Finding and Soliciting Shippers. Developing Shipper Relationships. Searching for Shippers is among the initial stages of the freight brokering business. However before you begin the marketing operations you’ll need to have at least a good website, which is considered to be good place to start your marketing campaign. Your broker’s course includes free website templates. Even if you are operating a small freight brokerage, a professional website will be helpful in giving your clients and shippers the impression that you are an established freight brokerage company. When you market your services to shippers they will want to see your website and more than likely, your website will be one of the key factors affecting their decision of making business with you or not. Your website will be a main source that describes all your services, testimonials, and contact information. Within your broker’s course, you will be provided a shipper and carrier database of over 250,000 profiles in excel format. Upon using this list of data you will be able to market your business by sending out emails, brochures to their business address and make phone calls to set up appointments. Pay your attention to plan a marketing strategy rather than just making indecisive searches or phone calls. Define your target area, set goals and work from there. It is good to start with e-mail marketing as you will reach a lot of clients with little effort, but making calls and setting up appointments is where most of your leads will start to convert into reality. The Approach. One of the best approaches is to target a specific market segment. By developing certain markets you will be referred to other customers, in addition through this method other carriers are much easier to find as well. As a search criteria try targeting your business based on the following criteria; The shippers’ location and the freight’s destination. Type of cargo (agricultural, perishable, oversized, bulk commodities, etc.) Loads’ size, specific industries, or some other special shipping segment. Upon choosing a particular demographic you shall consider what type of cargo that would be most comfortable brokering. You may choose to broker general commodity freight, which is more stable and less volatile or you focus your expertise in areas such as heavy haul, temperature con-trolled, hazmat loads, or oversized loads. Once you find a shipper, you shall approach the right person. In this industry, you’ll need to talk to the appropriate person in charge. Generally Traffic Manager is the person that you’ll need to contact. Thankfully, in this industry, the Go to People is not that evasive and there are very few loops to jump through to get to the right person. Key Contacts: Transportation Manager. Sales Agents and Brokers. Logistics Department. Traffic Manager. As mentioned previously your first goal is to look for shippers who need shipping services. As a service industry, you have no physical storefront that customer can visit it or a product to hand them for examination. Therefore, your website acts as a virtual storefront for you. Marketing Campaign Should Include: 1. Telephone calls. 2. Brochure distribution. 3. Promotional Emails with cover letters. Also, you need to pay attention to marketing over the internet through social networks like Facebook, Twitter, Craigslist Ads and Transportation Blogs Shipper Requirements: The shippers are always concerned about their limited budget to which they want their shipment to be constrained to. However, the budget varies according to the fluctuation in the supply and demand of any load type. Shippers want their cargo to be transported by the carriers with safety, efficiency and within their estimated costs. They do not usually have industry knowledge or time to spend on finding the reliable carriers themselves. Therefore, your clients (shippers) are constantly looking towards finding reliable and honest freight brokers to build with them strong business relationships. There are two types of brokers. Truck Brokers (the motor carrier with Authority and a Broker’s License) and Property Brokers (Only having a broker’s License, CAN NOT move freight). A Property Broker has NO LIABILITY, and only makes a commission for facilitating the move of the load, while the truck broker HAS LIABILITY and may hire other carriers / owner-operators to move the freight creating liability. The reason for this embodies in the difference between having an Authority and License A carrier has Authority, which means having the shipper’s permission to take ownership of the cargo to deliver the load by interstate or intrastate transportation. When taking over the cargo the carrier must show proof of cargo and liability insurance as upon the receipt of the cargo for transportation they have become responsible for it. A Broker obtains a License and can only arrange the transportation of the shipper’s cargo with carriers (owner-operators with Authority). A broker’s license is NOT a mode of transportation and a property broker cannot take ownership of the bill of lading. Property brokers are in a fiduciary (trust) relationship with the motor carrier actually hauling the brokered freight. The broker collects the money from the shipper and then pays to the motor carrier their rate, less his commission. In the case of a carrier (brokers) loads their excess to another motor carrier (sub-hauler), there will be no ‘’Broker’s license’’ required. However, both parties need to share 100% labiality for the cargo. So many truck brokers think that they are not responsible for freight that they subcontract from one motor carrier to