Freight Brokerage Essay Example

Introduction

The transition from horse-drawn transportation and trains has proved significant as trucks have become a central component of shipment with the development of infrastructure like roads. In the beginning, trucks were preferred for short range, but with the increased need for right movements, trains became overcrowded, and therefore merchants began to prefer road transport for longer distances as well. The establishment of legal regulations in the freight brokerage industry provided an opportunity for the smaller enterprises to enter the market and induce competition to the larger organizations.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Current laws

The foundation of legal frameworks in the freight industry is the Interstate Commerce Act of 1887 which seeks to restrain the monopoly of large corporations through calling for moderation of charges. The Act seeks to ascertain that all short range and long distance shipment is charged under the same metric and regions with less business than others are also not subjected to bias. Also, the Motor Carrier Act of 1935 is an addition that intends to normalize bus and trucking by enabling them to be common carriers; although the convention is considered a downfall for the industry as it facilitates brokerage abuse (Kinsler, 290).

Future Laws

A bill to amend the Federal Aviation Administration Act of 1994 is underway, and it seeks to enhance uniformity among shippers and merchants in the hiring of truckers, and this will be accomplished through the establishment of a similar standard (Ashe, n.p.). The proposal has been fronted before but it failed to get substantial votes, and the primary intent is to ensure the involved parties hire carriers in an ethical and reasonable approach. The bill dictates the approval of the freight company by the Federal Motor Carrier Safety Administration which has met the minimum insurance requirements and has a proper safety score. Regulations for brokerage compliance are calling for all the service providers to make it clear that they perform brokerage activities and should not promote on behalf of the carriers according to the FMCSA. While the restriction is already in effect, future compliance enforcement will necessitate intense investigations of the activities of the broker to ensure there is no misrepresentation.

Freight Brokerage Practices

Questions are emerging on whether there exist any significant variances between freight brokerage and 3rd Party licensing and concerning that, there are substantial elements that one should comprehend on the subject. To eliminate the confusion, a broker is an individual or group that links the client with the shipping enterprise, and they make the sale, bargain for better deals as well as overseeing the delivery of the merchandise (Roth et al., 568). On the contrary, 3PL references a business that is outsourced by the client to perform all the distribution or shipment activities at an agreed rate (Mitra, 2). The differences arise in the execution of services as the broker is a bridge between the two parties and the 3PL acts on behalf of the client to ensure the customer does not get involved in any way in the processes.

The establishment of a freight brokerage firm necessitates a series of insights and networks to execute the duties with ease and ensure compliance; this is challenging based on the many activities expected from the professionals. For instance, the brokers are charged with the task of networking and developing good associations with shipping enterprises, interact with other merchants, promote the practice and carry out service delivery. According to Lance, the compliance process encompasses the maintenance of records, avoidance of marketing as shippers which is illegal, and earning commissions from clients only and not the shipment businesses (n.p). On the contrary, like any business, the brokers must meet accounting standards that call for the decent profit and revenue recording and tracking of the expenses involved in the brokerage activities. The compliance demands when coupled with the restraints on who the brokers can interact with, what they can advertise as well as the insights they ought to provide to the client becomes challenging and requires keenness.

Future of Freight Brokerage

There is a profound advancement of the tools and strategies considered by different supply-chain logistics groups, and freight brokerage falls under this category; hence, providing an opportunity for development. Tools like optimal freight tenders to many shipment companies using trucks, Optimal less than Truckload merging, matching of loads and trucks are significant for the future of the industry (Silver, 1). The first strategy will be a useful technological advancement for the brokerage as it will allow the reduction of charges involved in the stops and mileage of each truck. Secondly, the consolidation of minimal merchandise is a future strategy for the brokerage and necessitates a high degree of planning and routing as well as market analysis. The last approach is an advanced strategy to avoid using large trucks for minimal entities or prevent issues of overload and multiple truck use for businesses moving large cargo; the brokers have access to different sized and capacity trucks they can recommend.

Banker argues that the emergence of small cargo movement companies and the online economy is disrupting the business and calling for innovation in freight brokerage to enable the merchants to remain relevant (n.p.). The future of the brokerage is not reliant on attracting consumers who are willing to lower the prices of their entities but rather, seeks to front other forms of value in the process. For instance, optimization in ensuring that all the different kinds of merchandise are moving in one direction are catered to under the least cost and delivered within the expected timeframe. The use of online request services will prove useful for future brokers to compete with the 'Uber' economy and maintain a substantial consumer base as well as ensure their services are essential in the globalized market.

While the Sanitary Transportation of Human and Animal Food Rule is already in effect for large brokerage firms, the restrictions will also apply to small businesses as well as the online economies. The FDA is responsible for the policy and recommends the freight brokers to uphold the standard in the handling of food entities as well as the processes of shipment. The regulation is crucial as it is a strategy formulated with the intent of eliminating or depressing food safety issues that have crippled some businesses in the past (FDA, 20106). Inspections will be carried out more stringently with the growth of technology to carry out the processes, and hence the brokers will have to be aware of the expectations and make sure they comply, and the shipment enterprise is also fully compliant.

Conclusion

In conclusion, freight brokerage is a crucial aspect in the transport industry and is an opportunity to reduce the hustle of clients attempting to locate shipment companies that can handle their merchandise. The conventions affecting the business are immense, but the Motor Carrier Act is the foundation as well as the most significant regulation affecting the practice, although other amendment bills to regulate pricing have been fronted. The future of the service dictates the adoption of consolidation and cost reduction technology as well as techniques to compete with emerging innovative enterprises competing with the model of the practice.

Works Cited

Banker, Steve. "Reinventing the Freight Industry". Forbes Magazine, 2016, Accessed 7 Nov 2018.

FDA. "Sanitary Transportation of Human and Animal Food. Final Rule.". Federal Register Journal, vol 81, no. 66, 2016, Accessed 7 Nov 2018.

Kinsler, Jeffrey. "Motor Freight Brokers: A Tale of Federal Regulatory Pandemonium". Northwestern Journal of International Law & Business, vol 14, no. 2, 1993, Accessed 7 Nov 2018.

Lance, Vic. "A Freight Broker'S Cheat Sheet to Regulations and Compliance In 2018". Supply Chain Brain, 2018, https://www.supplychainbrain.com/articles/27923-a-freight-brokers-cheat-sheet-to-regulations-and-compliance-in-2018. Accessed 7 Nov 2018.

Mitra, Subrata. "A Survey of the Third-Party Logistics (3PL) Service Providers in India". Indian Institute Of Management Calcutta Working Paper Series, no. 562, 2005, Accessed 7 Nov 2018.

Roth, A. et al. "Information Integration: A New Generation of Information Technology". IBM Systems Journal, vol 41, no. 4, 2002, pp. 563-577., Accessed 7 Nov 2018.

Silver, Jeffrey L. Optimization Tools for the Freight Brokerage Industry. Massachusetts Institute of Technology, 2003.

Silver, Jeffrey L. Optimization Tools for the Freight Brokerage Industry. Massachusetts Institute of Technology, 2003.