Newbie question about trucking industry

You know that's right...hehehe

 

I think the term is "fresh meat" rather than fresh fish...

 

In those prison shows they call them 'fish'....hehehe

 

Did I miss the post where someone actually answered the question? ("Who are the players and where does the money flow from in transportation?")

Shipper are "selling" products. They pay for the transportation of their product. This is where the settlement to the trucking carrier ultimately comes from.

Receivers ordered that product. They have an agreement with the shipper of products to pay for the product + cost of getting it to them.

The cost of the product is negotiated outside of the transportation of said product, although the cost to move the product is definitely a factor in the price.

The shipper wants to move the load for the best price possible. They can call dozens of independent owner operators with their own authority, a handful of companies with drivers, or a freight broker to get the load moved.

The independents and companies will offer their price, or the freight broker will make an agreement to move the load for a certain price.

If the O/O can secure the freight from the shipper, they will be paid directly by the shipper, usually <30 or so after delivery. This is called "direct freight" and there is no middle men involved. Direct freight rates are usually stable throughout the year and recurring. Many shippers lock In a rate and opt to supplement with a "fuel surcharge" to offset fuel price increase/decrease and keep a stable shipping rate. Most independents have shippers they work with regularly and have higher earnings as a result.

If the shipper gets a better rate from the trucking company, they will pay the company directly, usually <30 days of delivery and the company with withhold a % of the rate and put it on one of their trucks. This is how carriers make money, hauling loads for shippers and profiting from each load. When choosing a trucking job, it's useful to know a little about their direct freight, since different shippers and receivers have different loading times, policies, and sheer volume of freight. If the freight pays the company well, the company may not mind sitting their drivers (which does NOT pay well) to wait for it. There is no obligation on the company's part to share the profits with the drivers, who are usually paid per mile, not per load.

If the shipper doesn't have a dedicated trucking company or independent carrier they deal with, or irregular volume of shipments, they will call a freight broker. A freight broker is an middle man who matches shippers' available loads to carriers' available trucks via a load board. This type of freight is "spot market" freight, and the rates vary wildly by region and season and typically do not involve a "fuel surcharge" as they are one-time shipments for the carrier. The freight broker posts the loads, type of trailer required, origin and destination and pertinent details and carriers who have free truck capacity look on the load boards and call to place a bid and negotiate a rate to move the product. This model works well when you are trying to find a reload in an area where you do not have direct shippers, or during slow periods for your direct freight.

The shipper determines the cost of the move and the freight broker's profits are realized by finding trucking carries or independents to haul the load for less than the shipper is paying. If the freight broker underbids the load from the shipper, he will not be able to move the load at the agreed rate and may lose that shipper as a customer.

When the load is delivered, the shipper pays the freight broker the agreed rate and the broker is responsible to pay the carrier their agreed rate.

It goes without saying there is a tremendous capacity for abuses in this system, but this is how it works. Freight brokers tend to have little to no "skin in the game", since they don't own or maintain equipment, buy fuel or have to warehouse shipments that can't be moved. Their profits exist by skimming off the rates of carriers and shippers who cannot connect otherwise.

Hope his helps.

 

It varies. I am a former Driver/trainer/dispatcher/fleet manager and now a brokers agent.
As an agent, I do everything a broker does, but I have to split my profits with them.
As far as rates on the load board go, here is how I do it.

Lumber and steel loads are usually cheap and not really worth my time to tell drivers about the load, just to be hung up on when the rate is too low. So I will post those rates. My lumber customers regularly send me loads only paying 50-80cpm. I refuse to work on any load where the driver will not make AT LEAST 100cpm.

Other loads I will keep the rate off, and have people call in. The reason for this is a sales tactic. Just like with a car, the longer you are on the lot the more likely you are to buy. This way when we start to negotiate the price you are already invested in the load and are more likely to "buy" the load. I personally will never screw a driver. Having been one I know it doesn't feel good. If I have a load a customer gave me for $1300 I will want to cover that load for $1050-1150. When you call in, I tell you about the load, how great the FCFS shipping/receiving hours are, it's going into a great market, yada yada. Oh and they are trying to cover this load for about $950.
You say, Heck no I need $1400, do you have any room on the rate?
I say, well I guess I can go up to $1050, but that is about it.
You say, Man really the best I can do on this is $1200, can you help me out?
I say, here is what I can do, but the boss is going to be mad. I will chip in $50 on our end, and we can do $1100
Then you either take it or ask for $1150 (still in my goal) or walk away.

My goal here is I know what I need to make on a load ($150 min per load (I get about $60). Human nature wants to get a good deal, so I get you to "bid me up" that way you feel like you pulled one over on the broker.

There is a 3rd type of load that has not been mentioned yet. As a broker I have no assets to look at when a customer asks me how much it will cost to move a load from A to B. So I have to "test the waters." In this case I will post the load, but when people call on it I will quote really low. My goal is to get you to walk away. After speaking to 3-5 carriers I have a good feel for how much to quote the customer. Also some loads I post and within 20 sec I have 10 people on hold. That tells me I will not have any problem covering this load, on the other hand I had a load from Moses Lake, WA to Phoenix, AZ. I posted it and it took 4 days to get 1 call. That one I would need to bid high so I will hopefully be able to entice a driver over.

Clear as mud right?

 

Where brokers fit in.
In the shipping world there are 4 types of shippers.

Mom and pop shops who only ship out less than 5 loads a week. Someone can run the load board or call carriers in their spare time. No need for a broker.

Medium sized shops that send out 6-20 loads a week. This is now too much for someone to do on the side, but it is not quite enough for a new employee. Great fit for a broker.

Large shops that send out over 20 loads a week. This volume can justify a full time employee to find trucks and handle paperwork. No need for a broker.

Last are the crazy shops. These can be any size, but for some reason have large swings in their production. It makes no since to hire and train someone for 3-4 busy weeks here and there, and it is still too much work for existing staff to deal with. Great fit for a broker.

 

Set pricing with "click and collect" service removes the negotiation option and it would seem that during the negotiation phase is where brokers can earn the most profit.

As he mentioned the model seems to follow car dealers and probably other industries where the price of an object isn't clearly written on it. I know some dealers offer "the price you see is the price you pay" with no negotiation and he did say that was the case with certain types of loads.