Becoming a Broker, Detention Fees, and Broker Transparency | Final Mile 75

Speaker 1: 0:19

Welcome to this week's final mile on Freight360, where we answer all the questions you guys submit to us, either via YouTube in the comments, which we try to get to immediately, or that you guys email or shoot over to our website. So one appreciate everybody taking the time to actually send your questions, because it helps us be aware of what you're really dealing with, so that the content and the stuff we put out is relevant to the stuff you're experiencing. So let's jump right into this. Stephen, I'll read the first one again here. Hey guys, I am a one man team carrier and I'm looking to become a full-time broker and get rid of the carrier. My question is what is the best way to get into brokering with no brokering experience? Would a W-2 salary with commission be a good option to learn, or would an agent option be best? I'm going to let you answer that one first and then I'll have my thoughts.

Speaker 2: 1:16

Well it just depends honestly, if you find the right agent that's willing to, a broker that's willing to train you as an agent like, that's not a bad route to go. But because you are an agent and you'll be 1099, like, you have to have a lot of capital to get you through the beginning phases, cause it's going to take you a few months to get started enrolling and start making money. But that's going to be much harder to find than a W-2 that will be willing to train you and get you spun up while you're learning the ropes. So personally, I think your best option is going to be the W-2 route. But again, if you can find that golden goose of a broker that's willing to train new agents, then it's not a bad option.

Speaker 1: 2:09

I agree. I mean here's some of the pros and cons. I mean the pro with W-2 is one you're going to get a salary, you're probably going to get benefits and you've got a little more time to learn the job. You're going to be probably exposed to lots of other brokers. You're going to be learning likely lots of things and hopefully lots of things pretty quickly, because when you're W-2, that company definitely wants to train you, obviously so that you're valuable enough for what they pay and this is the important part that that company gets a return on that investment for paying you while they train you right.

Speaker 1: 2:41

The big downside, I think, of most W-2 positions is typically you will sign a non-compete or a non-solicit. So I feel like you will likely learn the industry faster right in that model and I think there's a little less risk to you personally doing that. But again, the downside is, if you are successful and you do build a large book and ultimately your goal would be to later own or run your own business, it's very difficult to get out of those because everything you built for that company is owned by that company. They paid for it, they risked their money, they spent the effort, the time to train you and all that. That's why that relationship exists. That way you said it best is like.

Speaker 1: 3:24

I think one of the best ways to probably go about it is if you could find an agent right that needs support, that needs help and can mentor you and train you with either some of their other people working for them or directly with them, because then as you prospect and build your book of business, there's a possibility that that agent will allow you to own your own customers and eventually keep growing and building your business underneath them and maybe ultimately eventually spin off to be your own agent. So I think again, ideally that would probably be your best, but it's also a lot more work to be able to find an agent and to be able to find that position. Do you want to read the second one?

Speaker 2: 4:04

The second question is I recently had a carrier pick up a load that was supposed to be tarped. They did not tarp it and the whole load of lumber was ruined. The receiver refused the load. The customer wants the carrier to pay for the full load. We filed a claim with the carrier's insurance and they denied the claim because the driver was not on the carrier's insurance. The carrier is not responding to us and is blocking all calls, emails and text. Has anyone ever been in this situation? Who's liable and am I going to have to pay for this $10,000 load out of pocket? I am currently a fairly new agent.

Speaker 1: 4:41

Well, this is incredibly frustrating. I've been involved in some of these. I mean and this is definitely not an attorney, but here's my understanding of what happens in practice on a day-to-day basis is one of the things I see a lot is, if this is a customer you've done a lot of business with, I don't believe this is legal. But many shippers will just hold other invoice payment until they're reimbursed for that claim. Like that happens a lot in practice and the frustrating thing is like, in order to fight that, one of two things usually happens. One, the customer stops doing business with you, which is again detrimental and difficult. The second issue is if you want to actually pursue the shipper legally for other unrelated invoices. Now you're paying an attorney and this can take a long time and a lot of money to even get some of these funds back right.