another. Carrier Requirements: Carriers are certainly looking for the best price that they can get for shipping the cargo. The motor carriers and shippers also have to face the cost constraints. The carrier company shall take care of many different costs such as truck maintenance, employee salaries, fuel costs, etc. If they learn how to manage such costs efficiently, they can achieve good profit. To facilitate a smooth process, a freight broker is required to make a win-win situation for all. This can be achieved by the excellent negotiation skills to devise a transaction in which all parties (broker, carrier and shipper) are satisfied. Broker Requirements: The broker looks for shippers who are in need to ship cargo and then they look for reliable carriers who are able to cover the loads. It’s the freight broker’s responsibility to do perfect load, carrier matching and keeping the shippers cost as low as possible or at least within their budget. When a broker starts his new business, he may need to make a lot of research on the phone and Internet to gather a useful database of carriers and shippers. This course will give you a database of 350,000 shippers and carriers to help you to overcome this process. The broker’s activity key role is to achieve reliable relationships between the shippers and carriers, and provide the shipper with a list of different options that can meet their needs of delivering their cargo. This is an art that will greatly determine broker performance and start bringing in recurring business. The next important step to success in the business is to do a credit check in order to be in the safe side deals with new shippers. Try to avoid problems before they occur. Don’t be trapped even if a shipper has good credit, it may take from 45, 60 to even 90 days before receiving a check from them, so you either need to have GREAT cash flow management or you can factor your invoices with freight factoring companies that will pay faster just less their processing fees. With new carriers you’ll need to do a similar credit/background check. The broker needs to pre-qualify carriers, which mean they should have all their operational and insurance documents ready. No too many traffic citations or Highway Patrol Inspections. Also, there are some web service that can be used to check the carrier’s authority status, SAFER is one of those useful services. http://www.safersys.org/CompanySnapshot.aspx Use the carrier’s USDOT number to search the SAFER Web service. Cargo insurance is not required to be obtained by freight brokers as they use the cargo insurance of the carrier. But the Contingent cargo insurance should be purchased as a plan B insurance in case the carrier’s insurance does not pay or pays for only partial of the insurance claim. This is always a great backup to protect both you and the shipper, and ignore this drove many new brokers into financial troubles, so never think that you can abandon insurance coverage. In order to start your business relationship with the shipper, you’ll need to first get set-up with the shipper. The set-up process involves faxing the shipper an information packet, including all important documents such as their motor carrier number, proof of surety bond, insurance certificate in case the contingent cargo coverage is purchased, W-9 form and all other crucial information the broker want to include or the shipper may have specified. As soon as the shipper accepts and verifies your information you can now start business with him. This packet IS NOT like your marketing packet that you will send out to potential clients. This Set-Up packet is specifically to provide more information about your brokerage to the shipper who intend and agrees to start a business with you. Some professional freight broker can send a broker-shipper agreement that is rarely done in case of new brokers as they still do not have enough experience to do such agreements. This agreement ensures the shipper that their loads will be covered by the broker. This course included sample of broker-shipper agreement contracts. If you are a creditable broker, you will make demands in your contract that you can fulfill. The shipper might ask the broker to give his quote to deliver one or large number of loads, before deciding to start the business relationship with you. In the previous chapter we have reviewed how to do rate calculation, this will be helpful to prepare your rate sheet previously, to be always ready to send your Set-Up package in case the shippers request to include your rate sheet. What Do You Say? If you contact your customer, whether via phone or e-mail you will want to speak in terms that they understand, so you shall not appear uneducated in the industry. Shippers have the desire to deal with reputable and established companies that can handle the movement of their freight with the smallest number of problems. The only thing they may need to is consistency and reliability for the shipment of their various products. It is preferred to have a previous good working knowledge of the transportation vernacular prior to contact a shipper for the first time. It’s been said by Human Resource experts that we only have 15 Seconds to make a first impression. Do not worry if you have never had any previous experience in Direct Sales as most of the work in this profession is completed using a telephone or email. It would be beneficial to spend a little time on the phone or in practice sessions with a partner role-playing prior to set up a perspective sales meeting with a client personally. This is also called the Elevator Pitch. You have the time to go from one floor