Double Brokering & Market Shifts | Final Mile #32

Speaker 1: 0:19

Welcome back for the final mile. We're going to answer your questions that you guys signed us. We got the vast majority from our Facebook group. Thank you guys for participating in that. If you are not part of it, go to the episode description notes or the description box on YouTube. There is a link for the Facebook group Frey Brokers and Carriers Network and check out the sponsors and affiliates in the description box. Help support the channel. And check out our website, freight360.net. You'll see the Frey Broker Basics course up there. It's our course. It teaches you everything that you need to know on how to start your brokerage and succeed. We did it in partnership with DAT and it's gotten. I mean, we've had well over 1,000 customers go through it. So a lot of good success there. Let's get into it today, ben.

Speaker 1: 1:07

First question double brokerage. I feel like we could never dodge these ones because they come up all the time. In a double brokerage situation, how does the actual carrier that haul the load get paid? Well, I'll tell you. I'm going to give you two scenarios and then feel free to hop in if you want to add anything. But in the old days when somebody would double broker, what they would do is they got a load truck and company gets a load from a broker, end up not having a truck. They resell it for cheaper to an actual truck that can haul it and everybody gets paid and a lot of times no one like we weren't on guard about that. You'd maybe see it once, twice a year and you'd DNU that carrier. So you put them on, do not use.

Speaker 1: 1:50

But what we've seen the last couple of years is different. We've seen just like straight up fraud, identity theft. So what happens is I give the. I'm a broker. I give the load to a truck and company. They don't even have trucks or they have no intention to haul it.

Speaker 1: 2:06

They resell it, they post it for like $1,000 more than they're going to get for me, sell it to another truck and company take a quit, pay for me once they get paperwork and send it in and they disappear and then down the road this carrier that got spoofed and actually hauled the load and did the work might go to my customer. They might go to the receiver who sends it to the shipper who sends it to me. Either way they end up coming back to me and they're like where's my money? And I'm like oh, like this. I'm not saying this personally because we've had, we've got a lot of things in place not to prevent this, but this is what brokers are have been seeing, and it's usually, you know, newer brokers that either aren't aware of it or just entered the market and it's an experience or they have poor vetting practices. So what ends up happening to that? Who pays that actual truck? Well, there's a couple of scenarios here. If you are an ethical freight broker and what do you got?

Speaker 2: 3:05

I was just going to say I think we should just start with where like kind of the law dictates right and at the first is right, right.

Speaker 1: 3:14

The law states that the shipper is responsible to pay the transportation cost to the party that moved it. That moved it right.

Speaker 2: 3:22

They're ultimately responsible regardless if they already paid a broker and that broker paid another carrier, regardless if they paid two brokers and two other carriers. At the end of the day, if that carrier goes back to that shipper and says I'm the one that picked it and can verify it that they delivered it, that shipper owes that carrier that money full stop.

Speaker 1: 3:41

Yep, you're absolutely right. So yeah, option one is they get it from the shipper and that broker is never going to use that shipper again because the shipper just got screwed and paid the bill twice. The second option is the broker says it was my fault, we screwed up, we hired a bad actor and we already paid them, but we're going to pay you and they the broker ends up paying it twice, and that's usually what the ethical brokers will do.

Speaker 2: 4:09

Now I think we're not. The other reason they pay the carrier is because they don't want to piss the shipper off and they want to keep doing business with them. It's not necessarily out of the goodness of their heart, it's. And to be honest. Yeah, it's a business choice and they're the one responsible for hiring the poor carrier at the end of the day, so like they should be the one that pays it. But they are not legally required to pay it they're not.

Speaker 1: 4:28

But yeah, but if you're going to pay, if you're going to lose five grand on a double broker versus losing a hundred thousand dollars in monthly business, I'm going to. Yeah, I'm going to pay five grand and make it up and learn from that lesson. But the carrier might say, well, they offer me a thousand dollars more than you'd offer to pay me and you can just say you got double brokered. They're. The carrier has a due deal they have. They have to do their due diligence to vet out who they're taking a load from. Yeah, if somebody steals identity it's a little tough, but you know these fraudsters out there who get caught and you're reported on. Dude, there's plenty of websites out there, plenty of lists that go around of the bad actors. To your due diligence. But either the customer pays, which is the legal you know the legal end, full stop or the broker eats. It pays it twice to save face of the customer.

