Wednesday, April 23, 2008

Bad brokers and bottom feeders

It’s not hard to find a raw nerve in the trucking industry right now. But the Special Report I wrote on Tuesday, April 22, really set off a firestorm of sorts.

A long-time trucking analyst Donald Broughton reported that 935 trucking companies with five or more trucks went out of business in the first quarter of this year. You can read the whole article here.

What seemed to capture the attention of several readers was the observation that brokers collect fuel surcharges but fail to pass them on. That only scratches the surface of the havoc that brokers are playing with shipping rates.

I started getting messages about brokered loads where the broker was making nearly twice as much as the trucker. Two amazing examples involved government loads.

The first load needed to be transported 95 miles. The trucker was paid $500 to haul it. Hey, that’s more than $5 per mile. What a great rate.

The second load consisted of one pallet that only had to go 63 or so miles, and the trucker raked in $600 – that’s right, a $10-per-mile rate.

In a time where truckers are struggling to get paid a rate that covers their cost of hauling the load, these hardly seem to be examples of what is wrong in the industry.

With apologies to Paul Harvey, here’s the rest of the story.

The broker who handled the first load was paid $1,950. The trucker got $500 of that, so the broker made $1,450 – nearly three times what the trucker who actually did the work made.

The second load paid the broker $1,767. After the trucker was paid his $600 for doing the work, the broker made a whopping $1,167 – bordering on two times the amount the trucker made.

There are two brokers who sat on their hind ends, made a few calls and sent out invoices. I mean, come on; they couldn’t have put in more than an hour’s worth of work for either load – to be generous.

It easy to see why the truckers didn’t question the rates – $5 and $10 per mile are incredible. But that’s chump change compared to the $20 and $18 per mile our tax money actually paid for the loads.

And who benefited in the long run? It sure as hell wasn’t the trucker.

Everyone knows these loads are the exception. But the highway robbery committed by these brokers isn’t.

We routinely find cases where brokers take 40 to 60 percent of the rate and pocket it. Sure they provide a service and deserve a cut, but to make more than the trucker for less work hardly seems fair.

So, anyone who wonders where all the good rates have gone might look a little closer at that rate your broker is pitching you. You too may find there’s more to the story.

17 comments:

  1. The answer is don't haul for those brokers or get more money next time. O wait there won't be a next time because someone else will get the $500. Is it right that the broker made so much? Probably not However, those drivers agreed to haul it for that amount. I hauled a government load that paid the broker $2169, I got $2000. Should I give some back because the broker only made about 8.5% instead of the so called customary 10%? It's time to quit whining about how everyone is out to screw the trucker. If you were happy with rate then be thankful you didn't agree to haul it for $300.

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  2. The most pathetic part of this rate issue, we are the government and paid the damn high price in the first place. The government employee that agreed to pay the rate should be relieved from his position. If he were accountable, like folks in the private sector are, I guarantee the company he was employed by would have a huge issue with his judgment.
    Brokers for the most part will absolutely take advantage truckers who stupid enough to haul their loads at ridiculously low rates. Frankly, I have had brokers make light of truckers lack of business acumen. The largest non asset based broker in the country is probably one of the worst offenders of low rated freight. Their comment is we can always find idiot to haul it. Sad..

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  3. brokers need to be regulated...while they are making outrageous profits with minimum efforts the owner operator makes numerous sacrifices, little home time, junk food or high priced truck stop restaurants, no medical insurance, cant afford it need to keep the truck running…we need help!!!

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  4. Mike Corwin ,and Anonymous # 1, Sound like Brokers to me ! Anonymous # 2 , No doubt is a Trucker !

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  5. Anonymous #1 is a trucker whose is damn tired of listening to truckers whine. It is simple, if it does not pay what you require, DO NOT HAUL IT
    Got it. Find another profession...

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  6. Anonymous #1 never mentioned how far he hauled it, nor the details of time. So either he has a family member who brokers or he/she bailed someones butt out. There is a third option...just another trucker tale.

