How to Leverage Co-Broker Agreements in Freight | Episode 240

Freight 360

April 19, 2024

In this episode, we look into the freight industry’s complexities, clarifying the terms co-brokering and double brokering, while exploring their market impacts and discussing the broader dynamics, including a critical look at industry leaders and a playful analysis of conspiracy theories following a ship accident investigated by the FBI. We also connect the dots between the precision required in freight brokering and strategies seen in sports, referencing O.J. Simpson’s legacy and Scotty Scheffler’s performance at The Masters. Wrapping up, we focus on managing risks in co-brokering, emphasizing transparency and trust to protect customer relationships and comply with FMCSA regulations.

Support Our Sponsors:
QuikSkope – Get a Free Trial: Click Here
Levity: Click Here
Bluebook Services: Click Here
DAT Freight & Analytics – Get 10% off your first year!
DAT Power – Brokers & Carriers: Click Here
DAT Express – Brokers: Click Here
Truckers Edge – Carriers: Click Here

Recommended Products: Click Here
Freight Broker Basics Course: Click Here
Join Our Facebook Group: Click Here
Check out all of our content online: Click Here

Show Transcript

See full episode transcriptTranscript is autogenerated by AI

Speaker 1: 0:19

Welcome back for another episode of Freight360. What's up, freight360 Nation? We're going to talk about co-brokering today and how it compares to double brokering. That's been sort of a hot topic the last handful of years, but it's been an ongoing thing for a very long time. So we'll get into that in just a little bit. But first make sure, if you haven't already hit that subscribe button, hit the follow or like whatever the buttons are on each platform. Leave us a comment, leave us a review, share us with your friends, send us your questions. We'll answer them each week as we have time. And check out our website, It's got our whole library of all of our blogs, videos, all the content, some downloadable content as well. And while you're there, check out the Freight Broker Basics course. That's our full-length educational piece that'll help you get started on your journey in the freight brokering world. Ben, what's happening, man? How's Florida? I'm back where it's not sunny and warm anymore, but what's going on down south?

Speaker 2: 1:22

Not bad. Weather's been pretty much the same since you left. We haven't seen any rain, and it's basically kind of just waiting for the rainy season, which is usually like very beginning of may.

Speaker 1: 1:33

Then it rains every afternoon for like the next three months well, you're from the northeast originally, so you know the whole april showers bring may flowers, all right. So there it's, uh, it's wednesday right now and it's raining here. It's supposed to rain tomorrow as well. It's funny because, like yesterday, a lot, it was like it was sunny and like 60 like for a little bit, and people, everyone was out there like doing their first mowing of the year, like cutting their grass. I was like, should I do it and I go out there? I'm like, uh, I was busy as it was, but like my grass was still kind of wet. We have a very like shady front and backyard. Um, we don't get a whole lot. Well, get some sunlight, but not enough that. It was nice and dry, um, so I'll have to wait. I'll have the ugly lawn for another couple weeks, but spring is, uh, spring is here and summer's around the corner.

Speaker 2: 2:18

Can always clean up the front, get to the back later, keep up appearances, that's true curb appeal um, so a little sports here.

Speaker 1: 2:27

The uh, the late juice, aka oj simpson, um died last week. Did you hear like?

Speaker 2: 2:36

so everyone was expecting that he would give like a deathbed confession and he didn't so like just silence here's what I did hear, though two interesting that One in his will there was like a clause and I can't remember how it was phrased, but it basically prohibited. Was it Ron Goldman's family that mostly, I think, sued him and won the lawsuit? Anyway, you know that he owed hundreds of millions of dollars. Ron Goldman that lawsuit you're talking about him and won the lawsuit um.

Speaker 2: 3:05

Anyway you know that he owed hundreds of millions of dollars, lawsuit, correct? Yeah, and in his will there was a clause that basically none of the damages, that or none of anything that got liquidated could not go to him. And then his attorney spoke out after the death and said, like you know, like his last wish, or basically, was that none of his estate goes to pay that wrongful death, whatever, right Again, I don't know. They were talking about on morning radio and like sports radio and I was like that is wild. I mean like, yeah, the exact opposite of a deathbed confession. Right, it's the exact opposite. And his.

Speaker 2: 3:40

Bronco's up for sale. I heard Really it's going to be auctioned. There's like three guys that owned it and they said you know, it's the 30th anniversary. They were going to plan on selling it anyway, but they're expecting like a million to a million and a half. It's on loan to some museum right now, but they said it only has 30,000 miles on it. So I mean, hey, if you're in the market for a 30-year-old bronco with 30,000 miles on it, yeah the last 10 or 20 miles on it have a good story behind it.

Speaker 1: 4:08

Yeah, all right, so that's OJ. The Masters man, scotty Scheffler, got his second green jacket in three years, and it wasn't even close, like he won by like a margin of like four strokes at the end, or something like that.

Speaker 2: 4:21

Yeah, he kind of ran away with it. I mean, and, to be honest, also like he didn't look great. Let me rephrase I don't want to say he didn't look great, but he missed like three of the first four or five greens Like long short, like wasn't hitting greens really early on and I mean I was texting all my buddies too, watching I'm like I don't know. I hope he holds up, but like I just kind of felt like he was going to win the whole tournament and I'm like I don't know why it was. I mean, he's a great golfer, he's number one in the world, but they even said like for the odds on favorite to actually win the masters hasn't happened since 2005 when Tiger won it when he was the favorite. So like even the world number one in the odds on favorite rarely ever actually wins the tournament because it's so competitive and there's literally the entire field of the world's best.

Speaker 1: 5:11

And when you say favorite, it's not even like they're a majority. Like it's a plus bet. If you know sports betting. It was one to 500. It was Saturday.