Speaker 2: 5:18

Now here's the thing, right, everybody says, oh, like, this is a huge issue, and it is, and we talk a ton about it, right, I'm not discounting any of those things, right, but I do want to point out that to every issue, right, if you look at it hard enough, it becomes an opportunity, right, and to me this is a huge opportunity to differentiate yourself from other brokers by being able to articulate how you vet your carriers, how you mitigate that risk, because the important piece is the shippers know that risk isn't really on you, the broker. They know it's on them. So that's another reason why they don't just want to work with any broker that they don't trust and don't know what you're doing or know if you know what you're doing and if their loads get double brokered, this is the best case scenario is that it gets delivered and you pay the bill. Like we had somebody I was talking with last week where there was somebody that stole the identity of a carrier, then gave the load to a false broker that they weren't called a truck on a load board, had them move it and try to have it delivered to a warehouse by the border in California where they were just going to steal the load and move it, probably into Mexico, and they caught it in the middle.

Speaker 2: 6:27

But again, these can go much, much worse than the scenario we outlined. Yeah, oh, for sure, for sure. And that's why it's important to a shipper to be able to explain to them how you'll protect their freight and how you know who you know you're working with. That's their risk. That's why they'd rather work with an asset carrier than a broker, because at least they know the company that they paid is the one that picked it up, even if they didn't do the work and the way they wanted it to. There's at least less risk that this happens.

Speaker 1: 6:55

You know, I never thought to ask or look into how often shippers are getting double brokered on directly.

Speaker 2: 7:04

Yeah, I don't know.

Speaker 1: 7:06

I never looked into it, because if anyone's got any stories about that, if you're a shipper or if you're a carrier that hauled a double brokered load that did not involve a broker but a fraud carrier, well I don't.

Speaker 2: 7:18

I doubt that it happens that commonly because, to be honest, like you still need to get your money from the shipper and the shipper's not going to quick pay you, so it's much easier to perpetrate the fraud against a broker.

Speaker 1: 7:26

Yeah, but what if they just get standard payment and just never pay the other guys?

Speaker 2: 7:32

That's true, you're right.

Speaker 1: 7:34

It's usually a quick pay, so it's probably more. You know they're going to go where the it's easier Path of lease resistance. Yeah, all right. Next question how can I source dump trucks? I'm going to defer you to episode 208.

Speaker 1: 7:48

Jared Flynn from bulkloadscom came on and talked to us about the bulk industry. So, whether it's a dump truck or any other niche type of equipment, there tends to be either a community or a load board that's very niche to that specific equipment type. So, like bulkloads, they're a great example because it is niche, but they're a very massive community of the various different types of bulk equipment. You know hoppers, end dumps, et cetera, bulk liquid and all that. But for dumps in general, I would do the, I would go bulkloads and I would also find out where are dump truck carriers hanging out, whether it's a load board or an online forum or maybe there's a trade show that everyone networks. And you want to go meet a lot of these carriers in person, because it's super niche, and find out where they operate, what's their specific equipment type, what's the radius that they operate in, do they have preferred lanes, et cetera. It's a great way to do it.

Speaker 2: 8:54

Yeah.

Speaker 1: 8:54

Next up.

Speaker 2: 8:56

The only thing I would add is there's a lot of different dump trucks, like, if you're talking triaxles that you see ship mulch like they're pretty local, they don't go too far. That's probably not the type of dump truck though that you'd be looking to get for your customer You're probably looking at like end dumps or like hopper bottoms or some other type of like larger trailer dump. Again, bulkloads is a great place to source them. Highways, another way for you to get a large list of those carriers with that types of equipment that you can reach out to directly. To Nate's point, you really want to understand it, because it operates very differently than Vans, reefers and Flatbeds, for sure.

Speaker 1: 9:36

Next question how can I best operate as a freight broker during a market shift? I'm going to kind of stay generalized on this because we can't go every specific type of market shift, but here's the reality the market does always shift. It just happens to be a very slow shift. Right now it kind of feels like we've just been stuck in this soft freight recession and maybe we're climbing that a little bit and get like literally right now the most drastic change is diesel fuel versus, like, supply and demand. But we're starting to see a change. The reality is that a normal freight cycle and we've talked with Ken Adamo from DAT a ton about this it's going to cycle normally. We've seen an exacerbated situation this time with COVID and the post COVID repercussions.

Speaker 1: 10:23

I will always tell you plan where I had, look way into the future, stay up to date on news, industry trends etc. Because you need to know that this market shift is coming. Then, if you know that on a macro level we're going to have an industry change or market change or shift, that doesn't mean that your specific customers are going to be affected by it the same way that the national average will be or some other customer. So have these conversations early and often with your customer. I always like doing like a end of the year is great, right, like end of the year. People are doing inventory. They're not shipping a whole lot. You probably get you know if they're not off the whole week. You're, you're pulling a contact, just talk about what's coming up and this is good for like just planning in general.