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  7. So, if rates are low to begin with across the board, and no one tells you what price the broker is getting, how is the driver supposed to know if he's being cheated or not? Until this information is mandated to be given to the driver, then the broker can give whatever he wants. Of course no one would willing be taken advantage of, but if you have no information to determine the true payment, what can you do? No brokers should be mandated by law to HONESTLY tell the trucker what he is getting paid for the load by the shipper. Also, brokers who pay later than 30 days should be charged daily compounded interest for every late day. Just some thoughts.

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  8. Brokers are mandated to tell the trucker, but after the fact by written request. Do you really think anyone is going to change that when some of the largest asset based companies are doing so much of the brokering?

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  9. I sold my reefer back in 78 due to the ripoffs by the so called "brokers" i prefer the name "truck pimps" as they are no better than pimps..... that prey upon the weak.... my latest truck pimp story involves a government load also it was a load of aerospace from ca to michoud la the pimp in this load was truckers express out of missoula mt. I found out that between them and the carrier i was leased to steelman transportation out of springfield mo they actually kept over fifty percent of the load....THERE IS SOMETHING WRONG WITH THIS PICTURE.... In total disgust of what was once a proud industry i parked my two trucks and trailers and became a company driver afterwards...All the hell i ask is to make a decent wage for a decent days work... Unfortunately "greed" and a lack of "morals" have destroyed this industry.....JAMES DUNCAN showtrucker@yahoo.com

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  10. I can't believe all the BS from drivers that are saying how well they're doing!
    I guess it's an natural reaction to do, when you can't face reality, and being on the edge of going out.

    The ones that are doing well, are keeping their mouths shut.
    Why would throw out there that you're doing so well, when you're brother trucker is on the edge?
    The industry needs a lot of attention, we all need to be in this together, or at least act like it..

    You wouldn't want to leak out where's the good money coming from.
    Just prove where you're making all this money! Go-Ahead! - Show us.

    Didn't think so.

    Well,, anyone that's smart, would keep their mouths shut, and still be a part of something.
    Trucking use to more be like that. With much more Respect towards each other.


    3 big things need to be done;

    Truckers need to be classified as Skilled Labor.
    Brokers need to be regulated, with enforcement.
    Fuel,, look for alternatives.

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  11. We are leased on to a company. In 15 years no cost of living pay raises or cost of doing business raises. The cost of living is going up every year & the truckers lifestyle goes down. Every time there is a problem with the economy or the price of fuel goes up we can look forward to loosing our homes & trucks & ect. And it's not as easy as getting a new job if this is what you do. You know this is true if you ever had to hire people to run your trucks. Most of these people came out of other professions, & they just don't work out. The government needs to step in this time & regulate the brokers, not the truckers. They need to mandate cost of living & of doing business yearly raises for the owner operators. As well as fuel surcharges need to kick in when the cost of fuel increases. No owner operater should have to lose their home, truck, cars or livlihood because of middlemen. The trucking industry needs laws governing the middlemen & how they are doing business. One thing that I don't hear mentioned is their profit margin is much higher. The cost of running & maintaining a truck as well as the other business expenses are hugh. The trucker should be paid most of that load not the brokers. Being a truck driver is a very hard & dangerous job, they are the force behind the US economy. THEY DESERVE BETTER.

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  12. Shipping charges need to be on all Bills of Lading - period. What's so hard about this concept? We need to push this issue onto these lawmakers who want to get elected this fall - they can't help with fuel prices but this they could require! Come on OOIDA - this should be the number one item on your agenda, before there are no O/O's left.

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  13. Michelle - OOIDA MemberApril 25, 2008 at 12:33 AM

    I completely agree with needing to know what the load actually pays the broker before hauling it.

    The only way that would happen (in the 1 minute that you're on the phone trying to get the load) is if the broker was legally obligated to tell you what they were being paid by the shipper and allow you to negotiate YOUR percentage.

    We need to get away from a "Per Mile" rate and more towards "What is it worth to you to have this load moved."

    Just this week I had a truck in IN - not 10 seconds after I had him posted I started getting calls like "How much do YOU need." "Name YOUR price." It was the first time in 2 years that I was able to name MY price without fears that some idiot would come along and cut the rate in half resulting in a phone call from the broker (after the load was booked) saying the load fell through.

    Those of us that busted our butts the last 4 months and are still here (for whatever reason) will start to see the benefits this summer - it's finally going to be a trucker's market - now we just have to keep it that way.

