In 2021, businesses transported more than $1.33 trillion in freight through various transportation methods, such as trucks and trains. Two key players that enable this complex market to succeed are freight forwarders and freight brokers.
While many consider the terms freight forwarders and freight brokers to be interchangeable, these industry assets differ in how they arrange cargo transportation to occupy unique industry niches. For those looking for the correct transportation option for their freight, it’s essential to understand the difference between freight brokers and forwarders to determine which service is best for your needs.
What Is a Freight Broker?
A freight broker is a business that serves as an intermediary between shippers and carriers and often arranges and plans freight transportation services. A shipper will contact a freight broker directly to start operations with a third party, such as a freight carrier. The freight broker will collaborate with the shipper and carrier to determine how and when they will transport the cargo. However, freight brokers are not in control of the goods they ship and do not own any equipment or vehicles involved in the shipping process.
Freight brokers do not draft paperwork for their clients or perform shipping services under their bill of lading. Most freight brokers also do not provide additional services, such as packaging, break bulk, or consolidation. A freight broker’s primary duties are making arrangements for the shippers and carriers.
Since a broker works for multiple shippers at once, they benefit from providing the carrier with a steady stream of shippers. Many trucking companies prefer working with a freight broker because the arrangement will enable them to keep their trucks in operation and prevent deadhead miles.
The Duties of Freight Brokers
While the primary responsibility of a freight broker is to connect shippers with the appropriate carrier, freight broker companies do much more than assist in rate negotiations. Freight brokers also monitor and track shipments and ensure all parties receive open communication by alerting shippers and carriers of any delays and changes.
During a typical day, a freight broker may perform some or all of the following services:
- Connecting shippers with carriers in their vast network of logistics and load boards to move cargo
- Negotiating shipping rates to get the best deal for their clients
- Matching shippers with specific loads, such as refrigerated freight, with suitable carriers
- Tracking client shipments to ensure cargo arrives at its destination safely
- Handling all compliance requirements to ship various types of cargo
- Ensuring carriers receive payment for their services
- Optimizing carrier loads to ensure all trucks are full for more efficient operations
Benefits of Using a Freight Broker
Enlisting the help of a freight broker helps to simplify the jobs of carriers and shippers. Since brokers have a unique position, they are equipped to serve as valuable assets to both parties and offer many benefits, such as:
- Brokers can help companies stay ahead of industry news by tracking regulations, freight and fuel rates, and emerging trends before communicating their findings to carriers and shippers.
- Freight brokers can help shippers and carriers negotiate better rates, as they often work with larger freight volumes.
- Brokers can improve shipping routes for greater accuracy and reduce inefficiencies to increase carrier profit and optimize shipping.
- If necessary, a freight broker can handle insurance claims due to lost or damaged shipments.
What Is a Freight Forwarder?
A freight forwarder operates similarly to freight brokers in that they help arrange transportation for shippers by contracting third-party carrier companies. Freight forwarders typically do not own the trucks or trains they use to transport freight. Unlike freight brokers, freight forwarders are more active in preparing and shipping cargo for a client.
Typically, freight forwarders perform various services such as packaging, warehousing, and preparing paperwork to pass through customs. Freight forwarders also use their own house bills of lading (HBLs) to ship cargo. Most freight forwarders own a fleet of containers to prepare loads for shipping and ease the overall process.
You can think of forwarders as freight consolidators since they take physical possession of items and ship under their own authority. Freight forwarders obtain licensing through the Federal Motor Carrier Safety Administration (FMCSA) for interstate and foreign commerce, and they can ship freight more widely than a typical freight broker.
The Duties of a Freight Forwarder
Since freight forwarders must physically take possession of freight, freight forwarding is a more hands-on position than freight brokering. Freight forwarders also store products in a warehouse until shipment making them responsible for insurance. While they are not responsible for moving the cargo, forwarders can provide more comprehensive assistance in arranging and coordinating transportation than freight brokers.
Typically, a freight forwarder will perform the following tasks:
- Preparing all documentation to import or export a good
- Selecting the correct transportation providers to move cargo
- Negotiating all freight charges for clients
- Consolidating freight into fewer shipments for greater efficiency
- Managing inventory throughout the storage and transportation process
- Filing insurance claims if a shipment sustains damage or becomes lost
Benefits of Using a Freight Forwarder
Freight forwarders simplify bulk order shipping, particularly for businesses that frequently perform international shipments. Working with a freight forwarder can also provide solutions for storing and warehousing freight before shipment and assist with tasks such as navigating insurance policies and establishing the proper documentation. Freight forwarders are a valuable addition to any shipping and carrier company and offer benefits like:
- Consolidating or breaking up goods while they are in storage.
- Packaging and routing cargo to reduce shipping costs and ensure they deliver goods safely and promptly.
- Serving as an intermediary between transportation services and clients to ensure the customer gets the correct product.
- Handling any issues with customs or international imports.
- Teach customers how to properly package products to complete domestic or international shipping transactions.
- Preparing proper documentation such as a bill of lading and commercial invoices. If your company serves international clients, freight forwarders can prepare inspection documentation or a certificate of origin.
A freight forwarder can also facilitate a labeling process to ensure all packages arrive where they need to be. The information they may include on a label to increase shipping accuracy includes:
- Items within a shipping container.
- Hazardous items.
- Country of origin.
- Weight in pounds or kilograms.
- Port of entry.
- Additional details in the language of the destination.
How to Choose Between a Freight Broker and a Forwarder
Deciding between a freight broker and a freight forwarder depends on your specific needs. Freight brokers assist with tasks such as arranging and overseeing the transportation of goods but do not take possession of the shipment. A freight broker is also ideal if you do not have international clients or are only shipping within a single area, such as from one location in the United States to a region in Canada.
A freight forwarder, however, may be a beneficial choice for your company if you require more services with a broader reach. Freight forwarders can store your freight and assemble and prepare your cargo for shipment. Since freight forwarders are under unique licensing agreements, they can also perform international shipping duties.
As you consider which option is best for your company, you may also wish to examine the responsibilities a freight broker and forwarder performs and what they need to complete their jobs accurately. Freight forwarding requires taking physical possession of cargo in addition to physical facilities and resources such as warehouses, trucks, and personnel. Due to the hands-on nature of their job, they may also necessitate insurance and other protection services.
Freight brokers do not require as much additional equipment or insurance and rarely own warehouses or other physical freight items. Freight brokers pay carriers, but the shippers still hold the carrier accountable for transporting their items. However, with freight forwarders, the forwarder is responsible for the shipper, and the carrier maintains responsibility for the forwarder.
Contact Porter Freight Funding to Find More Loads
We can help you find more loads for your company with freight broker factoring services at Porter Freight Funding. With our factoring services, you can pay your carriers immediately after delivering a shipment to allow for greater cash flow and enable your company to carry more loads. To start experiencing reliable payments and delivering greater customer satisfaction, complete our contact form or apply online to become a Porter Freight Funding partner today!