Speaker 1: 11:08

But you can talk about the market like hey, here's where I think things are going. What are you guys hearing on the inside? Have that conversation transparently with your prospects and with your shippers so that you guys are all on the same page, so there's not a unexpected increase in rates and they want to drop you. You had the conversation. Every shipper right now knows the rates are going to go up from here Eventually. We all know everyone's waiting for it. The customers aren't. They're loving it right now. They're getting cheap trucks, but the reality is the rates will go up, whether that's just inflation or diesel prices or the overall correction of the supply and demand within the freight market. So how do you operate? I would say have a lot of conversations, ask a lot of questions, stay informed with the news and get ahead of all this stuff. Do you have anything to add?

Speaker 2: 12:04

on that end. The best source I have for where I look is Dean. Dean Croak, dat puts out a weekly market update on DAT. He also does a show once a week. You can find it on YouTube and Dean spends a ton of time digging into the specific commodities and how those lanes that are predominantly running those commodities are changing. He's the only one I know that really gets that granular weekly and I look at like he'll say okay, the reefer market in the Salinas Valley is doing this, we're seeing an average uptick in rates here. We're seeing the housing market, for instance, pick up, maybe in the Southeast, and you're seeing lanes change. So, like he gives you some real good real time info that you can use for your conversations with your prospects.

Speaker 1: 12:47

Yeah, Subscribe to our newsletter on our website as well, freight362.net. Every Thursday we have a market update that goes out and it's part of the midsection of that market update. I pull snippets from Dean's weekly reports that he sends to us on the weekends and it gets posted on our website and I include your national spot rates for van reefer and flat and your loaded truck ratios for van reefer and spot or van reefer and flat. So if you want the quick down and dirty, we throw it in front of you every Thursday morning on those three main equipment types. So you'll know and it's going to tell you where they're at and if it was a change upward or downward. And if you just follow that every week, you'll have an idea of where the rates are going compared to last year, last week, last month, etc.

Speaker 2: 13:39

To tie it back in how I use that is again. My customer might ship flatbeds for example, Memphis and mostly up to like, the Great Lakes right, for instance, and flatbeds might have spiked in rates in the Southeast. So, like I know, that's not really in my customer's you know wheelhouse and it probably didn't affect them. But by me asking them to your point if they're experiencing any of it, it shows them, without me bragging, that I am tied into the market and I know what's happening elsewhere and I'm looking out for them. Right, and that phone callers were like hey, jimmy, you guys seeing anything? I saw a bunch of the spot rates pick up in the Southeast for flatbeds in the past week or two. You seeing any changes in your rates over there? How things shaping up for you? No, I ain't seeing it at all. Ben Again, I probably knew it wasn't, but the fact that I'm bringing new information to that conversation from our episode last week on prospecting creates value for them. Right, I'm giving them something far before, long before I'm trying to take anything.

Speaker 1: 14:33

Yep. Next question how does moving freight between US and Mexico work? I'll broaden this. I'm going to go US, mexico, canada and I'm going to hit on three different things. I'm going to talk carriers, authority to do it, the use of freight forwarders, and I'll start with the third one, which is going to be the USMCA.

Speaker 1: 14:59

So the and also, uh, cabotage law. So the US MCA is the United States, mexico and Canada agreement. It replaced NAFTA in the last five years and it allows very easy trade between those three countries in North America. Now cabotage law states and we've talked about this before in other episodes that a carrier, so like in the US, a US carrier, let's say a Canadian carrier, comes into the US or a Mexican carrier comes into the US. They're allowed to enter our country and deliver a load and they can either drive back empty or they can grab a load and take it back to their country, but they can't hang out and operate within our country, and that's for just one country. To the next, domestic competition reasons, we want to have US carriers run in the US market.

Speaker 2: 15:52

You can pick up in one country and deliver to the next. You can't pick up and deliver in a country you don't live in. Yes, stupid, simple.

Speaker 1: 15:59

So that's that part, the use of freight forwarders, part oftentimes with international. If you're not experienced with it, you might, and it can be tough because they have their margin two. Freight forwarders are really really good at this international stuff and they will set up the customs portion of it for customs brokerage and they can. So here's what you might see. Let's say it's going from US to Mexico. They might line up a US truck to go from Chicago to Laredo and you might have I mean, if you want to get really complicated you might have a dredge company pulled from Laredo over to the Mexican side and then a Mexican carrier take it down to Mexico City, like that's. That's I don't, I'm geographically. I don't know if that lane would run through Laredo. Probably not, I'm not really sure, but that was just an example. Now a third option, and this is where it's really cool with like, like US Canada. I have way more experience than the Mexico.