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  14. Ok here goes. I am a Company Driver but that isn't the issue. Why can't there be a way to bypass the broker game altogether. If there was a way to get loads booked with the shipper direct then the broker would more useless then he already is. If you are a Company, even a small one, then hire a person to get contracts with shippers in the areas that you haul out of. If you are the driver then talk to your boss, the guy that signs your check, about doing this. Large companies use this middleman to stay a large company. It's not that they take "cheap freight" because they are in it for the buck also. The answer is so simple, DON'T USE A BROKER..

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  15. Caryn - you're absolutely right - but when the customer says:

    - I have 100 loads a week that I need moved - can you move that with your (1) or (2) or even (10) trucks?

    My answer is no - but I might be able to find other trucks to help out.

    He then asks:

    - Why should I pay you $.50 - $1.00 more a mile than XYZ or ABC Company to move my loads when you can't even guarantee me that you'll have the trucks I need?

    What's my answer then? Cause I'm showing off my long legs in this short skirt? Now I'm stooping to a whole other level.

    My example may generalize the issue, but this is the exact thing I/We face on a day to day basis - trying to find customers that will take a "chance" on us.

    My driver asks every shipper and every receiver he comes in contact with why they chose XYZ Company to haul their freight. You would be surprised at the answers - anything from "They were the cheapest" to "They were the only ones that could find a truck" and sometimes it's "I don't know." Then he hands them a stack of business cards and says "Call us next time!" In 2 years we have YET to get a phone call even after follow-up messages.

    On the other hand, the US has a lot of "hot spots" that change depending on weather, time of year, etc. Right now freight is slow in the North East - last month Houston was dead, but this week it seems to be picking up. Rather than get "stuck" in a dead area because of customer obligations, I would much rather beat the brokers down with "NO" and hear them say "How much do you need to move MY load."

    Example - and I can fax / email paperwork to anyone who wants proof: Larger carrier calls me up and offers me $1150 + $125 permits for a 9'6" wide load going (with deadhead to pickup and back to a major city after delivery) 489 miles. I said NO with a capital "N" and a capital "O". I counter offered with $1600.00 + $150 permits. He told me I was nuts and I said "Thank you!"

    2 hours later - same carrier calls again - "I can go up to $1400 + $125 permits - but that's ALL I can do." I say my driver needs $1600 + $150 permits to do this load...I'm sorry." He begs and pleads, asks for the driver's number to see if he can "talk some sense" into him. Laughingly I told him doing that would probably cost him an extra $100. He begs and pleads - I say $1600 + $150 permits.

    Another hour passes - it's now 1PM - the shipper shuts up shop in 2 hours.

    Phone rings - "Please - $1400 + $125 permits." Now I'm upset - I've already told him a couple times that we can't budge on the rate and he still insists on jipping me $25 for permits.

    After calculating our costs I figure that we can do the load for $1500 + $150 and still be $17.51 profitable (Click here for a PDF of our rate calculation sheet.)

    He calls back 15 minutes later and says "I just called the customer - we can only do $1500 + $150 permits and we'd be losing our butts on this, but I need to get it covered. I covered 4 other loads today for MUCH less than this." His attempt at a guilt trip actually made me laugh and I finally said Ok.

    Now keep in mind, the average load I was calling on or getting calls on was around $1.75 a mile (all miles).

    Moral of the story: By saying NO several times I was able to make the truck an extra $375.00.

    I will always be an advocate for SAYING NO TO CHEAP FREIGHT - PERIOD.

    Having transparency with brokers or a flat percentage that they would be allowed to keep would not change that, but it would certainly lessen the number of No's I have to hand out.

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  16. One bad broker in Manhattan is a guy named Bill Yorgan, BUT if you want to file charges against him with the Department of State, you won't find him because his REAL NAME IS HALIL BULENT YORGANCIOGLU ---- yeah, try saying that in one breath. This guys a bottom feeder and rips off both landlords and tenants. New Yorkers stay away from him and if you haven't been lucky enough to steer clear because he claims to be the LANDLORD when HE'S NOT, then just use his REAL NAME and nail 'em!

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