A broker refers to an individual who purchases and sells assets for other parties. It could be an individual or a firm that charges a commission or a fee for facilitating buy and sell orders that have been submitted by any one given investor. The brokerage can also be taken to mean the role of an establishment when it acts as a broker for a customer and charges the customer a commission for the services offered. On the other hand, an asset-based carrier refers to an organization or firm, such as a trucking company, railroad carrier, or LTL carrier who has their equipment and liaises on a direct level with consumers to move their freight. It is worth mentioning that freight brokers and 3PLs are companies that are non-asset based. Brokerage carriers offer consumers more diversity since they are well connected and will provide the type of arrangement a consumer needs as opposed to asset-based carriers who would prefer customers to use their fleet.
The advantage that comes with making use of brokerage carriers is that they offer flexibility to consumers. In as much as they are never in possession of their fleet and equipment to move freight, they always have a disposition of the major available networks; networks were comprising a lot of asset-based carriers which have the capacity to work best for clients. Whats more, brokerage transportation act as middlemen right from the shippers to the trucking companies when moving their products using their massive networks. Another advantage of making use of brokers is that they have the ability to operate from cradle to grave whereby they get to learn the shipping needs of customers, finds them trucks and trailers appropriate for the job, quotes their lanes and makes sure that deliveries or myriad different entities in the brokerage team have the ability to handle an end users account. In essence, the types of operations that are accorded to customers are very much dependent on the brokerage involved (Clarke, Greene & Conlon, 2016).
With brokerage, the advantage is that they are more knowledgeable and experienced. This is always better than asset-based logistic firms that will always look to promote their ways of doing things; not ready to give customers the type of fleet they require. As aforementioned, asset-based providers are in possession of their resources, fleets, and materials, giving rise to the notion that they are superior choices. All the same, consumers should consider the manner in which a problem could evolve. In other terms, an injunction or financial penalty that is assessed by the DOT (Department of Transportation) could jeopardize an entire operation. But if the arrangement is a brokerage one, additional resources can be diverted and accessed to keep a company in operation (Thaduri, Galar, Kumar & Verma, 2016).
The use of brokers offers flexible solutions for young companies that are still growing; this is scalability. Scalability is very much essential to the success of any one given business. Market trends are usually dynamic and can change at any one particular time, and business usually requires adapting to rapid and unpredicted changes within market forecasts. In as much as analytical tools can assist any one given company in the creation of accurate forecasts, there are instances when an analysis can be wrong. As such, there is a need for a solution that is flexible, and it so happens that using brokers is the only way to meet such a demand. In many ways than one, flexibility is deemed to be the most important benefit that a company making use of a broker can realize(Clarke, Greene & Conlon, 2016).
Unlike using asset-based carriers where there are hidden costs and a lack of visibility, agents provide a clear and visible picture of the whole freight process. Many businesses come with hidden costs nowadays, and in the usage of asset-based carriers, businesses have no particular way of knowing what the real operating expenses of having access to their assets are like. For example, a company may not be aware of what the fuel charges are and how do they said costs compare to the rates that are currently being charged. Different from asset-based carriers, brokers have a vested interest to maintain visibility; this promotes greater usage of the services that they have in the offing. Additionally, their goal is many a time the provision of the lowest service costs, even if it culminates into a need to outsource additional processes to asset-based providers. This can be very much confusing, but there is a need for business owners to decipher that all brokers have the wherewithal to make sure that their costs are maintained at an all-time low and passed along to the businesses, which are their partners (Lindsey & Mahmassani, 2016).
Brokers are more advantageous because they have made payments to be recognized by the DOT and provide resolve that is compliance driven. Before the year 2013, any one given establishment could make a claim that they are providers of brokerage services and there was no framework for reporting. As such, there was a possibility of some brokers to take advantage of this claim to operations that were non-asset based. Today there is less to worry about because the Department of Transportation made a mandate of a $75,000 freight broker surety bond for all providers that were non-asset based. As a result, the true non-asset providers are the ones that can decently make payment of the bond amount minus any disruption of operations that are existent. Overall, business owners have completely and utterly been shown that non-asset providers and potential shippers have taken meaningful steps to ensure the safety of their partners.
Finally, it is worth mentioning that brokers offer better when it comes to the monitoring of transactions and the prevention of double billing among other errors. In other words, because asset-based providers are usually vested within a business payments and never in any way benefit from the above-mentioned actions, it is within their best interest to monitor a business' operations for accuracy and get a hold of errors the moment they take place. As opposed to asset-based providers who may be biased by their profit making incentive, the absence of assets is a connotation that non-asset based providers ought to work to limit inefficiencies in the operation of any one given business and make an identification of errors and problems to take advantage of limited profit for the sake of larger reclamation (Thaduri, Galar, Kumar & Verma, 2016).
In a nutshell, brokerage carriers have more to offer to consumers as opposed to asset-based carriers; much more because they do not bias by an interest for profit. Beyond doubt, brokerage carriers give to end users i.e. businesses much more diversity because they are well connected and will provide the type of arrangement a consumer needs as opposed to asset-based carriers who would prefer consumers to use their fleet.
Clarke, R., Greene, R., & Conlon, B. (2016). U.S. Patent Application No. 15/156,318.
Lindsey, C., & Mahmassani, H. S. (2016). Sourcing truckload capacity in the transportation spot market: A framework for third party providers. Transportation Research Part A: Policy and Practice.
Thaduri, A., Galar, D., Kumar, U., & Verma, A. K. (2016). Context-Based Maintenance and Repair Shop Suggestion for a Moving Vehicle. In Current Trends in Reliability, Availability, Maintainability and Safety (pp. 67-81). Springer International Publishing.
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