Speaker 2: 5:21

It was bet 100 to win 500.

Speaker 1: 5:45

I think Morikawa and Max Homa that were second and third at the time it was like about 100 to win like 1200. Yeah, so wild Olympics coming up in July, so as of like today, I think it was 100 days out. Did you see? So, obviously people are always like you know, do Olympians get paid? Why don't they get paid? They can be paid by their country.

Speaker 1: 5:54

But for the first time ever, the the Olympic Committee set aside was like two point four million dollars for track and field to award the like 40, some gold medalists, 50k each. So first time you're seeing Olympians be paid by the actual Olympic committee versus their, their host nation. So be curious. So did you also see the girl from UConn I can't remember her name the basketball player? Her contract came out this week for the women's NBA and it was crazy to see I think it was like seventy thousand dollars for her first year versus these guys that are making millions in the NBA and there's like all kinds of you know, uproar about it, but the reality is like the market's not there yet for women's NBA. It's the same way that NFL players 30, 40 years ago see contracts today.

Speaker 2: 6:41

They're like man had two jobs Back in the 60s and the 70s, like that wasn't even a full-time job for baseball players, basketball players or football players. Back in the day and again, like they also did, I saw, like they showed they were talking about the revenues right of the leagues and it's like by a factor of almost 100, right Like what one league brings in from fans and the amount of people that watch it and, to be honest, like it's a product, that's the number of customers. There's more customers in one. Right now, this one's growing. She's going to be instrumental, I think, in growing it.

Speaker 2: 7:11

I think so, but they also play in the summer they play a shorter season and most of the WNBA players also play in Europe, so like it's also not when we watch a lot of sports because we're outside. So I mean there's a lot of things, I think, that go into that beyond.

Speaker 1: 7:26

Yeah, and the NBA has a big following in China, which women's NBA doesn't. So I think, like you said, hopefully she'll, you know, help like, be a catalyst to grow that I mean think about all the random sports, not that basketball is random, but different sports that have gained traction over you know a period of years, and it doesn't just happen overnight because of one.

Speaker 2: 7:49

You know one player, but but it's trending that way and I think it's good. I mean I have a daughter, I. I mean I like watching sports. I think it's great that more girls and they're playing more too. Right, like you're seeing younger kids. Another guy was talking to to same thing as like a daughter and you know teenage years and he's like you know, when we were kids, there just weren't year-round leagues for most women's sports for kids, right, like whether it's soccer, basketball or whatever. Now these kids are playing basketball all year round. There's leagues 12 months a year, no matter what girl's sport it is, and to me, like the more that more that you have there's the feeders, right, like all of the high school leagues. You got more girls that want to play because they're watching more. There'll be more in college and more college talent. You're going to see more talent go into, you know, major league sports for women. So I think it's a really positive trend. Really like seeing it. It'll be interesting.

Speaker 2: 8:41

Caitlin Clark that's her name Played for, I believe it was UConn and, to Stephen's point, there was some stuff in Free Caviar, but also Brush Pass put this out on what the revenues looked like last year. I got that in our news.

Speaker 1: 8:57

Ben, Look at the show notes there.

Speaker 1: 9:01

I already had it teed up. We'll hit on that first, actually, and then we'll get to the other news. So, yeah, so, Kevin Hill Brush Pass Research. This came out I think this morning is when I saw it, so I added it in here but 2023 freight brokerage revenues declined 15%. That's a year over year. All right, but it's still 56% higher than it was in 2019. All right, but it's still 56% higher than it was in 2019. And we all well, if you've been in the industry for five years or longer, 2019 was the last time that we saw a down market. Right, we had a boost in 2018 and then we had a down market in 2019. So we're 56% higher than we were in 2019. But, again, recency bias makes us all feel like, well, we just saw the COVID surge, or the post COVID surge in 2021, 22. And now it feels like a two-year hangover. So that was an interesting stat. The other one that he had did you see the pie chart that showed the breakdown of the large brokerages and the revenue?

Speaker 2: 9:56

I sent it to a few people first thing this morning because it's a really good summary of how the market, or the total addressable market for freight brokerages breaks down by revenue and size.

Speaker 1: 10:08

Yeah, so it was the largest 150 brokerages. They make up 70% of the revenue. That's a lot. And then think about this the top 3.5% of brokerages have 88%. And it's an astounding stat because with tens of thousands I think there's like 20, some thousand active brokerages right now the vast majority of them aren't really doing anything, right Like, maybe they never even move a load, right? Steven just put in the notes 27,450 active brokerages right now, but I would be willing to bet half them don't move anything. A bunch of them are just really small less than a million dollars a year. And again, brushpass Research has a lot of stats on this. And then the other thing thanks for adding this in the notes there, steven.

Speaker 1: 11:01

The transport topics did add their. They released their top 100 companies. If you, if you're a transport topics member, I think, if you're part of TIA, you get, like the I get literally a magazine once a week. So I think we only get one, ben, that's why you're not getting I'm stacked up at your house, but you get access online too. They put out like the top hundred logistics companies, the top hundred freight forwarders, top 100 freight brokerages. I will tell you this that I worked at a company in the past that had higher revenue than companies in that list, but they only list companies that are willing to release their revenue right.

Speaker 1: 11:38

So if you don't, partake in sharing your data with them. That will lead to you not being on their list. It doesn't really get you anything besides being on their list, but the list does have some skewed potential skewed to it based on people not sharing their data.

Speaker 2: 11:54

And there were some noteworthy things, right, and this is out of free caviar too, right. So Schneider stood out, was basically the only company that bucked the trend, because their revenue climbed from $1.64 billion to $2.2. And the shakeup really at the bottom of the leaderboard, with familiar names slipping out of the top 20. Redwood went from $1.2 down to $640 million and they do a lot in the bulk space. Convoys not on the list anymore, obviously, and Trinity also off the list.