Speaker 1: 16:59

Mexico is like a wild, wild West, but US Canada typically you'll either have like the dual authority, where they carry authority for both countries, but if you're, if you're a customer like I do this a lot on the asset side going into Canada and into the US from Canada. The shipper would properly prepare all of the customs paperwork and the carrier we would. It would get taken over the border and delivered and that was it. There was no freight forward involved. The customs part was all taken care of by the shipper and it can all be done. Remember that USMCA allows that to happen. Now, where there's fear with Mexico, with it being so unregulated and not even all of Canada's regulated, there's only certain provinces that actually regulate the authorities given to like freight brokerages, but carriers are different. But the Mexican side is really really wild. So you could say you could send a US truck in there and like, yeah, you can grab a load and come back or drive back empty, but you have carriers like not going there. I don't know what it's like, I've never been to Mexico.

Speaker 2: 18:02

Yep, I don't want to think. There's a standard time, there's a standard time?

Speaker 1: 18:05

Yeah, but it could be done. You could absolutely have stuff that delivers where I think you have less pushback, as if they're delivering just shortly over the border and they could drive right back over because they're not worried about driving 10 miles to. You know they'll get no clear customs. The carrier prepared all the customs paperwork, they clear customs, they drop it off and they just turn around and they go back to Tijuana or to San Diego or Laredo or El Paso, wherever right Negales, if you're like I'm going to send you down 100 miles into Mexico and you know you've got to find a load to come back, like good luck, who are you getting a load from? Yeah, so, but I will say there are, there are niche carriers that work in that arena where they're specific like yeah, all of our folks are bilingual, we have a presence near the border, we know the Mexican market, we know the Southwestern US market and they're really good.

Speaker 1: 19:00

We have a guy right now at Pierce that does a lot with US, mexico and Canada and the way he's able to do that is there's some really solid carriers that will do Mexico to US, us to Mexico and those relationships. We can rely on the carrier to be able to help deliver on that. They're comfortable with it, they know how it works. They don't really get freight, et cetera, but it can all be done. It's not easy. It's a really it's a niche market. I wouldn't start with trying to do international over the US Mexico border. I would be proficient as a freight broker and if an opportunity comes your way, learn from someone who's already done it before, or leverage carriers that you know that have expertise in that arena and then get involved with it.

Speaker 2: 19:40

Huge increase in business from Mexico to the United States, though Big opportunity for those people that are going to get into it for sure, for sure.

Speaker 1: 19:49

Last question, we'll wrap it up Is there a database to find carriers based on the number of assets they have? Two that I use personally. Dat has the DAT directory. You can go in there, search for a carrier by equipment type, by fleet size, any of the reportable data. That's one way. Number two highway We've had Michael Cainey on here before.

Speaker 1: 20:12

It's a product I used myself. I used it for years and we're going to have their onboarding platform roll out and it could be as early as next week. It might be next month, we'll see. We got some work to do with having it get done, but theirs is really cool. So it's like the DAT directory. They do a lot more than that, but one of their tools is very similar. I can search, say, I want a truck Chicago to Atlanta, I want it to be a reefer, I want them to have 24 months or more authority, I want them to have at least 20 trucks and maybe some other stuff in there too, and it'll tell me every matching carrier that meets that criteria. And they're using FMCSA data. They're using inspection data. They're using location to rank them based off of where it was a headhaul. It's a backhaul Inspection. History tells me where they've actually ran that lane. It can verify what they've got at least 20 trucks, how long they've been in business, et cetera.

Speaker 1: 21:06

But yes, these companies are out there. They're not free. You got to pay for them. But if you're already a DAT user, go to the directory on dat1. If you're not a DAT user, get 10% off your entire first year. Use the link down in our description box. There the directory is included. There, highway, you could pay for their basic version or you could pay for their connect version, which is an onboarding tool as well. But they're out there and they're great. As your companies grow and freight brokerage, these tools are going to be massive, massive value added for you to help source capacity. Anything else you know about that?

Speaker 2: 21:40

realm. No, that's exactly what I do, exactly how I use it and exactly how I pull my carriers. I pretty much only use highway at this point for Yep, I use highway and DAT. I don't really need anything else.

Speaker 1: 21:51

To be honest, yeah, for sure, good stuff, good questions, and keep sending us your questions. We'll get to them on every Tuesday's the final mile. Final thoughts, ben.

Speaker 2: 22:02

Whether you believe you can or believe you can't, you're right.

Speaker 1: 22:07

Until next time, I'm going to point like you, go, bills.