Dispatching service provider pens book about freight brokers
Over the weekend of Oct. 11-12, 2008, after stock values plummeted and watchers reported a veritable freefall in the American economy, Augusta, Ga.-based Paul Todd watched a corresponding fall in rates from freight brokers and other transportation middlemen like freight forwarders.
“Just like politicians, brokers love a crisis,” Todd says, and when news of the economy tanking hit the pavement, rates fell at the drop of the hat.
Todd is an increasingly high-profile critic of the middleman’s portion of the trucking industry and something of a middleman himself. As owner and operator of T&G Dispatchers he finds freight for several trucking owner-operators, taking 5 percent off the top of every load he books. The title of his book, Industry of Thieves, refers to freight middlemen like brokers and forwarders, so he hopes his 5-percent cut sounds small. “You can’t go out and write a book about people taking too much of the gross and do the same yourself,” Todd says.
He came to his current business after years on both the shipper’s and trucker’s side of the freight transaction, where he saw time and again what he thought was abuse of power by freight middlemen. “That happens a lot in the industry,” he says, though without regulation it might be part and parcel of any middleman’s business, where the imbalance of information parties are privy to is in the middleman’s favor. That’s what led to the current regulation of the real estate broker’s trade, he says: “Transparency at the time of the transaction” is the goal there, Todd argues, and should be in the broker/carrier/shipper transaction. Right now, the broker doesn’t have to disclose his or her cut of the load to either the shipper or carrier unless it’s part of his contract with either.
How big is the middleman’s power in the freight movement landscape? In his book, Todd estimates broker charges are costing the average American family $100-400 a month. “They intentionally inflate transportation costs … resulting in higher prices for everything we purchase,” he writes, aiming his critique not at the trucking community, necessarily, but at the entire American population. His proposals for remedying the situation via regulation, though, can apply either at the level of government or industry.
“Private industry can self-regulate,” Todd says, by taking up his proposed solution, a contract addendum included in his book in which shippers spell out to the brokers they contract with that the broker will take no more than 10 percent of the total the shipper is paying to move the load and that the carrier will be privy to the amounts, the remainder either going to the carrier or back to the shipper. “Capping a middleman is nothing new,” he adds, pointing to mortgage brokers’ situation, SEC caps on what hedge fund brokers can make and the like. Under his proposed solution, if in fact carriers “want to cut each others’ throat” in competition, “the shipper should benefit, not the broker,” Todd says. “Caps help bring two parties together in a truly free market. A 10-percent mandate [or industry self-regulation] will wash the brokerage industry clean of the schmucks, and it will become service-oriented; it will be fair, fair for carriers and shippers.”
You can read more about Todd’s book at www.industryofthieves.com.
Negotiating rates Tools like Transcore’s Rate Index Pro and Internet Truckstop’s Fuel Desk Plus have in recent years offered for users of the load board services and other subscriber owner-operators access to real-time load market data along individual lanes and in specific regions, leading to a broker-carrier negotiation situation where, for the first time in history, individual owner-operators and larger carriers can tap into a huge amount of information about markets.
Today, “carriers have the ability to know what’s going on in the market and are much smarter about pricing and supply and demand,” says CRST Logistics President Mike Fouts. A new kid on the load-market-info block, though, does something different. The founders of FairTran.com have launched a load rate indexing service that’s more of a benchmark for the rate truckers should be getting from brokers for their service to maintain an appropriate level of profitability. In November last year, Fairtran.com began offering the free National FairTran Rate service, specifying in flatbed, dry van and reefer segments average short- and long-haul rates as just such guides. The rates reflect what level of profitability relative to market conditions can be expected. Sign up for weekly rate alert text messages or emails at www.fairtran.com. FairTran also is available to provide company-specific rate and cost data to customers at $36-55 a month, updated daily, through which regional lane rates would be available tailored to company operating information.