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Double Brokering

These days, when you talk about freight, double brokering comes up almost immediately. The problem is on the rise and will probably keep rising until the scheme stops being profitable. That’s where Brokers come in. It’s our job to stay savvy enough to protect ourselves and our customers. Just like in the other parts of our jobs, the value we can present to our customers is that we know more about the freight industry than they can know, because it’s what we do full time.

We talked about double brokering in a recent episode of The Broker Bros podcast, and Freightwaves published an article on the topic in May. Each of those is worth checking out, as they discuss a lot of the red flags that come up with double brokering.

Working with a company like LDI also gives you access to the information we’ve collected and over 100,000 carriers that have already been verified. We have a process for adding a new carrier, and that process is designed to put enough eyes on the new carrier to keep an eye out for warning signs. Still, it starts and ends with the broker being aware of the risks and conscientious.

The episode of The Broker Bros linked above has some good, specific things to look out for when talking to a carrier to make sure your freight isn’t being double brokered. The bottom line is this: the carrier should be able to answer basic questions like the driver’s contact information, the MC and other details of the carrier that arrives should match the one you contracted with, and the carrier should be able to show a paper trail of prior reviews, inspections, etc.

Here’s the recurring theme to all of those details: you should be asking for them anyway. Do your regular homework on your carriers and look for things that sound suspicious.

That brings us to one final note, a little piece of trivia that is also good to keep in mind:

When you hear someone say they were “conned” or fell for a “con man,” that’s actually short for “confidence,” as in a confidence trick. Remember, that’s what these people are trying to do: get you confident enough to feel like you don’t need to check on the details. They’re usually not counting on their sophistication or a clever grand scheme – they’re counting on getting you to not look to closely. Don’t let your guard down.

IT Security for a Freight Brokerage

Back in May on The Broker Bros, we asked you to think about what would happen if right now, your biggest customer shut down or stopped doing business with you. It’s not a pleasant exercise, but it’s one you definitely want to play out in your head before it plays out in real life. We’re going to do another one of those right now. Stop and think what would happen, right now, if a person or program gained access to your work computer, potentially even locking you out of it.

If you’re a broker who is employed by a large company, you call IT and they handle it. Worst case scenario, you may get a talking to about network security protocols and lose a few hours of productivity. For freight agents though, you probably don’t have an IT department, you almost certainly don’t have a detailed plan for how to deal with a successful hack or malware attack, and how you would handle customer calls to get freight booked while you’re shut down is probably not ideal. We’ll circle back to that last part, because it’s probably the biggest difference in how to handle a computer problem for most people compared to how to handle it as a business owner.

There are a lot of very basic steps for protecting your computer and network. The SBA has a great list for small businesses to help you make sure you have your basics covered. The biggest things to know for a sole proprietor are the basics: have unique, difficult to guess passwords, don’t use unsecured Wi-Fi, install your software updates, and don’t fall for phishing emails. As much as we picture hackers as computer geniuses with super-secret tricks for getting your passwords, the vast majority of hackers get passwords by getting someone to tell them what that password is. Those are phishing emails and phone calls. Most of the rest use “exploits,” flaws in computer security that you can probably find via Google and that are regularly patched in software updates – if you run them.

The added step for small businesses is to have a plan. Major corporations have huge, complex disaster recovery plans that help them respond to a disruption and business continuity plans that help them operate during the disruption. A freight broker agency, especially one that only has one agent, can have a much simpler plan. While you’ll have to think about your own circumstances, some questions you’ll want to answer are:

  • Which passwords do I need to reset? Make sure to get your personal ones too.
  • Do I have any proprietary customer information? If so, you’ll need to disclose the security breach to them. It won’t be your favorite conversation you’ve ever had, but your customer is trusting you with that information and could be at risk if you don’t take this step.
  • How do I get my computer or network fixed? This might be as simple as resetting a Wi-Fi password or running antivirus software, but you may need to take the computer to a qualified IT professional in your area.
  • How do I operate in the meantime? Again, this might be incredibly simple – a borrowed laptop or a personal computer might suffice. Think about whether there’s someone you can call to help you with operations in the meantime, whether that’s someone at your 3PL if you work with one or even another broker you trust. Careful with that last one though, of course. This plan also may be good to have if your internet connection goes down or your computer just isn’t working.

