Are you part of the freight industry working with shippers and carriers as a freight broker? Or perhaps you’re curious to know what it would be like to run your own brokerage. It is crucial to understand the role of the freight broker vs. the freight agent in the logistics industry. Both play a pivotal role in connecting with shippers and carriers but have key differences in their responsibilities.
Even if you are an inspiring truck freight broker who wants to learn how to build a business, or a freight agent looking to explore more legal options to gain authority in operations, you need to understand the differences and similarities. In this blog, we will highlight the freight broker vs freight agent so that you can become your own boss or continue building a strong network as a freight agent.
What is a freight broker
A freight broker can be a single person or a multinational company overseeing financial aspects such as shippers’ invoicing, carrier payments, and working with freight factoring companies.
Truck freight brokers are the middlemen who arrange the transportation of goods by matching the available trucks with shipper loads. Freight brokers need to require a license from the Federal Motor Carrier Safety Administration (FMCSA) to secure a surety bond worth $75,000. A unique USDOT number is assigned to begin the registration process. Also, freight brokers have to maintain a compliance level annually as per FMCSA guidelines and maintain their records for three years with insurance.
What is a freight agent
A freight agent, sometimes also known as a sales agent, is a person whose primary role is to arrange freight movement between the carriers and customers. It can be one person or a group of people acting as independent contractors under a freight broker’s operating license.
However, a freight agent does not have an operating authority and they are not legally responsible for bearing any risk of loss or damage. Freight agents work under freight brokers on a commission basis and have little liability while building customer relationships. They can only do business by working with a freight broker.
They can be divided into three domains:
- Sales: They are responsible for engaging with potential customers negotiating freight rates and sourcing carriers.
- Customer service: The agent ensures the pickups and deliveries are scheduled and completed and also keeps the customer informed about the shipment progress.
- Logistics: Freight agents also coordinate with logistics to ensure trucks are dispatched and oversee the problems or issues that might affect a shipment’s pickup or delivery.
Similarities between freight brokers and freight agents
Though freight agents and brokers have different responsibilities, they are still similar in many ways. Let us dig into the freight broker vs freight agent discussion.
Service providers
Freight brokers and agents both are intermediaries and their role is to connect shippers with carriers. They ensure goods are transported at a fast turnaround. A freight agent works on behalf of the freight broker to secure the deals. They aim to meet the shipper’s needs with reliable carriers to move freight.
Service and price
Shippers and carriers are paired in a way that optimizes the service quality and the price. Freight brokers and agents focus on competitive pricing and offer excellent services to their customers. Rates are negotiated with the shippers and carriers so that both parties get a fair deal.
Profit earning
According to the negotiations, freight brokers and freight agents receive their share of profits as a commission. Freight brokers usually earn higher commissions while freight agents receive an agreed percentage with the broker.
Liability
Freight brokers are legally responsible as they have the brokerage license and also have to comply with industry and federal regulations. Freight agents are working under the freight brokers so they cannot be held directly liable for maintainer regularity compliance
Legal practice
Freight brokers and freight agents have to operate within the legal frameworks and are required to maintain licensing, insurance, and surety bonds. Both must stay up-to-date on the regulations to become credible service providers.
Branding
Branding is equally important for freight brokers and agents. Both roles cultivate strong relationships with the carriers and shippers. The stronger the reputation the better opportunity they have to build long-lasting relationships and grow the clientele.
Company size
Freight brokers and agents can be a part of a larger team (like a company) or act solo. They can easily work independently therefore their company size (if any) is flexible. If they have a large number of clients, they can shift towards working in teams.
Differences between freight brokers and freight agents
Now, let’s take a look at the differences between both roles.
| Factors | Freight broker | Freight agent |
|---|---|---|
|
Level of liability
|
Level of liability
|
Financially liable for loss |
|
Operations
|
Can operate without a freight agent
|
Needs a freight broker to operate |
|
Size
|
Have larger firms
|
Have smaller firms in comparison
|
|
Nature of tasks
|
Take care of daily tasks and are responsible for invoicing, claims, compliance, and credit checks, etc. |
Look out for customers and carriers and coordination between freights.
|
|
License requirements
|
Need a broker license from the Federal Motor Carrier Safety Administration (FMCSA) |
No specific license required
|
|
Authority level
|
Higher authority to make decisions
|
Do not have operating authority |
|
Setup costs
|
Require investments and operating licenses that cost a lot
|
More cost-effective option because they are independent contractors
|
Why do freight agents and freight brokers work great together
A freight agent and broker can make a great team when working together. When freight agents work with freight brokers, they can focus on what they do best—develop a strong client base and service them with robust logistics and transportation management solutions.
In addition to that, small freight agents can instantly grow by seeking support from a well-known freight broker. The good reputation of a freight broker can also help freight agents make a good name for themselves in the supply chain industry.
On the other hand, freight brokers can also benefit by teaming up with freight agents. Freight brokers can grow nationally or globally without opening or obtaining separate office space. Furthermore, freight brokers can witness significant growth in revenue by collaborating with freight agents who are well-known for building new customer relationships.
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A freight broker can also operate as a carrier. However, a freight broker is a middleman who connects shippers with carriers to move freight. They don’t own trucks or handle the freight themselves. If a broker wants to legally operate as an agent as well they need to meet certain requirements.
It depends on your operational goals. However, a freight broker has a more consistent look, and authority to manage transportation and has a higher earning opportunity as well
Freight brokers and freight agents both are in high demand regardless of the state of the economy. However, freight brokers often hire freight agents for the expansion of businesses and to drive up sales.