Speaker 1: 5:35

And, to be honest, what usually happens in practice is the brokerage will just cut the check to the customer. If the customer is valuable enough to keep, mostly again to make sure they're still customer. If the customer is valuable enough to keep, mostly again to make sure they're still paying the other invoices and to keep doing business with them and moving freight. That is not an ideal situation, but it happens a lot. I mean, there's one of the clients I work with right now had about five of these this year and they totaled about $180,000. So I mean these can range in large dollar amounts and it is incredibly frustrating. And other scenarios we've seen where, like the carrier just doesn't respond to the insurance company and then the insurance company goes, hey, that's my client, like we can't do anything unless they talk to us, right? And then again your recourse tends to be looping in an attorney which again starts running up another bill and another expense. What are some of your experiences with this situation?

Speaker 2: 6:30

So I've been fortunate enough that I haven't had to deal with a lot of claims. But the ones that I have dealt with, typically the insurance has accepted it. But that kind of points to part of the question where he says you know the driver wasn't on the carrier's insurance. So that asked me like did you, did you properly vet the insurance? Did you go through you know the, the equipment that was listed and all that that's on the scheduled autos? Um, one of the other things. It's a flatbed load and I've only ran a handful.

Speaker 1: 7:06

Well, that right there, hold on before you pass that like it's really difficult to be able to determine that the actual truck that trucking company dispatched for your load is the one that's on their insurance right. It's a big issue in the whole industry and one that, like I know, we use highway to verify Is it like hey? Is the truck you're sending right One that is actually listed on this VIN? There's a little warning in there that will show like hey autos have been seen that aren't on the policy and I'm very, very well aware, Cause like I've talked to carriers that have told us this is very prevalent, specifically in California. I know I hear a lot of it. They'll get a load and they'll just throw it on WhatsApp and then one of the buddies with the trucking company sends in their truck and the problem is most of those trucks don't have insurance or aren't on the insurance of the MC that you did actually book and secure this load with Right.

Speaker 2: 7:58

And then, leading into that, you know the handful of flatbed loads that I've ran. I've always gotten a picture after they've been loaded, whether it needs to be tarped or stacked or however it's supposed to be loaded and secured, I want to make sure that the driver does secure it the right way. So that tells me that the broker didn't get the pictures after loading which?

Speaker 1: 8:19

would have known what's known.

Speaker 2: 8:26

The other thing is, if the bol doesn't state that the product needed to be tarped, then there's a potential that the claim wouldn't. The insurance wouldn't honor the claim anyways, and it would be at fault of the shipper, you know. So there's some holes in this story. That what's that?

Speaker 1: 8:39

it was supposed to be tarp, like it says, the load was. So, as long as the shipper told the broker and the broker clearly communicate to the carrier and the carrier didn't, right, which is we'll just take it as that situation. Right, I think to your point. Like one, it's a good learning lesson, like, if you have these, like you should be asking drivers to just shoot you a quick picture that loads are tarped, that they're tarped correctly, so at least you can verify this was done. And it also points out a bigger issue of like this is one of the reasons why, also, like, shippers want to work directly with the carrier. Right, because there's less risk for the shipper in some of these scenarios, because if they're working direct with the carrier, there's less likelihood that a driver is just picking up there for one load and isn't aware of their procedures and doesn't know that they should or shouldn't be tarped, right, cool.

Speaker 1: 9:29

Next one I'm curious your thoughts on this one because I think you do more of this, but it's like. I would like to know your thoughts on 26 foot reefer box trucks with lift gates. Is it worth the capacity for 12 pallets for reefer or frozen LTO? And I don't know if the question is should they buy one or should they book one? Let's just assume this is from a broker asking if it's worth it to book a 26 foot reefer box truck with a lift gate. Um, you do some reefer ltl correct?

Speaker 2: 9:59

uh, very few and far between. I get asked about it a lot, which is frustrating because everybody's solution yeah, the solution is hard to find. Um, a couple things I'd point out. 12 pallets is about your limit, so you're gonna be getting into that. Uh, uh, that weight issue with a box truck and I don't know if a 26 foot box truck, especially if it has a lift gate, is going to solve your problem, because I think that, uh, that weight is like 26 000 pounds or something like that. So it just depends on what the product is, if you can even do it.