to another in an elevator to get your pitch in. Can you do it? Prospecting For Customers. Find Your Customer Base. In order to be a successful freight broker, you will need to have a good database of customers. Shippers are always looking for the most safe, efficient and cost-effective methods to transport their products. The information mentioned below will provide you a general knowledge base that will grant you the require skills to manage and find appropriate freight and customers. Gather the Information. There are several useful methods to find your customer database. It can be as easy as picking your phone to do a call. Products manufactured in the U.S.A. have to be shipped to the retail or wholesale distributor. Targeted markets: Distributors. Warehouses. Cold Storage Facilities. Growers and Packers. Membership Associations. Trucking Companies. Manufacturers. Wholesalers. Databases. The information databases are provided by third party resources. However, you have to be aware about what kind of information included in the database you are purchasing and whether it is useful and up todate or not before paying your money. You may try one of the following resources: Contact DB (Website Link - http://www.contactdb.com) Info USA (Website Link - http://www.infousa.com) Selectory D and B (Website Link - http://www.selectory.com) How to Search? You can reach a huge variety of sales and contacts information by performing searches of various membership databases. You can perform the search process for membership directories and get the membership directories and their buyer’s guide for free and easily via various trade organization. Using Truck Load Boards. Load boards are websites that are widely used by the freight brokers to post the shipper loads available with them, in order to find available ready trucks to cover them. On the other hand, the load boards are used by the carrier companies to post the availability of their trucks. So simply the carrier companies are searching for brokers and loads matching their post request. The usage of loading boards can come up with the desired solution within few minutes. Load boards operates differently some may allow the broker to post load and to perform searches for trucks aw well, while other load boards operators automatically notifies other load boards with the broker loads post as soon as it is posted achieving a quick matching. Nowadays load boards provides many customized services, but the primary one for the freight brokers off course being posting loads and searching for available trucks to cover these loads. Qualifying Prospects Sales Strategy. You need to gain and maintain very strong negotiation skills so you can market your freight brokerage successfully. Almost everyone isn’t good at negotiating many are intimidated by the person on the other end of the line. If you are not feeling comfortable with negotiations, then keep in mind that this job requires frequent situations and negotiation skills are highly involved in the daily procedures of your business. However, you can enhance you negotiation skills and you may need few ideas and thoughts to overcome your fears and become a successful negotiator. Before quoting freight rates it is very important for you to remember your service value. You should know and understand your product and its value, which you introduce to your customers. Your previous customers will give you a bit of information so that you can keep your competitors’ products and services on the top. As those customers will tell you about your weaknesses and strengths points according to their experience and needs. By that time you shall be open-minded and accept their criticism in order to develop yourself. If you do that, you will gain your customers and grow your business. Study your competition: As it is essential to know, which rates are being quoted on lanes and how your competitors are meets them. You should understand other’s pricing and how they are getting them in order to improve your predictive abilities. You should study and research your competitors. Customers are always looking for a better deal, so they are going to hang around to get the best possible prices. If you understand your competitors, that will make you develop your services and will grant you the lead during negotiations. Understand Your Sales Strategy. Firstly, you should define your strategy before beginning negotiations. Then do as much plans as possible that you may propose as further opportunities to your client’s in case your first suggestion wasn’t accepted. Your strategy should be flexible enough to work efficiently with all of you provided opportunities when negotiate a rate. If you succeed in developing such strategy for marketing your service then you will definitely acquire the forefront in negotiations with your clients. Rates Quoting. Define spot quote? A spot quote is a group of rates for a month. It is calculated based on the current market and it is done without a contract. So the spot quote is a rate quotes for an individual Line Haul. So you should start talking to carriers who run this line and before that you shall gather all information that they are going to ask you about. Information Needed For Quote. You shall do the following: Origin and Destination. Truckload, LTL. Dimensions. Commodity. Weight, Trapping Required? Pallet Exchange Required? Date of Pickup and Delivery. Contact (5) carriers to get their quote on the Line Haul. Post the load and request rates from carriers that call you for the details. Get an average price for the load and then contact your shipper with the rate. Dedicated Lanes. When