Not only this thread but a couple of others in the past week have been well debated by people who know a great deal about the transportation industry from all sides. As a newbie on this board, I've enjoyed reading many different forums but the owner operators forum tends to have the best business discussions.
As someone who only recently started calling brokers to get loads for a new owner-operator who busting his ass just to load, drive and deliver, I looked at the requirements to become a freight broker and found them to be extremely lax. Any swinging d*** can fork out $300, post a bond and hang out a shingle.
For the most part, it's probably wise to stick with experienced brokers with decent reputations and credit scores (as many have already pointed out) and (as many like Ridge Runner and Twilight Flyer have said repeatedly) stop hauling cheap freight. Know your input costs, control your variables expenses, and add a reasonable profit margin to establish your rate - nothing less is good enough (but more is always better :lol: ).

 

Paul, I didn't really want to get into the theoretical side but, in my opinion, it's all about the efficiency of the market. With an economics background, you know what I'm talking about. The more inefficient the market, the greater the economic losses experienced by ALL players. It's painfully obvious just how inefficient this market is and how much waste occurs.

No, I would not advocate placing any kind of price controls. History has shown time and time again that they simply don't work. You put in regulations to punish bad behavior and encourage desirable outcomes, such as better information. If you limit regulation to those areas, pricing takes care of itself.

As far as this being an example of perfect competition or a perfect market...hardly. This market has maybe half (and that's being generous) of the characteristics of a perfect market. The most obviously lacking of which is perfect and complete information.

 

Great point, I agree on all counts. Having lived through the Nixon "WIN" (whip inflation now) price controls of the 1970's and seen the problems WIN created, I would think regulation, not price control, would lead to the best results for the most people.

Got to hit the road. Hope to chat with all of you again next week.

 

The only regulation suggested in this thread so far that would have a positive overall effect would be bonding regulations that put 100% accountability on the broker. It would also likely put most brokers out of business.

 

would you feel bad if you could haul loads and bring home 1/2 a million a year to yourself? I think you would even brag! the bottom line is why are you so upset because a business is doing well. that is what a good business is supposed to do!!!

a free market already has checks and balances instilled into it. Its called competition. its what keeps prices down and service better. if you charge a high rate and provide poor service then you will fail eventually (this is true in any industry) if you provide outstanding service at to low of a rate you will fail. you have to find the happy medium. competition is what makes it possible.

if you can't get a decent paying load, or you think the broker is ripping you off DON"T USE HIM. would you use a plummer that did the same thing to you? no you would use his COMPETITOR!

 

Care to expand on what those other regulations are and why they wouldn't work? So increased bonding would be a positive?

So this would be a positive?

If it were to put brokers out of business, wouldn't it just be those that fail to pass on their costs of doing business?

 

The definition of insanity is doing things the same way and expecting different results. In other words you ought to change yourself before you demand that others change.




Turn the fuel price argument around. Do the gas stations complain to the government when the price they pay for fuel goes up? NO they simply raise the price. Why do we expect the government to do what we won't do for ourselves?

 

I did.

While he certainly could have gotten more out of the load than he did, he was comfortable with the rate he negotiated, and when push comes to shove, that is all that matters to his business. The fact that it ultimately has a negative effect on other carriers is simply a byproduct of how he runs his business. In that particular situation, the complaints should be directed at the carrier who failed to properly negotiate the rate, rather than the broker who took advantage of that fact.

The opposite also holds true. I'm sure you've hauled a load for far more than what you needed to earn on it. In that situation, would it have been fair for the shipper to complain that there need to be rate caps on the motor carriers to eliminate those excessive rates? Would you support that?

I'd be happy to.

Rate caps: While it would guarantee that the motor carrier would receive the same amount of the rate every time, it would have the negative effect of causing brokers to raise rates with shippers to compensate for lost revenue, thereby causing shippers to resort to using non-brokered carriers. It makes the big carriers bigger, and the small carriers smaller.

Transparency: This is already available if you do the research. If a broker chooses to not do business with you again for requesting it, that is their right to do so.

Flat rate brokerage: This is essentially the same thing that any carrier who provides percentage based rates offers. If that is what you want, then lease on with a carrier.

Streamlining the process: This would spell disaster for the trucking industry by actually lowering rates. The trucking industry thrives on ineffeciency.

And now onto the issue of 100% bonding:

Yes and no. While it would guarantee payment in full to the carrier, it would also put most brokerages out of business. Think about it: If a single broker has 100 loads currently brokered for $1000 each, that would result in that broker needing to be bonded for a minimum of $100,000. It would also require the broker to obtain a larger bonding if they wanted to broker any more loads. I doubt that many brokerages have that kind of cash flow lying around to obtain bonds that large. Due to this fact, the broker is going to attempt to "sell" (not literally) the load to the carrier for as little as possible, to prevent their bond from being tied up. After all, if they have 100 loads for $1000 each eating up their bond, they could simply drop the rate to $900, and squeeze another 11 loads out of their bond, and profit another $10,000 in the process.

The best way to handle it would be to simply run a credit check on the broker (which you should be doing anyway), and choose not to do business with brokers who do not pay. I've said it several times in this thread, and I stand by it. If carriers choose to not do business with a bad broker, the broker will go away, as shippers will stop using that broker. After all, why would any shipper use a broker who can't ship their loads?

Absolutely. And the costs would be passed on to the carriers, which would start the complaining process all over again.

In the end, all of the complaints should fall on the carriers who allow such brokers to thrive; be it the broker who is taking 50% of the rate, or the broker who isn't paying the carriers for services performed. But it's easier to complain about the brokers than your fellow carriers.

 

a broker bond works much the same way as a carriers insurance.

A carrier needs 1,000,000 dollars of Liability insurance.
He does not put up this million dollars himself.
He pays an insurance company a yearly premium .

same with the brokers bond.
They do not put up the 10,000 dollar bond in cash, they pay an annual premium.
The price depends on their credit.

I checked into this, and it would cost me 500 dollars a year to get a brokers bond.

If you raised the bond to lets say a million dollars, then anyone trying to get a brokers bond, would have to have some decent credit, or pay a hefty premium.

This would weed out the guy in the basement brokering loads in his underware, with a phone, and a fax machine.

 

Just thought I'd paraphrase what I mentioned earlier. I am all for free markets, but this is more like an auction with a reserve bid.

It has already been decided that the load will move with, oh say LNDSTR company on this day for this amount of money, but MAM posts the load on the internet hoping to get somebody to move it for fuel. The free market theory kind of implies that the broker NEEDS a carrier. They do not. They WANT a carrier to do it for less.