Speaker 2: 10:37

Um, number two, there is a lot of opportunity for reefer LTL, but those are typically food products and can't really be put. Some can be put together, some can't, and the temperatures range so much that you're probably going to be running it dedicated anyways. The upside is you're going to get a higher rate than your regular box trucks because it is so specialized, if you can find the customer and the capacity, the demand for it, which is going to be. You know your cities are going to be more likely for that kind of freight and then stuff like that. But this is my experience. I don't know if it's something I would venture into as a business opportunity, but it's something I've considered.

Speaker 1: 11:27

Yeah, if I was a carrier like, I would just be looking at and talking with my customer to see if the amount of business offsets the cost for the driver and to buy the equipment Right, like, do you got enough loads, enough days of the week to do it?

Speaker 1: 11:45

Because the reality is is like, why most customers want it is because there aren't that many small carriers that can do reefer and, like you said, mixing commodities. And then you got the next variable of mixing temps, like in produce, everybody wants it and the reason is because a lot of times their customer only needs five, six pallets. Like we've got a customer we ship lots of loads that are dedicated on reefers, right, that are eight, nine, five pallets, seven pallets. So I mean from the shipper's point of view. Clearly they would like to have a lower cost, they don't want to pay for a full truck to move, you know, a very small amount of weight or product. But again, the industry doesn't typically support it because even the companies that have tried to do referral TL like they don't make enough money and they end up going out of business for the very reason, like you really do need to have very consistent volumes, the right temps with each one and the right commodities that you can mix, which again is why it's so asked for, but not often available.

Speaker 2: 12:40

Not only that, but, like your customers, the reason they want ltl is to get a discount on the full truckload, which they want it cheaper. You right, you may not be able to provide that discount, given the the volume and how everything's running. So correct.

Speaker 1: 12:58

All right. So next one why doesn't the broker be up front with the carrier on financial details of the shipment? That would establish trust and transparency and everybody can win. So my question is why aren't you upfront about what you're making? The problem is, it's not a win-win for the carrier and the broker. Winning is not defined as taking advantage. I agree that winning is not taking advantage, but what are your thoughts? And we've talked about this a lot recently, obviously, but why? How do you answer this question? Leave it there?

Speaker 2: 13:33

I would start with what are your costs? Because if we're going to be transparent and we're going to, you know, provide a win-win, I need to know your cost and you need to know the cost of this shipment so that we can provide a solution that is long term. But the problem is, if the, if anything, shifts whether you find freight nearby that pays better, you're gonna bounce. Or if I find a carrier that can run it for cheaper, I'm gonna bounce, and that's unfortunately the market that we find free market Competition.

Speaker 2: 14:07

What they're asking is for one-sided transparency to provide a win-win when they don't provide transparency. And the lesser known fact is most of these people I won't say most, a lot of these people probably don't know how to calculate their operating costs, because trucking is so convoluted and there's so many costs and variables in their expenses it is hard to calculate. But if you don't know your costs, how do you know what to run?

Speaker 1: 14:37

I agree, and I think that does create some issues right? The first thing is like I think every brokerage should do this in every trucking company and I think there's at least an easy way to get an idea. So for a brokerage, if you are doing your end of year books, you should just add up all of your expenses for the year you got to do it anyway for your taxes, whatever that number is right Of all of your expenses. Look at every load you ran for the whole year. Divide your expenses by your loads. That will tell you what the brokerage's cost was to move every load, and those numbers can range anywhere from like 10 to 15 bucks to I've seen them run up to almost $200 a load. That's the piece that I think is very missing from this conversation is like nobody's asking what are the costs for a brokerage to actually secure the load that the carrier wants to run? Right, and they are not zero.