Speaker 1: 12:28

So some noteworthy- You're looking at logistics companies or the specific freight brokerage, because they have multiple lists, keep in mind.

Speaker 2: 12:36

That should be the brokerage. That was off the brokerage list, so out of the-.

Speaker 1: 12:40

I'm not from transport topics. Right now there are 2023 top freight brokerage firms. You said Armstrong or no, I'm sorry, Trinity. Trinity is at 1.2 billion. They're number 17.

Speaker 2: 12:52

No, it said that Redwood went from 1.2 billion down to 640 million was what Freight Caviar cited.

Speaker 1: 13:03

Gotcha Interesting. Oh, my old company's on here at number 43. Nice, they finally decided to disclose their data. Ch Robinson top of the list. This is 2023 top freight brokerage firms CH Robinson $15.8 billion. Tql $8.7 billion. Coyote is number three, Worldwide Express number four. Lancet are number five. Six through 10 are Mode, Echo Global, RxO, Uber Freight and JB Hunt, All at over $2 and $3 billion a year. Big market, Big market. A lot of freight out there. Lastly in news, the Baltimore Bridge Did you see the FBI probing and doing an investigation into the ship? I did not. Yeah, so the ship this all came from like an anonymous source who didn't want to be. It sounds like they were on the ship or they were in the area and knew about this, but basically there was known electrical issues before it left the port and they left anyway. So the fbi is launching a criminal investigation.

Speaker 2: 14:18

So we'll see how that happens the very least, it sounds, though, like it's negligence, not like, oh for sure Malicious behavior.

Speaker 1: 14:26

Yeah, well, and it's a tragedy regardless. But there's, I think it's kind of obvious no one tried to, I mean there's. I'm sure there's some Correct Conspiracy theorists out there that you know, my brother-in-law included that think that there's, whenever something like this happens, it's it's the deep state Right Of that. Think that there's a whenever something like this happens, it's the deep state right, of course. But you know, no one, I don't think that the majority of people think that it was intentional, but someone's at fault, was it, you know, mechanical? Was it, you know, the error of a human? Was it portis? You know they'll get to the bottom of it, right? Yeah, I always laugh at that. There you go.

Speaker 2: 15:05

We were talking about that off. You know just DC and stuff. It's like my friends and family that live there. They always kind of laugh at those like deep state comments, mostly because they're like there's just so many people that don't like each other in DC that like even if that existed, anybody who found out about it would have made it public to try to take them out of power, right. Like it's just this constant push to try to take them out of power, right. Like it's just this constant push. So like I don't know. I've also been rewatching House of Cards recently, so like it's kind of oh, I love that show.

Speaker 1: 15:33

Love that show? Yeah, and then what? The last season they had to kill off.

Speaker 2: 15:39

Dude, I'm rewatching. I don't remember it well enough. Like the guy got canceled, it was like public. I know that happened for sure, but I just mean like I don't remember the storyline and I just started like the fifth season I've been watching for the past two, three weeks, yeah I won't say anything else then.

Speaker 1: 15:55

Kevin spacey yeah, thank you, steven, all right, uh, ben, let's talk. Uh, co-brokering man, that's a good jump into a good intro today, man, a little sports and news banter there. So we get this question a lot from people that are new to the industry, and it is a very valid question, because I don't think I understood co-brokering and double brokering for like the first six to 12 months that I was on the 3PL side.

Speaker 2: 16:22

Here's the other thing about this right Like the terms are not defined in any way that they're used consistently, Meaning like people interchange co-brokering with double brokering, with fraud, and it's always kind of been that way, at least as long as I've been in it, but there's definitely been a shift for sure.

Speaker 1: 17:53

Yes, and so, on that note, the TIA does now use the phrase illegal brokerage activity when they are lobbying for anything regarding the fraud that we've seen in the double brokering space recently. Right.

Speaker 2: 18:10

So we'll talk about.

Speaker 1: 18:11

We'll talk about co-brokering, double brokering and then the illegal brokerage activity. So we'll start with I'm going to start at the severe end, right Illegal brokerage activity, which is oftentimes called double brokering. This is when somebody is brokering without a license to do so, oftentimes stealing someone's identity to make it look like they have a license. All right, those are the common scams that we've seen lately. Double brokering could entail that, but could also entail someone that is licensed and rebrokers a load without the consent of the other parties, whereas co-brokering is Everybody's aware, it's rebrokered and it's transparent and everyone's on board with it, right. So let's talk through a little bit more detail how co-brokering works.

Speaker 1: 19:01

So normally we have a shipper, a freight broker and a motor carrier. So the shipper would tender a load to the freight broker. The freight broker would contract a motor carrier to pick up and deliver that load on their behalf. That's a standard brokerage transaction. Co-brokering is going to involve multiple brokers in the middle, typically two. So shipper gives load to broker A, broker A, for one of many reasons, rather than finding a truck, gives it to broker B and then broker B then finds that truck. And we'll kind of break down the reasons why you would do this, but I at least wanted to lay that out for you and keep in mind. This is all transparent, right? Broker A knows what broker B is doing. Broker A knows what truck broker B is booking. Broker B knows the customer that broker A is using Like. All of this is transparent. We'll talk about the contract and the legal aspect of it in a little bit, but in a nutshell, that is co-brokering. It is not illegal, it is not wrong. It is used very frequently for many reasons.