These are pretty easy questions to answer, but they can be hard to figure out in the heat of the moment. It wouldn’t be a bad idea to write out a quick checklist, look up a local computer repair shop, and have a conversation with the person you’d call for support. Write it up, store it someplace safe, and hope this plan is the best thing your business never uses.

Hiring Employees

If your freight brokerage has reached the point where you’re considering hiring employees, you’re not alone. Around 20 million employees in the US, more than 15% of all workers, work at a company with 20 or fewer employees. Hiring that first employee can be a milestone for your business that helps determine your growth prospects for years to come. The decision to hire and the process of making that hire should not be taken lightly.

Should You Hire?

 

If you’re considering hiring, that almost certainly means that you’ve grown your business to the point where you can no longer manage it alone, or you foresee reaching that point very soon. Congratulations on your success so far. The first thing to do is stop and think about whether you need to hire someone, or if you might have better ways of getting help. Hiring an employee is a major, ongoing investment that changes the way your business operates, even if the employee doesn’t work out. Before you hire, check to see if there are services or contractors that can do what you need.

If there’s no service for what you need, or it looks like you’re going to need those services so much that it’s more cost effective to have a full-time employee, that’s when it’s time to move ahead with hiring. Be careful though, just because you’re sure you need to hire doesn’t mean you have all the information you need.

Requirements

 

There are some important details in hiring that can’t be overlooked, and frankly aren’t fun to research. Fortunately, there are resources available to help. The Small Business Association (SBA) has a guide to help hire and manage employees. It’s likely to be an important resource for you, since your area of expertise probably isn’t HR. The SBA’s guide should be able to help you through some administrative requirements, required and optional employee benefits, and other laws you might need to understand. Make sure to look at your state’s laws as well, which the SBA has aggregated in a link on the same page.

A common question for freight broker agents when hiring is whether they can pay their employees commission only. As with most employment questions, the answer is more complicated than a simple yes or no. That said, you’re probably going to be held to federal minimum wage and overtime requirements.

Reading the link above, you’re naturally going to be drawn to the outside sales exemption. It’s possible that someone working in your agency will qualify for that exemption, but it’s a high standard. The Department of Labor defines who qualifies for the outside sales exemption, including that “The employee must be customarily and regularly engaged away from the employer’s place or places of business.” On page two of that same document, you can find that ANY fixed site qualifies as your place of business. The phrase “customarily and regularly” is less clearly defined, but court cases seem to view this as a high standard as well. Bottom line – unless they mostly travel to customer locations, they probably don’t qualify, and will need to be paid at least minimum wage, plus 1.5 times minimum wage for hours worked over 40. They can be commission only, but you’re on the hook for the difference if their commissions are less than minimum wage would have been.

So now we’ve got the scary stuff out of the way. Those requirements are a big part of the reasons we talked about whether you can find support without hiring in the first section. Here’s the good news: if you’re heavily leveraging outside services to get your day-to-day work done, or you’re not growing because you just don’t have the help in the office, then a new employee can be a great investment – as long as you hire a good one.

How to Find and Interview Candidates

Wanted

This… probably won’t work on its own

It’s almost unfair to small business owners that when it’s time to grow, hiring becomes maybe the most important factor in your success. That almost certainly wasn’t the skill that made you decide to start your own business in the first place. For freight brokers, booking loads does very little to prepare you to find and interview potential new employees, so you’re left with a whole new skillset you need to learn.

There are more ways to find candidates than we could ever discuss here, so let’s just talk about what works for small businesses. You need to compete with everyone, so take the advice of baseball great Willie Keeler and “hit them where they ain’t.” Major companies are prevalent on top job sites, so check out sites that serve your specific industry like Jobs in Logistics. Talking to people in your network is also a great idea. In a small business, being linked up with candidates by people who know you and the candidate can help make sure you’ll have a cultural fit. You’re not just asking them for help, you’re looking to potentially give someone they know a great opportunity.

No matter where your candidates come from, it’s important to go into hiring with a plan. You want to make sure that you’re asking relevant questions to help you identify the person who best fits the job and your business. Keep in mind, too, that you are trying to grow, and the person you hire today needs to be a good fit for the organization you want to become. You need to decide ahead of time the skills and temperament that you’re looking for and how you’re going to identify those.