Speaker 1: 15:31

I think often carriers think that because there's a $200 margin on call it, $1,000 load, which would be 20%, that that's somehow all profit. It is not. It is a business Like you got to pay and hire and risk salespeople. To go and get a business, you've got to pay and hire and risk salespeople to go and get the business. You've got to pay for tools and the TMS and the rate cons and the insurance and the vetting tools and the tracking tools. All of those things aren't free, right? So when carriers talk about what they're making or what a broker's making, that's the revenue number. That's not including the expenses, and then what a broker makes is what is left over. So I think it's one completely disingenuous to just ignore the costs a broker has to put in to actually get the business to provide to the carrier and the spot market. Because most of the carriers are running loads through the spot market from brokers, right? Well, it costs those brokers money to get and secure and distribute those loads which just nobody talks about. And the other side is your point right, like which is what is the carrier's operating costs and what should they be running it? Because I think that's part of the problem. Let's lead that right into the second and actually it's going to be the third question. Then I'm going to read this, because I think this is part of the issue.

Speaker 1: 16:45

Somebody responded to an episode. We've done this a couple of weeks ago. It says Ben, you hit the nail on the head. It's what I've been saying with freight leaving Florida. Why are carriers taking loads to Atlanta for $350, but then asking for the government to get involved? That's crazy.

Speaker 1: 17:05

And I think that goes to your point, stephen, which is we're not driving rates down. It's other carriers willing to run loads for cheaper than another carrier that actually brings rates down. Right. It's not the brokers and it's not the shippers, because even if you remove brokers from the middle, if a bunch of carriers are going to run a load for $1.25a mile and the other carriers want to run it for $1.80, the shippers are going to run a load for $1.25 a mile and the other carriers want to run it for $1.80, like the shippers are going to go with the cheaper carriers until either service fails or claims and then they start paying more, right, like that's what a free market does it finds the lowest cost in a competitive market.

Speaker 1: 17:37

And I don't think that a lot of carriers to your point one maybe know what their operating costs are and then they just keep running loads, thinking it's all profit, without looking at the expense line. Which reminds me of the thing we were talking about earlier in the news, the Cal Freight thing, like if you don't know what your operating costs are and what it costs you to drive your truck one mile, whether empty or loaded, over a given week or a month. Like maybe lots of carriers are running loads for less than what it costs to run their business, which is why some of them aren't staying in business. But that's the big piece that is just not in this conversation. I feel like yeah, 100%.

Speaker 2: 18:13

And that goes back to you know I've seen people push back on. You know backhaul is not a real thing and you know it is. I mean you look at it is a thing.

Speaker 2: 18:21

Yeah, you look at these mid to large size carriers. They are running freight that will just pay for gas because it's getting them back to their direct customer's freight, which pays a higher margin. And some of them, like I, was talking to a driver a couple of weeks ago and he was complaining about taking a load into North Carolina and now he can't get out of North Carolina because there's no freight. It's like well, did you get enough money on the load?

Speaker 1: 18:46

to North Carolina to take that out.

Speaker 2: 18:49

So there's a lot of education that needs to happen to understand the market dynamics and realize that you know, just because this is a good rate getting you to North Carolina or, you know, florida at this time of year, you still need to be able to get out and make money and be profitable. So understanding those operating ratios and that cost is crucial.

Speaker 1: 19:08

I was doing a training on this this week, on that right, because there's two, I think, terms that are used interchangeably that aren't. One is there's a backhaul for a carrier and there's a backhaul market, right. Okay, so for a carrier, to your point, like, just as an example, if I am a trucking company in Miami and my shipper that I work with directly is in Miami and say every single day one of my trucks and I got five of them runs a load from Miami to wherever you said Charlotte, north Carolina, okay, that shipper typically will pay me above market rates. Why? Because they know the trucking company, the trucking company knows their freight and they have guaranteed levels of service, meaning that trucking company will make sure there is a truck at their facility every day of the week at 8 am to pick up the load, right, and for that reason there's less risk to the shipper. And the shipper goes hey, if the market rate for this lane throughout the year is two bucks a mile, we'll give you 215 a mile all year. You make sure all our loads are picked up every day at the same time with the same trucks with good equipment that has well maintenance and drivers that have good records, ok, so they get paid a premium.