Speaker 2: 20:05

And I want to go and reiterate right the other two scenarios that you explained, right. The other scenario, too right, is like this is referred to as double brokering, but I think it should be referred to as unlicensed brokering. That is, when a shipper gives a load directly to a motor carrier. That motor carrier then books another motor carrier on it right, like they don't have a license, that's your fraudulent brokerage or your illegal brokerage activity.

Speaker 2: 20:31

They do not have a license to hire anybody, they only have a license to perform the work they were contracted to perform. So if you, if a shipper worked directly with a motor carrier and that motor carrier sent another motor carrier in, that is unlicensed brokering. If that motor carrier hands that load to a brokerage that is owned by the same people and they broker it, that is also unlicensed brokerage, because that motor carrier does not have the authority to hand the load to anybody but their own company drivers. Right, and I think that's also it happens in the industry and there's like a gray area with who's a lease on driver and who isn't. Too. We don't need to go down that rabbit hole. But like those are fundamentally right.

Speaker 2: 21:13

Like, very simply, how you look at this shipper to carrier normal shipper, broker, carrier, normal co-broker, shipper, broker, broker, carrier Okay, if everyone's on board and there's a piece of paperwork that says that, right. But if a load goes to a motor carrier and they don't move it and that load is moved by anyone else, that is unlicensed brokerage and it can be fraud. It could be intentionally trying to steal something. It could just be trying to send another truck in to save face and you had the best intentions, but it's still unlicensed brokerage.

Speaker 1: 21:45

So here's like the gray area. You have a trucking and a brokerage authority, right? Or you have both Trucking and a brokerage authority, right? Or you have both. So let's say you have a dual authority or you have two different MCs. We see this frequently and it's a gray area to an extent. So trucking company has a brokerage, they sell themselves as an asset-based company, get tender day load, don't have a truck for it, and then they go broker through their brokerage onto a third party truck. Not technically illegal, so it can be frowned upon.

Speaker 2: 22:22

Is that true, because here's the point that I've always made, in the way I, at least I see it is that depends on the contract. If you have both companies and you go through the procurement process with your asset MC. You are signing this piece of paper and usually the terms of that agreement state that you are only using your trucks and that it is you and this MC moving it. And if they onboarded the brokerage and the brokerage gave the load back to their motor carrier, now you don't have an issue.

Speaker 1: 22:50

So let me give you an example. Though Mom and pop shop, small farm, right, little, smaller medium sized company who doesn't do contracts or paperwork, they just say, yeah, I'm going to give you this load, right, there's no contract that says X, y or Z is required. The rep takes the load, uses their brokerage authority and brokers it. It's not illegal. There's for sure a gray area there and it is frowned upon Because then if the customer doesn't know about it and they're like I thought you were putting on one of your trucks, I would have just found someone who had their own truck, because now I'm paying a brokerage margin here. And that is how it used to be a lot of times before a lot of this fraud came into place. But again, you can go down a rabbit hole on that.

Speaker 1: 23:39

Contracts a larger company, yeah, contracts are going to state. You know a lot of different things. Another, another gray area is if we've seen this with large shippers right, they have a requirement that you need to be asset based to get onboarded, but the specific rep at that company will tell you like, hey, man, that's just corporate red tape. Like I don't care what truck you send in here, I just got to onboard your asset MC and then you can whatever truck you want. It's like like what, if push comes to shove, there's an accident of fatality and then we realized that our asset company was contracted with them, tendered the load, and then you know whoever the lawyer is is going to go after whoever's got the deepest pockets and as many pockets as possible, and your trucking company could be at risk, agreed, dangerous.

Speaker 2: 24:31

That's the point that I've always kind of looked at. It is like, if something goes wrong, I feel like in a lawsuit they're going to look and go through the chain of custody, if you will, of the tender Right, like where did it go, who was allowed to do what with it? And if you're in violation of a regulation or a statute by the FMCSA, that opens you up to liability, to lots of liability, and to me that's where this gets very different, for sure.

Speaker 1: 24:56

So I mean the legal side of it, right. If you don't have an authority, you're illegally brokering freight. The ethics behind it. If you do have an authority and you're doing it without transparency. Or if you have, well, first of all, let's go back to the legal part. If the contract with the customer states you can't you know rebroker it, then yeah, you're breaking contract. Now the ethics side, right. We talked about some of the gray areas there. If you're not being transparent, you're not putting the co-broker agreement in place. I would call that unethical. You know there's a, you know a gray area of the legality behind it, but the ethics are clearly in the wrong.

Speaker 2: 25:34

So, yeah, and where we used to run into this a lot again a long time ago was like this was really common within land stars and this was something that, like again, was really common in the industry 10 years ago, where some of the offices we could work with from a big when I used to work at a big brokerage like they were green we could use those to book as asset trucks because we needed that Landstar trucks a lot of the time in certain areas, right, but a lot of them would be black flagged for this very reason, meaning you would book Landstar, they'd say they're booking their truck and then they would just broker another truck, send in a truck. And this is where it becomes an issue, right? Is you think it doesn't matter as much You're like, well, if I paid Landstar this dollar amount and they sent a truck, does it really matter if they sent theirs or another? And here's where it did was because, in order to make that additional money, the Landstar rep again in the situation a long time ago they would hire a cheaper truck.

Speaker 2: 26:32

And well, why does that matter? Because most of the time, that cheaper truck had higher out of service ratings, higher safety, it had lower maintenance spend because they just didn't have the money to keep up with it. So they're willing to run it for cheaper. Now it's like hey, I thought I was putting this on one of your trucks. I looked at your out of service, I looked and vetted you. You went and sent someone completely different. It's like what I paid for and what I got are two different things, and I think that's also kind of where it breaks down ethically.