To do that, really stop and think about why you’re hiring. It can be tempting to hire “another you,” someone who reminds you of yourself, has a lot of the same skills, and can back you up on almost anything. Undoubtedly, that person can make your work easier, but is that the best move to help your business grow? After all, your business already has you. Consider what this person needs to be best at. If you’re looking to offload the tasks that you enjoy least or struggle with most, another person like you may feel the same way. If you’re just overwhelmed with volume and need someone to back you up on everything, it could work. Even if that’s the case, though, it might make more sense to let a hire take on administrative work so you have more time to do what you do best.

Onboarding

 

It’s easy to overlook the importance of the employee’s first few days in a new job. Before they start, you should have a checklist. They probably need a computer and a phone, but what else? If they’re working from your office, where are they going to sit? If they’re working from home, how’s their internet service? There are probably all kinds of logins, licenses, and software they need in order to do what you do. It’s best to have all of that in a list and even set up ahead of time to make a good impression, but that’s a small part of onboarding.

Your new employee is looking for a paycheck, of course, but the best employees are usually looking to grow and advance. They’re going to want training, not just in a formal setting but from you every day. None of that starts the day they get to the office, but it’s a good idea to make sure they know you’re there to help them learn. Employee retention is tough in an age where people have unlimited access to information and employers can hire in your neighborhood even if they’re a thousand miles away. Ultimately, you can think all you want about compensation, benefits, and titles, but your employees want to feel good about their work.

Making sure your employees find their jobs fulfilling, while also making sure they are a good fit for you, is a tough task. There’s no one way to make sure you hire the right people, but if you make sure you have a clear understanding of your needs and what you’re offering through your hiring process, onboarding, and during their time at your company, you and your employees will be far better off.

The Importance of Customer Retention

Let’s face it, landing a customer is hard. We don’t always like to say that out loud, because most of us make our living based on how good we are at landing customers. Being good at it doesn’t necessarily mean it’s easy though. According to sales consulting firm The Brevet Group, it can take 8 cold calls to reach a prospect and 5 follow ups after a meeting to give yourself a good chance of landing a sale. Even then, up to half of all sales go to the first vendor that responds with a workable solution.

Of course, you need new customers to grow and even sustain your business, but it’s important not to overlook the value of customer retention and maximization. Both are exactly what they sound like: customer retention is how many of your customers continue to do business with you over time, and customer maximization means getting the most out of your existing customer relationships. Effectively, we’re talking about selling more to your customers, for longer.

Why is Customer Retention Important?

 

Okay, we all have a pretty good grasp on this on an intuitive level. It’s not like anyone reading the first section stood up and shouted “why should I keep my customers?” Still, it’s important to take this to the next level and quantify what we’re talking about, so you can make educated decisions on how to focus your efforts.

It’s an old adage in sales and marketing that it costs 5x as much to replace a customer as it does to retain one. Depending on who you ask, that number can be almost anything, but it’s always at least a few times more. Of course, if you’re a freight broker agent, you’re really looking for how you can make more money, more reliably. Simply put, it’s easier to run a business if you have a baseline of recurring or relatively easy to close sales each month. As an example, picture this: you reach out and try to make a sale with 20 contacts, 10 are existing customers, 10 are new leads – how many sales do you make to each group? If you’re an average company, you make 6 or 7 sales to the existing customers and 1 or 2 at best to the new leads. New leads are critically important, but when you’re planning out your day, you may want to focus a little more on deals that are very likely to land. There’s no better lead than a prior sale.

More reliable business is nice, but how much does this really hit the bottom line? One study showed that “increasing customer retention rates by 5% increases profits by 25% to 95%.” If you own your own business, that’s probably all you needed to hear.

How to Retain Customers

Business meeting in a booth

Develop a relationship with your customer

You’re going to find a lot of overlap between retaining and maximizing customers, and for good reason. Retaining a customer without maximizing them means that you’ve landed a recurring deal, and now you’re leaving a lot of money on the table by failing to do anything more with that customer. Maximizing a customer without retaining them means you’re either got great profit margins or a high percentage of the customer’s business, and now they no longer do business with you. Either way, you and your customer probably don’t interact much, and are indifferent toward each other at best.