you quote dedicated lanes for shippers you will need to do some research. Dedicated means constant loads weekly from the same origin to destination and carriers usually love this type of freight, so they will give you a better rate than the normal spot quote line haul rate. Because of the demand, this type of freight is very competitive and your quotes will be compared and considered against many others. It is essential to offer your shipper a quote that actually can transport the freight especially that you are non-asset based freight broker. Most brokers will provide low quotes to shippers so that they can get the freight in hopes of brokering it out to carriers. When this happens many of these freight brokers will not be able to move the freight since your quotes are not accurate. This is one of the main reasons shippers will not deal with many freight brokers. You must set yourself as apart from the rest and here are a few ways to do that. Rates of Market prices: Sometimes shippers will need carriers to move their freight due to a truck falling out or another vendor’s inability to provide the service. That will be when a shipper will have to pay the going rate for a truck to move the freight, so there will be a relationship with a lot of carriers that will be possible. You can make huge commissions on these loads, as the shipper will most generally pay whatever is necessary to transport the load. Do not gouge your shippers! Rates Calculation. Freight charges varies according to number of variables, but the two main factors are the weight of the load and the distance it must travel. Truck’s type affects the rates, regardless of the driver’s needs to make one or more stops to pick up the freight or to deliver it. However, rates for additional stops are usually negotiable. You’ll need to get an idea of the current going rates for the types of shipments that you can handle before you begin shopping for rates for specific shipments. This can be achieved by requesting copies of tariffs from several carriers and studying them. There are different methods to calculate these rates mentioned below. Load boards and calling for rates on posted loads is another way of getting information on current market rates. The National Motor Freight Traffic Association (NMFTA) classes products according to four characteristics Weight, Handling, Storability and Liability. There are 18 freight classes that are beginning from class 50 (the least expensive) to class 500 (most expensive). For more information on NMFTA classes visit: http://www.nmfta.org/Pages/welcome.aspx 1. Flat Rate: The broker can set up a flat rate for shipper’s load that might need to be hauled from one state to another. For e.g. the loads are to be shipped from Miami FL to Houston TX, then the broker can decide upon the flat rate to be $2200. 2. Rate per Mile: Rates can be determined based on mile. For, e.g. the rate per mile is $1.5 and the carrier covers 2,500 miles then the total cost to cover the loads will be $3750. 3. Rate per Unit: The shipper may prefer to pay the broker per unit price like the payment for a carton of juice cans to be delivered is $1.75 4. Rate per Hundred Weights: The shipper can also choose the payment option of pay per hundred weights. Say if $6.25 is the price per hundred weights and the total weight of the loads to be shipped is 32,000 lbs. Then the total amount the shipper will pay is $2000. The broker should find if there is any extra cost involved in the shipment such as extra picks, unloading fees, etc. The broker should have good negotiation skills to ask the shipper for some add-ons like fuel surcharge etc. above the regular rate. With increasing fuel prices more and more truckers want the fuel surcharge payment to be added in the deal. The broker should have good knowledge about all loading techniques and regulations. He should be aware of the loading terminology like Full Truck Load (FTL) and Less than Truck Load (LTL). He should keep himself well informed to avoid any future problem related to loads transporting. Commissions that you earn on each load is your main source of income. There are two methods to receive your payment: You can bill the shipper the amount you’re going to pay the carrier plus the amount of your commission, or the carrier can bill the shipper directly and then pay you a commission from its revenue. The most common and efficient way to handle billing and commissions is to have the carrier bill you and then you bill your customers. Freight rates are based on many factors, including, 1. The distance that shipment will take. 2. The shipment’s weight 3. The density of the shipping goods. 4. The commodity’s susceptibility to damage 5. The value of the commodity. 6. The commodity’s load ability and handling characteristics. All of the above factors affects the classification of a commodity. The NMFC, or National Motor Freight Classification tariff, contains all product classifications. There are eighteen possible classes ranging from 50 to 500. The increasing of the class increases the rate for every hundred pounds you will ship. Most less-than-truck-load (LTL) rates are stated as a rate per hundred pounds, or per hundredweight. Rates of each hundred pounds is structured to decreases as the total shipment weight increase. For example: a shipment weighing 100 pounds may cost $41.00 per hundred-weight, while a heavier shipment--say, 500 pounds--of the same commodity (moving to the same destination) may only cost $35.00 per hundredweight. But doing the math, we see that the total charges for the 500 pound shipment are higher (5x$35 is greater than 1x$41). For very light