Speaker 1: 26:58

Yeah, and so that brings up our next point of contracts. So the TIA has a model co-broker agreement which I highly recommend. If you don't have one in your company, utilize theirs as a starting point. It is branded by TIA, which is totally fine. It's actually probably a good thing if people see that you're a TIA member. But you can always use their model contract and have your attorney use it as a baseline and add verbiage in, because some of the things to your point, ben, about maintenance on trucks one of the things that I highly recommend that you have established in your co-brokerage contract is who is responsible for vetting the motor carrier, and we mentioned broker A is who gets the load from the shipper. Broker B is who gets the load from broker A and then eventually hires a truck. So typically broker B would be responsible to hire and vet and do all your track and trace on that carrier.

Speaker 1: 27:53

But broker A let's say that I got a load for my shipper and I'm going to co-broker to you, ben, I could stipulate in my contract that you're going to be responsible to hire or to contract and vet and track and trace carriers. But all carriers that you contract must meet the following requirements. You can include that in a contract. So you could state that they've got to have whatever your thresholds are for CSA scores or your length of authority or insurance requirements, whatever is SOP for you at your company or, in addition to that, your customer's requirements. That should be reiterated through that co-brokerage contract to the broker that's going to actually book a truck for you. Or if it's not in the contract, you could state it somehow in written communication via email. That way you've got a paper trail that covers your butt that you're dotting your I's and crossing your T's. So why would we do a co-brokerage?

Speaker 1: 28:49

Let's talk through scenarios and you and I have different. We have probably some of the same but some that are different scenarios in which co-brokering happens. I've acted as broker A. I've acted as broker B, more so as A, less as B. So remember, a is when you're the one getting the load from the customer and giving it to somebody else. Actually I said that backwards. I've acted more as B and less as A. So I'll tell you when I've been broker A and I am currently LTL, intermodal and expedite. So we've got co-brokerage agreements in place and I'm actually setting up some more REL co-brokers currently because my brokerage that I work for, we don't have enough LTL volume to secure competitive discounts from the you know the old dominions and T-forces, all the big LTL carriers, right, we don't have. If we go to a I've done it before If you go to the sales rep for these LTL company and like I know LTL very well I used to, I started in LTL and and I go to them, they're like, well, how much LTL do you move?

Speaker 1: 29:55

And I tell them it's like less than 100 loads a month. They're like, okay, like here's your discount, which is very slim. And then you go to a company that's a big LTL brokerage and they're getting like an 80% discount on the rates. So I would rather set up a co-brokerage with someone who's an expert and has a lot of leverage Well, yeah, a lot of leverage and cost benefit in a certain niche market and take their rates and have them marked up than to go and have triple the rates on my own.

Speaker 1: 30:28

So, ltl, I've done a couple of co. Actually I've done like four or five of them over the years. So, ltl, I've done a couple of co. Actually I've done like four or five of them over the years. There's one main one that I use now. Basically, I can go to my, we can go to a customer and get them a cheaper rate through this co-brokerage agreement through quality regional and national LTL carriers, cheaper than if we did it on our own without the co-brokerage. So it's a win-win-win. Everybody wins, right. The LTL and my assistant was actually asking me the other day. He's like why do we do like, why would we do a co-brokerage, like what's in it for everybody? And I'm like well, the customer gets service by us at a good rate.

Speaker 1: 31:03

We are able to service our customer and provide them a cheaper rate, the co A little bit they otherwise wouldn't get, and they make a mark, which is how they get the leverage. By the way, Yep, and then the motor carrier gets the business that they otherwise wouldn't have gotten. So, everybody, this is a win, win, win, win, win. Everybody's winning in this situation. Right, it's all transparent, it's all contracted, it all works out good.

Speaker 2: 31:29

Same for intermodal right, similar in regards to the reasons why you do it right, like trained, like csx, canadian national union, pacific, any of the you know handful of rail companies.

Speaker 2: 31:43

They won't negotiate for one shipment because think of the amount of people they would need to employ to talk to and service individual shipments, like they deal with larger volumes. So the rail lines again negotiate directly with, like the major shipping companies, like Ameriskin Costco and them. They also work with, to your point, other companies that just pull together everyone else's business so that they can negotiate with the rails to give the rail enough volume that it makes it worth it for them. And then the intermediary or brokerage right. Same Then goes to all the other brokerages that just need intermodal from here, like occasionally right, like hey, I got a couple of loads a week, a couple of loads a month, and then that broker pulls all of their customers together to get better pricing from the rail and for the same values. Right, you know we use them. And again, back in the day, all the big brokerages did that as well because, like you, just couldn't even get individual pricing in intermodal without going through a co-brokered situation.

Speaker 1: 32:40

Yeah, and one of the things I really like about the intermodal co-broker is the and it's the same with LTL. It's the ease of use, right. When these are like you can just go to a portal or go to your rep and say here's the lane. Can you quote me door to door on this Right? And with rail, rail gets like really, really detailed if you're doing a door to door move because you've got to get rubber, rail rubber.

Speaker 2: 33:01

You need to draw it to the rail. You got to track the rail, then you got to draw it on the other end to the delivery.

Speaker 1: 33:06

Exactly. So what is that? If you're new to this, if you can't visualize that, picture a truck pulling up with an empty container. Right, that container gets loaded up at the shipper, gets driven we'll say I don't know 20 miles to a rail yard, gets loaded onto a train, driven 2 000 miles across the country. That container then gets offloaded onto another truck with a chassis and you know, power only, and taken to its found destination. So you've got three pieces, like you said rubber rubber, rail rubber I've never heard it called that, but that's good. And they do all the work for you, right? They're experts at that. They have the volume, they have the rates, they have the visibility on everything. You just go in, get your pricing and boom, you're done. So that's where co-brokering is very, very beneficial. Again, everybody wins in that situation. You've done Well, let's go on your side. So you've done it. Where you've used, you've co-brokered with just traditional truckload carriers based off of their capacity in a certain region, correct? I've?

