Redwood Blog

Shipping Brokers that Offer Transportation Management: What's the Best Business Model?

Many freight shipping brokers offer transportation management services. That’s when staff at the broker do the freight planning—load consolidation, route optimization, etc.—as well as execute the shipment.

What's the best business model for broker freight management?

When shipping brokers offer transportation management, questions can arise about the objectivity of the service and whether the broker might funnel loads to carriers in its own network.

Some brokers keep the two services—transportation management and brokerage—completely separate and have their clients determine which carriers to use. Others integrate the services. For small and mid-sized businesses (SMBs), there are several advantages to integrating the two services.

Leverage a Shipping Broker’s Resources to Access Capacity

Small companies operate with limited staffs. It’s simply not possible for them to know the top carriers in different markets. That’s the main reason they align with a broker: to access a broad carrier network. Broker staff are in regular contact with small regional carriers, and even private fleets, to document available equipment and capacity in specific lanes. As a result, the right broker will have detailed data on available capacity and the carriers’ preferred lanes. That’s a decided advantage to an SMB.

Leverage Broker Volumes to Achieve Price Leverage

Small shippers don’t have the bargaining power of a broker that might ship regularly with specific carriers. Brokers negotiate lower rates with these carriers based on an aggregate spend across hundreds of different shippers. Why force brokers to look outside their network when they can quickly identify a high-quality carrier with an excellent rate?

Leverage Broker Transportation Systems to Make Freight More Attractive

SMBs typically don’t invest in transportation management systems because the freight activity does not warrant the large capital investment. But without the help of a broker managing the freight, this can make it hard to gain preferred shipper status with carriers to ensure available capacity. The right shipping broker can use its TMS to make carriers more profitable. For instance, the broker can book a carrier for one headhaul move and then use that same carrier and equipment for a backhaul on the same lane for another client. Carriers appreciate working with savvy partner that have the systems to maximize their capacity utilization.

Objectivity is Over-Rated

When it comes to the business models for shipping brokers that offer transportation management services, objectivity is over-rated, particularly when it comes to serving SMBs.

Brokers can always offer clients the opportunity to designate their own carriers, but small companies benefit greatly from a non-asset based transportation management partner that has access to a large, network of pre-qualified carriers.