One of the most critical aspects of the freight industry is to connect the shippers and the carriers. The freight business is vast, and various interlinked entities work together to make sure that the system runs smoothly and effortlessly. The main lifelines of the freight industry are the intermediaries who have tied all of these entities together. The role of cloud based freight brokers and forwarders is crucial, and with a boom in e-commerce, it has become impossible to ignore them. They are the primary driving source of a company’s success. Although they may be similar and possess some overlapping roles, some technical differences differentiate both. People often use them interchangeably, but to get a deeper understanding of both, you must first be clear with their meanings and functions.
Basically, a freight broker is a middleman or an intermediary who bridges the gap between the buyers and sellers. His main goal is to connect the shippers and carriers and form a long-lasting and mutually beneficial agreement. Like any other business, both the buyers (shippers) and the sellers (transportation carriers) have diverse needs, expectations, and requirements. It will be challenging to align their distinct wants without any external help. This is why a fleet management software is needed to reduce their conflicts that prevent both parties from agreeing on one agreement. Most of the time, we see that no party wants to compromise as they think if they do so, they will turn out to be the losers in the game. It is because of this type of hostile mindset, that makes it more important for a freight broker to come to the bargaining table and help them make decisions that benefit both.
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Hiring a freight broker will have long term benefits for your business. He has a comprehensive amount of technical knowledge, has massive network connections, and is well versed with the freight laws. He can take care of all the paperwork, thus saving a lot of money and time. His main objective is to handle all the obstacles that come in the way and ensure a mutual settlement between the two parties. A good freight broker is the one who ensures that the negotiations made are in the interest of both the parties. He helps them to keep ego aside and to think rationally. After assisting them in cracking a deal and when both the parties begin their business, a freight broker is then responsible for maintaining an open line of communication between the carrier and the shipper to ensure that both parties are doing their part of the deal.
If you have a basic understanding of the freight industry, you might be aware of one other term used in freight business: third party logistics or 3PL. The majority of the 3PLs use the services of the freight brokers as a point of contact for carrier negotiations, keeping track of arrival and departure of trucks and scheduling pickups and drop-offs. Shippers often hire them as consultants whose goal is to analyze the company in detail and develop newer ways of optimizing routes, shipping practices, and cost-saving measures for the company. We can say that a freight broker is just one of the aspects of 3PL.
Thanks to the changes in technology , freight brokers have become much more efficient with the help of fleet management system. They can perform various functions for you, such as helping you keep up with the recent trends and adhere to state regulations. He can provide you better ways of reducing transport costs, improving delivery efficiency, and minimizing wastage. A freight brokerage is required to obtain a license and register itself as a business under the state government. He must show a fund or a bond to get registered.
Who is a freight forwarder?
A freight forwarder also acts as a liaison between the shipper and carrier. However, apart from that, he does a couple of other things. One of the most important tasks of a freight forwarder is the consolidation of shipments. It means merging small shipments or taking a large shipment and breaking it into smaller ones. He also specializes in arranging storage area and freight shipment for the client.
Since a freight forwarder has more duties to perform, he requires more capital and manpower than a freight broker. He takes charge of the freight and ships them. He is responsible and accountable for consolidation, storage, transportation, and insurance of freight. Apart from acting as an intermediary, a freight forwarder also ensures the “forwarding of freight.” He ensures that the shipment reaches the customer. He also deals with overseas shipments and handles import and export issues that come in the process.
Difference between a broker and a forwarder:
Possession and storage of freight: The primary difference between the two is that a broker is not responsible for handling or storage of freight. They do not issue various bills and certificates, as in the case of freight forwarder. A freight forwarder ships freight, prepares necessary documents, and is responsible for freight storage. Liability and Legal Obligations: Since a broker is not responsible for the possession of the freight, so he cannot be held accountable for any missing or damaged freight.
As long as a freight broker doesn’t provide the services of a freight forwarder, he cannot be made liable for freight shipment. However, a forwarder can be held responsible for mishandling the shipments. Hence, they must have cargo and liability insurance policies to cover the amounts. Both the freight brokers and forwarders provide vital services to ease the lives of shippers and carriers. They might look the same in some aspects, but there are critical differences between the two. However, the ultimate goal remains the same that is to optimize your shipping and save your money.
