The transportation industry is full of companies that offer logistics services in different ways. There is no “best way” to do so. Both freight brokerages and asset carriers are capable of meeting the needs of an organization, connecting that shipper with the transportation coverage it needs.
That said, even though many transportation providers can help businesses facilitate their supply chains, the methods used to achieve this end change greatly between them.
Freight brokerages are a particularly mystifying logistics provider.
It’s not uncommon for shippers to have trouble understanding how brokers secure and supply transportation capacity. That’s to be expected; as third-party providers, freight brokerage companies don’t own the assets used to move their customer’s freight. Instead, these companies must source a transportation solution from an outside party — preferably one that has been diligently selected.
Sometimes, it’s necessary for multiple freight brokerages to work together throughout the course of a shipment. This act, commonly referred to as co-brokering is not to be confused with double brokering (a far less ethical practice).
For this reason, it’s important that you understand the differences between these terms to make sure your freight is properly cared for by the broker you trust with it.
ATS Logistics has been offering freight brokerage services since 1989. We’ve co-brokered freight plenty of times throughout the years when it made sense to do so. That said, double brokering is always something we try to avoid.
In this article, we’ll explain the difference between double and co-brokering so you understand what these terms actually mean going forward.
What is Double Brokering?
Double brokering is a situation where the freight broker that was originally tendered a shipment proceeds to give it to a different freight broker without the knowledge or consent of the party that owns the cargo (or, in some cases, the original broker). In many situations, this occurs when the secondary freight broker falsely represents themselves as a carrier prior to accepting cargo from the original brokerage.
Double brokering, though not illegal in every case, is considered a very unethical practice and looked down on within the logistics industry. Usually, when double brokering occurs, this action represents a breach of contract between parties.
Double brokering becomes illegal when it results in a carrier not receiving payment for its work — either as a result of malicious intent on the secondary broker’s part or otherwise.
No matter the situation, double brokering should be avoided in all supply chains as it causes unnecessary confusion and risk.
To ensure your freight broker won’t participate in double brokering, make sure to do the following before tendering them a load for the first time:
- Question their process for sourcing transportation coverage
- How do they secure capacity?
- How do they vet their carriers?
- What steps do they take to avoid instances of double brokering?
- Verify their history, tenure and experience
- How long has this broker been operating?
- What kind of expertise/experience do they have?
- How many employees does this brokerage have?
- What ongoing training do they receive?
What is Co-Brokering?
Co-brokering is where one freight broker knowingly enters into a partnership with another broker that has a specific set of skills, knowledge and/or capabilities needed to execute a shipment. When managed correctly, co-brokering becomes a partnership between two companies where expectations have been set, trust has been developed and everyone is on the same page.
As an example, co-brokering may occur when a freight broker has a shipment that needs to move across the border into Canada and onward throughout the country. Since this broker doesn’t intimately know Canadian transportation rules/regulations and has minimal experience moving freight around Canada, they may turn to another trusted broker for help executing this move.
Provided the original broker’s customer knows they will be leaning on an external brokerage for this shipment, this is a completely ethical practice.
Co-brokering contract agreements are usually central to this process. Among other things, co-brokering contracts help both parties agree on carrier vetting qualifications, limits of liability, insurance requirements and payment terms.
Learn Everything You Need to Know About Working With a Freight Brokerage
Double brokering can have a detrimental impact on all stakeholders. That’s why the best freight brokerage companies constantly take steps to avoid these transactions.
In doing so, these brokerages help companies keep their supply chains as healthy as possible, allowing them to focus on other important aspects of their business.
Although the right freight brokerage is capable of becoming a seamless extension of their customer’s supply chain, using a freight brokerage might not be the right decision for you.
To make this discernment, it’s important that you understand what these transportation providers truly bring to the table, where they fall short, how they make money and what to consider when selecting yours.
You will find all of this information, and more, in this Ultimate Guide to Freight Brokerage, a comprehensive tool created to help you understand what you’re getting by trusting your freight to a freight brokerage company.
