A freight broker and a truck service dispatcher are not the same. There are many differences between the two.
In premise, a freight broker is an agent that works with the carriers and shipping companies together. Whereas, a service dispatcher represents the carrier side in the freight negotiations.
In this article, we will cover this topic in greater depth, so that you can make an educated decision upon which is right for your business.
So if you're ready to get the topic of freight broker versus service dispatcher cleared up, keep reading.
Who Is A Truck Service Dispatcher?
As mentioned earlier, a service dispatcher represents the carrier side in a freight negotiation. They earn their keep by taking a percentage form the negotiated rate, and they are motivated to find those who will pay higher rates for freight.
The larger the rate, the more money they can make. Good dispatchers will ensure to keep their reputation in check with lane preferences, equipment specifications, and freight rates. Using this data, a dispatcher can contact a freight broker on the behalf of the carrier and negotiate loads that meet applicable requirements.
Only after the negotiation is made and implemented, the dispatcher will charge their fee. If the career uses factoring, dispatchers will often submit their invoices to the factor on behalf of the carrier.
But not all dispatchers are the same. Some will keep a monthly retainer and some charge additional fees. As always, ensure to get to know them well and ask serious questions before hiring them.
Let's take a look at an example to make things a bit more clearer.
The shipper agrees upon a rate of $4000 with the broker. In this case, instead of using the broker, the trucking company makes use of a dispatcher to locate freight.
The dispatcher knows the needs of the company and realizes that they must make at least $3200 on the load to keep their business in order. The dispatcher contacts the broker about the load. The broker offers $3200, but the dispatcher refuses the offer.
The two continue to negotiate until the broker agrees upon a rate of $3600. The dispatcher speaks to the trucking company about the load and they agree on the haul. The dispatcher charges their 7% fee. When everything is done the trucking company pockets the $3200 minus the 7% fee. The broker gets $400.
Dispatchers Find the Best Freight but Work With Intermediaries
Dispatchers work very tightly with carriers, and that's how they find the best rates. However, most dispatchers work with load boards and freight brokers to find this freight as well.
If you find one that works with a shipper directly, that's the best thing you can do. Dispatchers don't make money unless you do. So their goal is to negotiate the largest possible freight rate. If you want to learn more, you can read more now.
Who Is a Freight Broker?
As mentioned earlier, a freight broker is an agent that works with carriers and shipping companies and serves as the man in the middle. Many freight brokers get their money by negotiating rates with the shippers and then negotiating a different rate with operators.
The difference is their commission. As a result, they are motivated to encourage shippers to pay greater rates while offering the carrier's rates that help them make money. If you lack negotiation skills, and without the knowledge of lane preferences, and operating costs is enough to make use of loads that bring the business down.
It's important to be selective when working with brokers. Some are working only for the money and can find unfavorable deals. If the freight broker provides quick pay, they take a percentage from the agreed-upon rate.
Once again, let's examine a real-life example. The shipper has an open load, they contact the broker to find a carrier.
The shipper and the broker agree on a rate of $4000. The broker reaches to the trucking company. The broker is not required to disclose the amount that was negotiated with the shipper. As a result, the trucking company hauls the load at $3400. The broker keeps $600 as their commission.
The trucking company also makes use of a quick pay, which extracts a 2% fee out of the original $3400. The trucking company receives that amount minus the 2% which goes to the broker.
Freight Brokers Convenient but Offer Lower Rates
Freight brokers have tight relationships with shippers instead of load boards. They are convenient and easy to work with. However, they earn a living by offering low rates to carriers.
They need to find a balance between lower rates and carrier enticement to keep them working together. Some brokers are better than others, and that's up to you to decide. However, you can never go wrong with someone you already have a relationship with, and that's what matters. Close relationships lead to better businesses.
Freight Delivered
Now that you know the difference between a service dispatcher and a freight broker, you are well on your way to determine which is most optimal for the needs of your business. In any case, you decide to make you need to be diligent when doing your research.
Get to know them well, ask important questions, and don't hesitate to be aggressive in negotiations. Some are in this business only for the money so keep that in mind. If you're interested in similar content on freight shipping and trucking, feel free to check out the rest of our educational business articles on the sidebar or category pages.
