Freight Broker or Dispatcher. What is the Difference?
When it comes to finding freight, carriers have several options. Load boards, freight brokers, and dispatchers dominate the industry. If you do not have time to search through the load boards yourself then you are probably thinking of using a freight broker or a dispatcher. Both work as intermediaries between shippers and carriers, but which one is best for your business?
What Do Freight Brokers Do?
First, it’s important to understand what these careers are and what professionals in the industry do on a daily basis. Brokers and agents do similar work and have many of the same daily duties. Essentially, the jobs are related to finding carriers to help move goods for shipping companies. In this profession, you will match shippers with carriers while also managing the finances and other important aspects of transportation.
Freight brokers work with both shippers and carriers and serve as the middle man. Many freight brokers make money by negotiating rates with shippers and negotiating a different rate with carriers. The difference between the two rates is the freight broker’s commission. As a result, freight brokers are motivated to encourage shippers to pay high rates while offering carriers a rate that helps them make a profit. If you do not have good negotiation skills, knowledge of pay rates in certain lanes, and know your operating cost when dealing with a freight broker, it is easy to accept loads that can sink your business. It is important to be very selective when choosing a broker (some are more motivated by profit than others). If the freight broker also offers quick pay, they take another percentage from the carrier’s agreed upon rate.
Dispatchers represent the carrier when negotiating freight. They take a percentage off the carrier’s negotiated rate, so they are motivated to find carriers high paying freight. The higher the rate they can find for the carrier, the more money they make. Good dispatchers will keep portfolios with their carrier’s lane preferences, desired freight rates, and equipment specifications. Using this information, the Dispatcher then contacts the shippers or freight broker on the carrier’s behalf to negotiate loads that meet the carrier’s requirements. Only after a load is agreed upon does the dispatcher charge the carrier a fee for the service. Also note, if the carrier uses factoring, many dispatchers will create and submit invoices to the factor on the carrier’s behalf. However, all dispatchers are not created equal, as some will charge additional fees or make you book a monthly minimum. As always, be sure to ask those questions before hiring a dispatcher or signing a contract.
What Makes Freight Agents Different.
The main difference between an agent and a broker is that the agent typically works for the broker. A freight agent may be an independent contractor or an employee, but because they work under the umbrella of a broker they don’t take on the liability for the work they do. Agents do the matching and negotiating and earn a living typically by taking a commission, or a percentage of the broker’s earnings.
Freight brokers have to be licensed through the Federal Motor Carrier Safety Administration, a part of the Department of Transportation. They also have to hold a surety bond and liability insurance. An agent does not have to carry these expenses, or liability, because they work under the authority of a licensed freight broker.
Agents may work for individual brokers, small businesses or large brokerage companies, and many work from home. The amount of money you can earn as an agent depends on how many shipments you negotiate, because pay is based on commission. This allows agents to have flexibility in their work, choosing their hours and how much they want to earn.
The daily work of a freight agent involves much of the leg work of brokering. An agent spends a lot of time communicating with shipping customers and the carriers who will move their goods, managing logistics, negotiating prices and problem solving.
The work of a freight agent is very similar to that of a broker, but there are crucial differences. For either career, you are not required to have specialized training or education, but brokers do have to be licensed and insured. For both types of career, it does benefit you to learn before you start working, but once you understand the business, you can choose to jump in as an agent or a broker.