Have you ever considered becoming a broker in supply chain logistics but didn't know where to start? Don't worry; this blog will help you understand the two types of brokers in the supply chain, what you need to become a broker, and what the job requires. At the end of this blog, we'll give you a link to a website where you can learn more about starting your career. Let's start with the first topic - understanding the two types of brokers.
In the world of supply chain logistics, there are two types of brokers: a 3PL broker and a freight broker. A 3PL broker provides more services than a freight broker. They can help with things like shipping goods to warehouses, managing inventory, and fulfilling orders by picking and packing products. The exact services they offer depend on the specific 3PL company. Some advantages of a 3PL broker are providing complete, end-to-end management throughout a logistics lifecycle, providing order management, from receiving orders and inventory to picking, packing, and distribution, and offering a range of core and value-added logistics services that companies can use if needed. One downside of using a 3PL broker is that you may have to pay extra money for any additional services you need. Let's talk about what a freight broker is.
A freight broker helps businesses find transportation companies that fit their needs. They know which companies are available, the routes they take, how much they charge, and what types of vehicles they have. A freight broker acts as a middleman between a company and a carrier and ensures everything is set up correctly. They help with agreements, expectations, and communication. A freight broker has some advantages, like being a single point of contact for transporting goods, knowing a lot about freight pricing and availability, and doing route planning, freight tracking, and price negotiation for a company. However, a disadvantage is that they only focus on the transportation part of the supply chain.
Let's talk about the difference between the two types of brokers and what a company should consider when deciding which will work best for their needs.
The main difference between the two is the range of services they offer. Freight brokers focus only on working with a company and a carrier to transport the company’s products. 3PL broker's services are more wide-ranging, including inventory management, order fulfillment, warehousing, and distribution. Here are some important questions to consider: Does the company manage its logistics? If yes, then they may not need all the services of a 3PL provider. If it doesn't, it may need more than just transportation. In that case, a 3PL broker can help determine what kind of service is needed. The next thing to consider is whether the company needs help fulfilling orders. If that's the case, then 3PL brokers are a good choice. But if order fulfillment isn't part of the company's plan, a freight broker might be a better option.
Another thing to consider is if the company has a tight budget. If so, a less expensive freight brokerage might be a good place to start, as end-to-end 3PL services can be expensive. Lastly, does the company want to outsource more logistics as it grows? Starting with a freight brokerage and then moving up to a 3PL brokerage and adding on services later might be a smart choice.
Next, we'll cover what you need to become a broker.
To become a freight broker, you must get a license from the Federal Motor Carrier Safety Administration (FMCSA) and a $75,000 freight broker bond. You also need a surety bond that guarantees compliance with all rules. You must renew these bonds annually. You also need to get a USDOT number and complete an OP-1 application to get your MC authority, which has a $300 filing fee. After getting the bonds, you must get insurance and complete the application form BOC-3. Now, we can move on to the job’s day-to-day functions.
Let's start with what freight brokers do. Freight brokers find and check a carrier for a load. They also negotiate shipping costs and other details, send loads, talk to the carrier and driver before, during, and after pick-up until delivery, track loads, fill out transportation papers, and make invoices. Freight brokers need to have certain skills. They should be good at negotiating, coordinating, using computers, managing time, communicating with others, and knowing different ways to ship things. Freight brokers are responsible for ensuring that they have all the necessary documents to ship goods. These documents can include a commercial invoice, which the seller issues to the buyer, a packing list that describes the cargo in detail, an import/export customs declaration, a bill of lading, and a sea waybill that serves as transportation contracts, a production certificate for sustainable products, a vessel certificate that verifies ownership, a phytosanitary certificate for plant products, an air or rail waybill, an arrival notice, a certificate of origin, an importer security filing for ocean cargo imports, and a letter of credit for international transactions. Because of this, companies use freight brokers for several reasons. Freight brokers can find trustworthy carriers, reduce costs, maintain good communication, and have access to necessary technology. Freight brokers are responsible for a big task, and you may be curious about their pay. They earn money through commissions and charge clients a fee for their services. The amount they charge depends on the type of agreement.
This blog has hopefully helped you understand what goes into not only becoming a broker but also what tasks a broker does. If you have any further questions, please contact the Supply Chain & Logistics Workforce Partnership. They can help you explore your options for becoming a broker within the supply chain and logistics. Also, check out their website at https://www.supplychainlogisticswp.org/ to learn more.
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