

    Reply 7 comments
  • profile

    Steven J

    • 3/14/2019 5:37:12 AM

    I run both direct and broker freight. Chad's exactly right on the loss of flexibility with direct freight. Although most of my direct freight is in the winter, and my rates are about 3 times what could be collected on spot market freight, there is no flexibility. My Christmas, super bowl, and other plans are at the whim of my customer. And, no matter the weather, the load has to be there. I run according to their schedule. When they call, I jump. But they pay well for my waiting and downtime in addition to my mileage rate, and pay my invoices upon delivery. On the spot market I can post my truck, give them my rate, regardless of the so called "market rate" and usually they balk, then about 30% of the time they call back after they missed the pickup, pay my rate for me to cover the load. But I'm not running my truck below my total cost per mile. If I have a problem come up, I have the funds in my accounts to cover it. It's better to run empty to a good rate, than take a cheap rate to get out of a bad area. I've done it both ways, and over 35 years of experience has proven this out time after time. At the end of the month, including my DH miles, my rate per total miles is higher when I just say no to cheap freight and reposition to a better freight area. Search out 300 miles and have a plan before you just DH out. The problem since the ELD is that large carriers are just refusing "problem freight " which then ends up on the spot market. Since the ELD most of my spot market freight has resulted in detention, delays, and difficult shippers and receivers. Due to this I will soon purchase the shippermate product from Internet Truckstop, which lists those good contacts to target my sales calls. And now that the spot market rates are below the cost to operate, it's the perfect time to focus on sales calls. Be prepared to contact each prospect about 5 times before they may give you a chance with a load. Then depending on how you handle that load, a future contract may result. The chunk the brokers take pays for all this time, gas, and lunches that the average OO doesn't see. Each direct shipper takes quite a bit of time, and the larger the company, the longer it takes them to pay. That's why I try to target small companies that ship fewer than 5 loads a week. I'd prefer 5 companies that ship one load a week with me, than 1 company that ships 5 loads, as if I lose a customer I only lost 20% of my business rather than 100% of it.

    Reply 1 comment
  • profile

    KENNY

    • 3/14/2019 6:21:01 AM

    Brokers have a place in this business. You with one or two trucks cannot commit to multiple loads from shippers you don't have the equipment to cover it all. When booking a load with a broker negotiate all these points before you sign a rate con. If they don't agree to a detention rate in writing find another broker. Just like shippers brokers like relationships they can count on. Find the sweet spots in your area NETWORK & NEGOTIATE! A smart owner operator will always beat contract rates.

    Reply 
  • profile

    Efrain

    • 3/14/2019 7:37:24 AM

    I think that the owner operators must be firm with the prices and publicize the firm price of loads in local area, of each different state and all respect it and increase it if it is also possible, for the rates of OTR too. the brokes and the shippers are the ones need ours trucks. We should not accept those low prices.

    Reply 
  • profile

    Elena

    • 3/14/2019 8:47:29 AM

    I would love to talk to the brokers your're referenced in this post. And so I would like to see if they are so friendly and give me the same price as shippers do. I don't think they would be able to let 3-5 hundred dollars go away just because a friend. But anyway let say.... You know what you're talking about!!!

    Reply 1 comment
  • profile

    Charles

    • 3/15/2019 2:05:36 AM

    Brokers are driving the industry into bankruptcy. It's time for these blood sucking scumbags to go. They have no assets to lose when trying to race to the bottom with their scorched earth policies. Just look what they've done to the spot market. It's creating dangerous roadways with trucks in major disrepair !!

    Reply 
  • profile

    leart

    • 3/18/2019 10:43:42 PM

    Us as carriers/ownerops we arent aloud to go direct to shipers and get rates from them. we have to go through brokers legal. Am i correct or is this just some miss information? Thanks to anyone that answers this.

    Reply 
  • profile

    Amanda

    • 3/19/2019 5:35:34 AM

    Unfortunately, there is a developing overcapacity on the spot bid board. This is driving the rates down. This is also why I do not believe there is a " driver shortage". There is a "GOOD driver shortage". Trucking companies are popping up at a rapid rate - with owners with no experience and a lack of knowledge of the industry. In addition, old, unsafe ( but paid for) trucks are being flooded into the market. This significantly cuts the operating cost of that particular carrier. While companies build capacity to take on lane volume, they are often forced into nothing but spot bids, and competing with the very companies driving the rates into the ground. Until our country stops handing out authorities like flyers, spot rates will continue to drop.

    Reply 
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