shipments, most LTL carriers state a minimum charge. Carrier expenses such as fuel mileage, driver wages, IFTA (International Fuel Tax Agreement) fuel taxes as well as the toll roads play a critical role in the line haul rates you submit to your customers, this is simply because carrier’s rates are based on mileage. Regardless of the line haul rate, which is broken into mileage, there are additional costs that need to be calculated for example. If that very same $1,500 load had two extra stops, you should add another $50 to $100 per stop to the gross line haul rate. Carriers tend to use two major formulas to determine shipping rates: 1. the linear foot rule and 2. The cube rule. The standard carrier linear foot rule states that shipments occupying 10 linear feet or more of trailer space are charged for 1,000lb per foot. Usually, this rule applies when there are at least five pallets single-stacked or 10 pallets double-stacked. For example, say a 10-pallet order of stackable freight occupies 10 linear feet. If those pallets were not stackable, they would occupy 20 linear feet. In the former scenario, a shipper would be charged for 10,000lb; in the latter, they would be charged for 20,000lb. Here’s a simple rule of thumb to remember: for stackable pallets, take the number of pallets on the floor of the trailer and multiply by two; that’s how many linear feet you should be charged for. For non-stackable pallets, multiply the total number of pallets by two to get the linear foot count. Review your invoices to see if this rule is being applied. How To Calculate Linear Foot from number of Pallets Example. Units: 16, Width: 42, Length: 48, Height: 42, Stackable: 1, Weight: 5000, Not Turnable: Turn pallets resulting in width of 48. Number Across: 2 Base Linear Feet: 42 / 12 = 3.5 Linear Feet after accounting for 2 wide in Trailer = 3.5 / 2 = 1.75 Linear Feet after Stacking: 1.75 / 1 = 1.75 Linear Feet for all Units: 1.75 * 16 = 28 Here is a great link to calculate linear ft. To reiterate, linear feet = square feet / width. http://www.wpg.org/Member/LinearFootCalc3.asp What is meant by fuel surcharge? A fuel surcharge aims to compensate carriers and balance the spiraling fuel expenses. In case the fuel cost has risen to $750 per gallon, then it’s not feasible for a carrier to haul a load at the rate of $150 per mile. We try to resolve this issue by getting the clients pay a fuel surcharge, which is then handed over to the trucking company. How is fuel surcharge calculated? The average of most trucks is approximately 5 mpg. The base fuel cost should range from $1.10 to $1.20 irrespective of the existing cost of fuel. For instance, here we will assume the base price to be $1.20. You now have to divide the fuel expenses for more than $1.20 for every gallon by 5 which is the average mpg for majority of the trucks. If the existing fuel rate is $2.50 per gallon then you will have to deduct the base price In this case $1.20. The amount which remains $1.30 will now be divided by the average MPG 5 as decided in the example. Thus you get $0.26 cents which is your fuel surcharge. Regional/National Fuel Prices. The fuel surcharge depends on the national average retail price of diesel fuel in a specific region from where the load begins. You can get the details about the average retail price from the Federal Government’s Energy Information Administration which is updated every week on Wednesdays. You can also call: 202586-6966 or visit http://www.eia.gov/petroleum/gasdiesel/ to find out more details. Often freight brokers decide on a floating fuel surcharge with their clients. This surcharge is modified every month. It is better to ensure that you update your customers about the changes in the fuel surcharge which will be applicable for the following month. In case you do levy a fuel surcharge then sincerely ensure that it reaches the carrier. Never be overcome by greed as it could spell doom for your business. Fuel Surcharge Rate Confirmation. The fuel surcharge must be included separately on the rate confirmation sheet and you must never levy any commission for this amount. It is better to have a detailed rate confirmation with all the overheads like the line-haul rate, the paid miles, the tarp pay, additional stops and fuel surcharge. Itemizing the confirmation sheet will give you better clarity in revenue sharing. You do not have to pen down the fuel surcharge on any other shipping documents like the Bill of Lading. But it is essential to include it on the load rate confirmation agreement as well as the invoice which you send to the client. Freight Rate Variables. The freight rates differ from day to day. Besides this, they are not uniform throughout the nation. The freight rates depend on the supply and demand at that particular location and as long as there’s no sudden hike in the fuel rates, the rates you finalize should be stable for around a month. After you have finalized a line-haul rate, it is easier to keep the base rate stable and negotiate with the rate variables like the truck fuel surcharge. The motor carrier will have to order the proper permits for all the states through which the load is going to be hauled. But you too should find out if the load requires any additional permits. The customer too should be fully updated of the same. A load must have individual state permits in case: Its width exceeds 8 feet. Its length exceeds 53 feet and it is hanging over the back of the trailer. In case the GVW Gross Vehicle Weight of the truck exceeds 80,000 pounds after being loaded. Because of the extra expense for the carrier, it is better that you get a good deal for such loads.