Speaker 2: 34:09

done A and B, so I'll go through. When I was broker A right so a situation that this worked really well I had a large customer. It was a maritime broker, so they were, you know, bringing the bulk steel in from Brazil and to New Orleans and they brought like one whole ship in a month, right, and that was like end up being like caught like five loads a day for basically that whole month. You know, 25 loads a week, a hundred over that month was the entire ship that came in. Now, the issue I ran into when we tried to book all the trucks ourself is it's a very centralized pickup, meaning like New Orleans, like there's not a lot of trucks that pass through it. There are trucks that go there to deliver, but it's not like the middle of the country. You don't drive through, you know, louisiana or by the port area unless you're already going there. So there's a smaller number of trucks first of all. Secondly, the destinations there's only a handful. They went to the steel mills up around the Great Lakes, right. So if you picture, right, like every load's picking up at the Port of New Orleans and then they basically go the same way and then just branch off at the end to deliver, to like steel mills around, right.

Speaker 2: 35:22

What happens is is if you are the only broker moving that much volume and what I mean by volume, like that's not a huge number, five or six loads a day, but it is when you are pulling you need as much of the flatbed capacity to go to a specific place on the other side of the country. There's just not that many flatbeds often that wanted to go there every day, like five or six every single day to go up there because there wasn't a much freight coming back. So like you're like okay, well, how do I keep a consistent price for my customer to bid this all month, which is also hard. And then you're like well, as soon as the market kind of realizes I need this amount of trucks, every day you lose your pricing leverage. Meaning the carriers all kind of talk to each other and they're like, well, hey, what did you make? What did you make? Then they start coming back to you after three or four or five days, like you're trying to hold an average for your customer and pay them the same rate, but they all start negotiating up and you don't really have a choice because you can't pull capacity from South of it, it's the Gulf of Mexico, like there's nowhere else to go and you can't pay trucks to come in from, like Alabama and Tennessee, because the deadhead's too expensive. So it's like well, how do you keep a consistent price so you can actually work over a month and still make this work? And what we found was, again, if I was the only one posting the loads from TQL back in the day, this is where I was running this like I'm the only one posting this much volume. So it's very apparent what's happening. They all just start negotiating back and I can't hold any type of consistency, right.

Speaker 2: 36:51

What I found was and I used the Landstar broker that I had worked with and other things that we had a great relationship and I'm like well, how many trucks can you get every day this week? What do you think you can provide on the asset side? And he gave me the number, right. I'm like okay, well, what can we do? Because I still need to get a couple extra trucks throughout the week that I'm not able to get and I don't want to keep pushing my loading schedule because the boat's only there for so long and then you can only keep it there. Then you pay storage. So there's lots of reasons why you can't just extend time, but you still got to be able to keep this rate.

Speaker 2: 38:37

And then what we found was, if myself and him were posting around the same rate and working the same lane, even with the same commodity, there were just trucks that had a preference to work with them over TQL. Maybe they worked with a broker that they didn't like, or somebody made a bad decision somewhere along the line or whatever. There's a number of reasons why a carrier and a broker end up not working together in the future because of some disagreement. And what I found was, you know, in a practical sense, I was able to get more capacity at the same price just by using, basically like a straw man, like another company posting, so that they didn't feel like they needed to work with a company they, for whatever reason, weren't okay with Because they're going to charge me more to work with me. So I was able to pay, you know, landstar a margin and he made money to do this with me.

Speaker 2: 39:27

But I got a bigger benefit because we were able to hold the market at least consistent. And again, everybody did well. The carriers did well. They ended up working with us week after week and month after month. It was mutually beneficial to everybody. But when you're the only one trying to basically hire all the trucks to do the same thing every day, it becomes very difficult because they all have the leverage over you and they could just literally up their rate 50%. What are you going to do? Like you still got to move it, like you're in a difficult, difficult place?

Speaker 1: 39:57

Yeah, I think whenever you've got. So you gave kind of a general way to use it. But it's a great example, right? Name recognition in a good way or a bad way, could be a reason that people will use co-brokerage. So they might, like you said, someone might be like I've never hollowed, you get like an owner operator. That got burned once by you know.

Speaker 2: 40:15

Yeah somebody didn't pay a tonu or whatever.

Speaker 1: 40:18

Yeah, like I'm not like they don't care, they're just gonna blacklist that, that broker, even if it was like one One out of 4,000 guys. Right. But also if you think about someone who has a really strong carrier network that is otherwise not publicly posting on load boards, right you get access to capacity that you otherwise would never know existed. Right. There's a lot of really big benefits to co-brokerage in that way as well.

Speaker 2: 40:48

So I'll take you through B, which is that side of it. Right, like when I wasn't working directly with a shipper, I was the second broker supporting the A broker or primary broker, right. So this brokerage was again attached to a motor carrier. So you have a separate brokerage and you had a motor carrier that worked with a lot of the big customers, right, and when I was prospecting them, like I intentionally called other brokers for, like the first six months when I prospected at TQL because everybody else was doing everything else, like it was hard to get leads for produce or any of the other commodities nobody wanted to call another brokerage because there was still a stigma that, like this is double brokering and you can't do this. So I spent the time to learn what we could do and not do and I'm like, oh, this is a whole market nobody's going after.

