Transparent ‘new deal’ for independents using brokers?
Over the past several years, James Lamb, a former DOT investigator, current head of DOTAuthority.com and self-described “volunteer president” of the small-broker advocacy group/business league AIPBA, has been outspoken on the increased broker bond (now at a $75K minimum for all registered freight brokers and forwarders). At times, his thoughts on the bond, which he opposes as a one-size-fits-all requirement, have seemed designed to drive a wedge between the Owner-Operator Independent Drivers Association, which supported the bond, and its core constituency, small-business-trucking company owners and independent owner-operators.
Saturday, however, in one of the final seminars conducted at the Mid-America Trucking Show, Lamb made a different sort of appeal, one that seeks closer ties in both business and advocacy realms between two groups that, in his view, have a mutual interest in each others’ long-term business health. In addition to the AIPBA brokers’ league, he’s now promoting a Small Business in Transportation Coalition of brokers, truckers and other entities and, more to the point, a brokerage soon to be launched that operates on the idea of rate transparency.
His seminar began Saturday with a query following the traditional view many owner-operators take of their brokers, often regarding them as the “lesser of two evils” in the grand scheme of things. “What’s the number one worst thing other than working with a broker?” Lamb asked rhetorically. “Deadheading. You can make a little money working with a broker, or none” with no freight on the hook.
He continued on by querying the audience, largely made up of independent owner-operators, about their gripes with brokers. Among the chief complaints: lack of information. And in particular, as he noted, what the load actually pays before the broker’s cut. The problem with brokers, ultimately, as it is with the hours of service and electronic logging devices, Lamb concluded, is money, pure and simple, and he urged a “new paradigm” in transportation transactions based “only on transparency in transportation. The question is not just how much the load pays the trucker, but how much the load pays period, and how much the trucker gets and how much the broker gets.”
Lamb is planning a launch of the “12PL” brokerage in order to “lead by example,” he said. “Watch our website. It’s a ‘new plan for independent owner-operators’ – if we’re transparent and tell you how much money we’re going to keep and how much we will pay you … ultimately, when independents see how much it is, it will probably be in the 10-15 percent range. It will catch on in the industry – I’ll be speaking a lot about it, of course.”As it does catch on, he hopes, more and more parties will demand to know the percentage brokers are keeping, thus making transparency the new norm and pushing rates to the truck up. “If we make it more lucrative for someone with their own authority … there will be a rush of people who want to get authority,” Lamb noted. “They’ll come to DOTAuthority.com” — how Lamb stands to benefit in one way — “and then, as more truckers want to become independent, the driver shortage [among sizable motor carriers] will get even bigger. It’s all cyclical. If we do this right now, what’s going to happen is [carrier recruiters] will have even more of a hard time recruiting. What that means is that there will be a supply and demand problem for recruiters. How will they have to compensate? They’ll have to make a better deal for their drivers. By being transparent, we’ll make it a better industry for drivers regardless of whether you’re a company driver, leased owner-operator or an owner-operator with your own authority.”
Brokers, he noted, will “make their money on volume rather than” a high percentages of the take.It’s a notion with no small amount of thought behind it, though obviously it will require time and participation in order to really gain the traction required to turn the entire industry for the better. Lamb’s not the only one talking about more transparency in freight transactions these days, however. Some automated freight brokering engines — such as the longstanding eBay-like uShip, and the Go By Truck initiative that got off the ground just this year — are certainly more transparent than the traditional negotiation-heavy broker transaction. In the case of uShip, however, many argue transparency only depresses rates, given the open competition encouraged among transporters in a down-bidding auction-style environment. In both instances, the automated “broker” takes a set rate, so everything’s out in the open. uShip’s “Pro” side, too, is allowing its marketplace technology to brokers to create private networks of carriers with more automated load selection and more transparency within those networks.
In some ways, the transparency train in broker-facilitated transactions has already left the station, as I wrote in this feature from last year, part of a round-up of load board-related news featuring commentary on the future of load selection. What do you think?
As for Lamb’s 12PL initiative, he says he’ll be releasing more details about the brokerage in the coming months. You can keep an eye on it via TwelvePL.com.