Speaker 1: 20:23

We would say, however, when they need to get back to Florida, sometimes, right, say, maybe the driver that runs up there on whatever Monday needs to come back down to reposition the truck, like they might take the best rate they can get, because what their preference is is, like you said, destination and time over price, right, like the carrier's. Like, I want to be home for the weekend. That is literally my priority. The second priority, right to your point, is the time when does he want to get back there? The third is okay, what is the best paying load I can do? That matches those two things, right? It reminds me of that saying it's like price, service and time right, you can pick two, but you can't have three. It's the same thing for a shipper or a carrier, right? So then the carrier is like, well, hey, man, like I'll get the best rate I can, because it's really important for me to be home on Friday, right, and I want to be physically there and on that date, so I got to choose whatever's available. That is a backhaul for a carrier.

Speaker 1: 21:20

But a backhaul market is like when, all of a sudden, florida's balance meaning freight coming in and out call it's two bucks a mile. But then maybe watermelon or citrus season hits and all these shippers are trying to suck up the trucks because they've got to get their product out of Florida before it spoils. They start paying more than that two bucks a mile. They might pay two, ten a10 a mile. Then the guy across the street pays $2.25 a mile. Pretty soon that market is $3 a mile to take freight out of Florida. Then what happens is all the carriers that want the $3 a mile freight coming out of Florida take whatever load they can to get there as quick as possible. Well, what that does is drive the rates going into Florida down. So then coming into Florida ends up at like a buck 50 a mile and leaving Florida is three bucks a mile.

Speaker 1: 22:06

That's like a backhaul market instance. Right, it's all just the supply and demand of the carriers versus the freight right. But like all of these, things aren't created equal. That's why the free market provides efficiencies, because the number of loads going into or out of any given city changes throughout days of the week, weeks of a month and months of a year, and the fact that these rates can go up and down based on what the need is in any given city or market allows rates to fall. What makes the most sense for both the carriers and the shippers? Right, like that's what allows them to get to equilibrium and creates efficiencies for the whole market right. Just wanting them to be the same everywhere creates actually inefficiencies and makes things more expensive, which you pointed out when we were talking about the history of the freight market and what it looked like previous to 1980, right isn't that good.

Speaker 2: 22:59

Especially when you know you've got carriers that can't legally go into certain areas during you know that regulated time, but you'll just have to watch that episode.

Speaker 1: 23:09

Right. Creating those regulations makes things more inefficient and actually drives more companies out of business faster. But I hope that kind of answers the question as to why. That's literally one side of the coin. Just the thing with the revenue number is does not tell you what that company did or didn't make money. Lots of brokers just lose money even if they've got $150 margin on some loads, right, just depending on what is happening. Last question we had was there, and I like this one there should be no delays in the first place. If a carrier arrives on time, you should get them unloaded or loaded. Maybe raise it to $250 in detention an hour after two hours and let's see what happens. And he says you know, just like lumpers, I don't like taking loads with the lumper service. That should be prepaid to get the truck unloaded. My rate's my rate, your rate is your margins. If we work together we can make money. I agree with what they're saying, but what is your take on why these things don't just happen?

Speaker 2: 24:10

Well there's. I mean, where you're going to is ran by humans. Humans make errors, they call in sick, so there's a lot of factors involved. Just because your truck shows up on time doesn't mean that that facility isn't running behind. So you're going to run into issues, just like your truck may not show up on time because you got a flat tire or the driver called in sick and you had to call off and now we got to recover it. So there's a lot of human factors.

Speaker 2: 24:37

Now, that being said, there's also a lot of facilities that are ran terribly and just do not care about the driver's time, and those do need to be addressed.

Speaker 2: 24:46

But when it comes to detention and necessarials, I think some of the issue is in how the shippers and the customers and brokers handle it. Handle it, you know, because at the end of the day, if you're shipping product from a to b and b is your receiver and they take six hours to unload and you're constantly paying four hours for detention, how much profit does a shipper have on that movement or that product? Are they just eating that cost? Because so then if they're eating the cost of not passing it on to their customer, the customer doesn't know or simply just doesn't care. So there's a lot of factors in play that would take huge changes for that to be addressed. But detention and layover is a big factor. Wrote in an article that got put out in the blaze that MIT said that 40% of capacity daily is being held up in docks due to detention or layover which is a great statistic, seems about.