Speaker 2: 41:34

So I called brokerages every day and prospected them to try to find the ones that had more volume than they had capacity for. Right, that meant they're leaving money on the table that's their opportunity cost and they didn't have enough staff yet to keep covering the loads and they couldn't hire quick enough. And they're basically just like my customers want us to do more and we can't because we don't have a staff yet. My pitch to them was let me co-broker with you. I'll help you grow. So I'll get you the trucks you tell your customer, you'll take everything they can give you and then, as you make more money every month or quarter, now hire another person and then give me less freight and then I'll shift it back to you. So I'm basically funding their growth by allowing them to cover more loads, for their customer makes them look better, customer's happy. We help them grow in a way that was mutually beneficial.

Speaker 2: 42:22

Right, yeah, so that's what it looked like and that's exactly what we did. Like we there were large customers and the brokerage that was my customer was like look, these are the amount of loans and loads I can cover today. These are what I can't cover. And we would. We would call it like horse trading to negotiate rates so that we would split it down the middle and kind of like what we made. But basically, at the end of the day, we just worked together. Right, it was just two brokers that worked like we were literally at the same company, except when we posted to the market they were from different brokerage MCs and the money went through two different companies, but we very much worked like a team.

Speaker 1: 42:56

Yeah for sure. So we'll talk about like. So, broker B right, when you're broker B, you have a lot more control because you're the one that's actually selecting the truck. I want to give another example, to kind of like what you just had, but a little bit different.

Speaker 1: 43:12

When broker B and I do a lot of this now is, let's say, a, I'll just generalize them and say a transportation company right, it could be a brokerage, someone that's. I mean, they have to be a licensed brokerage, but they're not. They don't all look the same. But any transportation company that maybe specializes in one type of freight but their customers have other kinds of freight, right, you like, let's say they only do, they only do like flatbed, right, standard three foot flatbed. But you've got expertise in heavy haul and oversized stuff and they are just turning away that freight from their customer.

Speaker 1: 43:51

It's like, no, no, no, like you can be a single point of contact to continue to service that customer. I'll help you find the capacity, where I'm an expert, to win, win, win for everybody. And when I go to hire that rgn, right, I know that I'm vetting their insurance, their safety record, all of this stuff. I have total control over that truck that's being hired in there right Versus when I'm broker A. Depending on how the contract's written, I'm kind of at the mercy of broker B to hire the right truck, the right quality of truck, the right type of truck, and all that because that could damage your customer relationship if broker B screws up that's the risk.

Speaker 2: 44:26

Yeah, and that is the risk right, because carrier the broker B is the one talking to the trucks. So broker A really needs to trust broker B because that's the risk, right. Like if you're my B broker and I'm working with a shipper and you say you're sending in a certain truck, and let's just say you made a mistake and send in the wrong equipment, I'm the one that has to go and own up to that to my customer. I can't blame it on you. I have to go and say we made this mistake, that's on us. We'll make sure it doesn't happen again. And that isn't an easy place for lots of people to establish that amount of trust, right.

Speaker 1: 45:05

To be able to do those things. Other risks that I want to talk about here are if you miscommunicate or fail to set expectations on certain procedures. So whenever I do a co-broker and I'm broker A or broker B, I always want to talk through what does the invoicing process look like, right? Who's sending what where? What are the timelines on it? What unique identifier am I using to identify which load is mine or what's my load number and your load number? And then also, how are claims handled? Right, if there's a claim, is broker B the one that's going to facilitate that on behalf of my shipper, or am I going to have to step in and do that? And there's not like a right or wrong way, just have the conversation. So when something does happen, you're not like, uh, what do we do? Now? You know what I mean.

Speaker 1: 45:56

Steven put a good one in here in the notes the risk of back solicitation. So, yeah, this risk exists with just broker to carrier, but also broker to broker to broker with a co-broker. Where you're, you're essentially giving someone else access to your customer's freight, whether that be a motor carrier and a standard transaction or another brokerage, which is a bigger threat in the issue of a co-brokerage agreement. So typically those agreements have a no back solicitation clause in there. And again, if you are being transparent with your shipper about how you're getting capacity for them right, you kind of set the expectation up front that this is my relationship. You know I'm bringing this guy in to help me out. He's not here to take business away. There's always going to be a risk because you know someone can just decide to go rogue one day and try to steal your customers. We see it happen with carriers all the time where they try to back solicit. But the reality is if you've got good, strong relationships, that's going to weigh a lot heavier than someone trying to come in and poach.

Speaker 2: 47:04

What do you think on that one, ben? I definitely think that's true. I mean, there's always that risk that's out there that someone is going to back solicit you, a brokerage or the carrier. But there are things you can do to kind of protect yourself, meaning like, the BOLs I'm getting from my shipper are not what I'm sending to the other brokerage. The other brokerage is getting a rate con which has the information I want them to see.

Speaker 2: 47:25

So they're not going to get my customer's point of contact info. They might not know who or how I invoice, how that setup process works. They might only, and should really only, have the pickup address, the delivery address, the relevant details to secure a truck and nothing beyond that. And to your point, if you do this well, your customer should be aware that they also exist. So if at any point they go to your customer, your customer is like look, I know you guys have this relationship with Ben and his team, why are you coming to us directly? And that is going to immediately make them look unethical and, you know, mostly dash their hopes of backdooring me anyway, for sure, for sure.

Speaker 1: 48:03

So there you have it Risks, pros and cons. Dash their hopes of backdooring the anyway For sure, for sure. So there you have it Risks, pros and cons. Oh, I did want to add in here too. Steven added a note about the FMCSA fines. So this is a real thing and we talked about this in DC the last couple of years that the TIA policy forum happened. There is currently a standing fine of $10,000 for illegal brokerage activity. All right, and I think it was 2023 when I was there, they had up to 80,000 complaints, and that's just the ones that actually reported it, not the ones that went unreported or whatever. The ones that actually reported it, not the ones that went unreported or whatever. I remember the stat was like if they had fined $10,000 on 8,000 carriers, it was an $800 million revenue stream.

