11/14/2021
I recently started a Freight Brokering company six months ago. During this six-month period of getting the business started I read a lot about the supply chain issues in the United States, and there is a lot of discussions around the larger supply chain issues. However, no one is really talking about what is going on at the working level which in my professional opinion significantly contributes to the supply chain issues within the United States.
A little about myself, to demonstrate how I can state “in my professional opinion”. I served 22-years in the United States Army, where I became a certified logicians, Movement Officer, Airlift Preparation and Planning Officer, and Hazmat Transportation Technician. Where I was solely responsible for preparing equipment, BOL, invoices, contracts, and coordinating all movements of unit equipment in the United States and around the world.
So, during my six-months of getting my Freight Brokering business started, I have noticed the following list of road blocks happening at the working level:
1. Shippers will not work with a Freight Brokers unless they have these additional above standard requirements that are not established by the FMCSA.
a. If a Freight Broker does not have additional contingency cargo insurance, shippers will not work with them despite the fact that Carriers already carrier a very specific cargo insurance to provide coverage for the shipment if something happens during shipment. Also, the Carrier takes responsibility for the shipment once it is loaded and the door is sealed. So, this additional insurance requirement is simply a bureaucratic idea thought up by insurance companies and sold to shippers to increase the wealth of insurance companies and create a roadblock in the supply chain.
b. Another added above standard requirement shippers impose upon Freight Brokers, is the asset-based requirement. A vast majority of shippers will not work with a Freight Broker unless the company is asset-based, meaning the company also is a Carrier. This significantly slows the supply chain, because over 80% of the trucking companies and Freight Brokerages in the United States are independent small businesses. Meaning that the bulk of the United States Freight Brokerage is conducted by non-asset-based companies that rely on the overwhelming majority of small independent trucking companies.
2. In reference to the above, because shippers are adding additional above standards requirements and not working with smaller Freight Brokers, and the Freight Brokers in turn work with the smaller independent trucking companies. Shippers are instead working more with larger 3PL companies, who predominately use their own fleets and shipments are moved from the manufacture to the 3PL warehouse before being moved once again for final distribution. So even if the 3PL uses an external Carrier, the rate is either over inflated to pay the Carrier or the Carrier does not receive the going rate. This is because the same shipment that would typically move from the manufacture to the customer accumulating a single touch point shipping rate. Now under the 3PL system has multiple touch point shipping rates. So yes, the company cuts cost by not having the manage the shipment directly, but the consumer pays for those cost savings because now that shipment cost more because instead of paying for it once we pay for it to be moved from the manufacture to the 3PL, then we pay for the 3PL to handle it at the 3PL warehouse, then we pay for it again to be moved from the 3PL warehouse to its’ final destination.
Notwithstanding the fact that as shippers more frequently use 3PLs, the larger percentage of available trucking companies are not being utilized.
To affectively address the supply chain issues in the United States, everyone has to begin looking at the issue holistically. These are just a few of the very significant roadblocks I have noticed at the working level that will continue to create supply chain issues if not addressed. As independent trucking companies continue to find it difficult to maintain in an industry where large 3PLs are allowed to monopolize the freight shipping and despite the VERY LARGE MYTH, 3PLs are NOT saving the United States anything on shipping costs. The 3PLs are ONLY saving money for LARGE corporations, but the consumer is paying for that cost savings by the increased cost of shipping.