Speaker 1: 25:49

Right, dwell time is a huge issue. Right, there's a ton of inefficiencies. I do agree that something should be done. I wish that shippers did deal with this better. Right To your point, I think human's part of it. I think other trucks arriving late causes other schedule issues. Also, hey, maybe the way the loads were, basically my mind's blanking on what the oh staged right, like some shippers stage the load so when the next truck comes, that load's ready to go on that truck. Well, that truck was late because at their last receiver didn't get them unloaded on time or there was traffic or weather or a number of issues, and the other person gets there first. Then now that shipper has to literally move all that freight maybe to a different place on the dock, now restage another load and like that just physically takes time which can cause delays. Right, I definitely agree that I think shippers take advantage of this and like I've definitely worked with customers that just on average take six to eight hours to get trucks loaded or unloaded, like that is absolutely ridiculous.

Speaker 1: 26:54

The problem, I think, is I wish that the whole industry could implement some of those things they suggest, like just more expensive detention time. The problem is the same thing with trying to get consistent rates for carriers right. Like a bunch of carriers don't agree with what some other carriers are willing to run freight for, so the rate falls. I think the same thing happens with accessorial policies is like I might be able to, as a trucking company, tell this shipper, this is my detention policy.

Speaker 1: 27:24

But if three other companies come along and want to win that business and they go, you know what? We'll give you four hours free and we're only going to charge 125 bucks. So now my 250 doesn't matter. The shipper's just going to start using them more and taking their time. And then eventually another carrier comes along and says you know what? I really want that business, I'll give you five hours free. So getting everybody to agree to put pressure on a shipper to actually change this at the same time is what is very difficult. That is one of the downsides of kind of the free market is like somebody can always just come along and just be cheaper. It is very hard to put pressure on a shipper to change those things if everybody wasn't doing them at the same time, I think one of the scenarios I think about when it comes to detention from my time in the military.

Speaker 2: 28:06

It's more of just a funny thing, but one of the memes that goes around is the battalion commander says okay, I want everyone here at uh 8 am. We're gonna muster at 8 am, and that goes down to the uh, the 8 am, and that goes down to the next officer in line. It's 15 minutes prior, all the way down to the sergeant telling the corporal to tell the lance corporals 15 minutes prior. Next thing you know, you've got the whole battalion showing up at 5 am when the commander's not going to show up until 8 am. So everyone's sitting around for three hours because nobody wants somebody to be late.

Speaker 2: 28:41

Um, which I? There's probably some of that when it comes to these larger shippers where it's like the shipper will tell the broker I don't want you to be late, so make sure they're an hour early. And the broker tells the driver I don't want you to be late, so show up an hour early. So now they're already there for two hours when they weren't going to get downloaded until two hours later. Anyways, there's probably a small percentage, but you know, again, things happen in a world of automation Right, like if one thing's out of order it wrecks the whole system. So trying to keep everything in line with all the elements involved is it's a tough issue to tackle.

Speaker 1: 29:19

I couldn't agree with you more. Well, sweet man, that kind of wraps up what we had for a final mile. Any final words, stephen?

Speaker 2: 29:28

No, that's it. I mean, I know they're still taking comments on the whole broker transparency deal. So if you feel like getting your voice in, go ahead and put that in the epim CSA. We've got some good stuff coming up and uh, yeah, that's about it.

Speaker 1: 29:46

Yeah, and this will drop Friday. So we got a little bit of a schedule swap, so you'll hear the full episode will drop early next week. Again, that episode is going to be with the CEO of DAT and Trucker Tools. Big announcement this week the DAT acquired Trucker Tools, so I'm really looking forward to it to hear about what they've got planned, kind of how this came about and what the next year looks like for both of these companies, Because I mean, just about every broker is on that website on a daily basis. So hopefully this is going to be some really cool stuff that we can look forward to next year basis. So hopefully this is going to be some really cool stuff that we can look forward to next year and that, whether you believe you can or believe you can't, you're right.