Speaker 2: 48:54

Which sounds like a lot of money.

Speaker 1: 48:55

But the reality is these companies, the illegal ones, they're popping up and shutting down. You're not going to really be able to go get any money out of them. You know they're popping up and shutting down. You're not going to really be able to go get any money out of them, but there is. You know, there's a. There's a fine in place for the legit companies that cross the line, and until that is imposed on somebody, there's really no precedent being set that you can't get away with it. So it's kind of wild.

Speaker 2: 49:20

I agree. It's like one of these things. It's like, well, if you have a regulation or a law that has a penalty and you don't enforce it, what's the point of having either the penalty or the regulation Right? Because if there is no repercussions, I mean human beings are human beings.

Speaker 1: 49:37

It's like if you tell your kid that you're going to take something away from them if they act up, and then they act up and you don't do anything what are they gonna do next?

Speaker 1: 49:46

taught them that they can do that and get away with it, regardless what you say. So, yeah, exactly. Well, good talk on co-broken. Let us know what you guys think in the comments. We've actually I appreciate all the comments out there. We've had some serious trolls on uh on youtube lately. Some people love us, some people hate us, some people are indifferent, but for those of you that hate us, we love that you're commenting because it's driving engagement and it gets us in front of more people, either just like you or not like you, which we don't care either way, because it helps us get in front of more people. So, thanks for the negative comments. What else we got, ben?

Speaker 2: 50:25

Unlike the bigger agenda or just related to. I don't know Anything.

Speaker 1: 50:30

I think that's kind of it for co-program. We're going to do next episode. I think we're going to talk about negotiating. Yeah, I want to talk.

Speaker 2: 50:37

Yeah, two and just get in the weeds on this.

Speaker 2: 50:40

I'm doing more of it and prospecting more, so got more bids to work on and more lanes to work through, and it's just things I'm seeing over and over again. The one thing I want to do some content on that. I was listening to a podcast this morning. They were it was a negotiation discussion, but it was negotiation to like buy companies, but the premise still holds for us, right, and they were like. You know, most people feel like they're on different ends of the table and they're opposing each other because they both want different things. And it's like, if you can just shift the perspective to like both of you are really on the other, on the same side of the table, and what's on the other side of the table is just what the problem is you're trying to solve. Right, and the other thing he had said in there is like, what would you need to do to be able to make this happen? Right, just asking that question.

Speaker 2: 51:27

And it made me really think about what are the variables that are really important to a broker and a carrier? Right, like for a carrier, everybody defaults to rate. Why? Because rate and money is the only thing that mitigates every other risk, so it's the easiest one to go to. That's why everyone jumps and goes at it.

Speaker 2: 51:45

But the reality is there are a lot of other things that are more important. It's just, if there's no trust, the other things don't matter, right? Like, if you're a motor carrier, you might very well rather take 150 or $200 less on this load. If you knew there was no dwell time, meaning like as soon as you pulled up you could get loaded, you'd probably also take it if you knew you could get loaded very quickly and be rolling with inside of an hour. That 200 bucks all of a sudden doesn't matter as much, right, and maybe that loads also lighter, which also saves you in gas, which is important to you.

Speaker 2: 52:13

But the reality is is like there's so much distrust between the carrier and the broker and these very specific and quick negotiations that, like, nobody believes anybody. So even if you have these things, it's really hard for a carrier to believe you, because they've been lied to so many times that they all just revert right back to well, I just need to get paid more for the risk, because I just don't know if I can trust you on this load, right, and that leaves a lot of room to learn how to negotiate in a way that both people can win. So I want to build some of that content out and just like what are the specific variables that are important to each, and why do we always end up only just talking about the money, when some of these other things are equally or more important? And how do you get the trust to actually make those other things that are important work in a negotiation, not just saying it, to say?

Speaker 1: 52:59

it right. So yeah, we can get into like the psychology behind the conversation and all that stuff. That'd be good yeah.

Speaker 2: 53:05

Sweet. So that's what I think. I mean I'm kind of anxious to dig into and pick up next week. Talk a little bit more about it also, as well as like the same thing for shippers, right, we can do the same thing for a broker and a carrier. It's the same thing for a shipper, right? And it's funny because, like all week, I'm talking to other agents that I work with or work with me and I'm just like everybody's customers are saying the same thing and everybody's existing customers are saying a little bit different but the same Meaning. Like every new customer wants to pay either the bottom DAT rate or less than medium.

Speaker 2: 53:35

If you look at anybody's customers they've had for more than a month, they're paying median plus about 10 or 12 percent Right Closer to the high, plus about 10 or 12% right Closer to the high. And it just shows you like objectively, factually, that as your trust increases, the amount they're willing to pay you to work with their freight will go up. But in the beginning they're never going to because there is no trust, right? And that's really just the whole business of freight brokerage getting more shippers to trust you and more carriers to trust you so that you can use the other things that are important to both in a way that doesn't just cost more money, right, Because they're there. It's just nobody wants to take the time to think about them. It's just go to rate and if the rate doesn't work, move on. And I think that's where a lot of opportunity is lost, because people are only just looking at the one thing instead of all the other things you can use to have an advantage to make it work for everybody, Yep.

Speaker 1: 54:28

So precisely good stuff, man, great episode. Thanks for joining us everybody.

Speaker 2: 54:33

Ben final thoughts whether you believe you can or believe you can't, you're right.

Speaker 1: 54:39

And until next time go bills.

About the Author

Freight 360
Freight 360

Freight 360 was born from a vision to share knowledge about transportation with everyone.

To read more about Freight 360, check out full bio here.