We would all love to discuss a brilliant new strategy for this, but the bottom line is that you need to build a relationship with your customers. If you run a Google search any time for how to retain customers, you’ll get article after article full of great ideas. Honestly, it’s a great idea to run a search and read new articles often. Each of those articles is going to give you ideas on how to build and maintain relationships. In freight brokering, your customer stays with you because they’re confident that you know their needs, you’re reliable, and they’re comfortable working with you. Bottom line: handle their shipments well, and then make sure they know you can do that for more of their shipments.

That last part is also huge when we are discussing automation and technology companies that are working to get some space in the freight brokerage market. No matter how good their technology gets, there’s one thing they can never offer your customers: you. If your customer feels a sense of confidence knowing that you are available to them, then there’s nothing anyone else can offer that replaces that.

Maximizing Customers

Online shopper

Maximizing sales to a customer doesn’t have to look like this.

Just like retention, there’s no magic formula or big secret to maximizing your sales to each customer. Maybe the most important thing is that you keep this fact in mind: you should be maximizing sales to your existing customers. That has to be one of your goals. It’s a shame not to do it, but it’s easy to get so caught up in prospecting for new clients and handling customer service for existing ones that we forget that a current customer is also a sales opportunity. When it comes down to it, the best lead you’ll ever have is a prior sale.

There are a lot of great ways for any small business to maximize customers. This article breaks them down into three categories: increasing penetration, developing a plan of action, and building credibility and trust. So, what does that mean for a freight broker? It’s a good idea to read the article and think about that for yourself, but let’s quickly summarize each part.

  • Increasing Penetration: Are you currently handling a small part of your customer’s freight, or most of it? Talk to your main contact at your customer’s company and see if you can find out if they have any lanes or types of freight you’re not currently handling. See if you can find out if there is anyone else at the company that purchases logistics services, and if you can make contact with that person.
  • Developing a Plan of Action: Work with your customer to make sure you know exactly how they want their freight handled and make it clear to them that you understand. Consider combining this step with LDI’s CRM blog to give yourself an advantage in tracking and executing that plan.
  • Building Credibility and Trust: Do what you’re going to do, when you say you’re going to do it, and when that goes wrong, make sure your customer hears from you that you know it went wrong and you’re on it. The last thing you want is your customer hearing from their customer that there was a problem with their shipment. Do your best to be in front of any problems and honest with your customer.

If you take nothing else away from this post, just take some time to think about whether you focus enough of your time and energy on retaining your customers and maximizing your sales to them. There are a lot of ways to do that, but the first and most important step is to make it a priority.

Logistics and Transportation Industry News Update: Q4 Recap

Before we jump into 2020, let’s take a look back at the logistic and transportation news from Q4. From our podcast success to the ELD mandate, there’s quite a bit for us to review from the last quarter in 2019.

Logistics and Transportation Industry News Update: Q2 Recap

End of the second quarter already! Time to deliver an update to our 2019 Logistics Forecast published at the beginning of this year.

Logistics and Transportation Industry News Update: 2019 Forecast

The New Year is loaded with all kinds of new and shifting developments. It almost feels like a gamble to report the news lest the information is no longer relevant in a few weeks. But for the moment, here’s what we have.

United States – Mexico – Canada Agreement (USMCA)

November 30, 2018 marked the official agreement between the United States, Mexico, and Canada on a new trade policy when leaders of all three countries signed off on it at the G-20 Summit in South America. The renegotiation of the North American Free Trade Agreement (NAFTA) has added a few new chapters addressing digital trade, anti-corruption, and good regulatory practices to protect small and medium-sized enterprises. Since NAFTA originally went into effect in 1994, it was undeniably in desperate need of modernization. Today’s technological advancements and developments have been identified and addressed fairly extensively to protect intellectual property in each country.

As far as transportation goes, there’s unanimous agreement that this new agreement is a good thing. For the most part, it’s very similar to the existing NAFTA, but the updated text aims to streamline transportation standards. Primarily, it’s aiming to implement more technology to expedite shipping and transportation procedures. The expectation is that the USMCA should translate into faster shipping times and relieve some pressure currently placed on logistic companies that cross international borders.

The only major concern associated with this otherwise good news is Section 232 of the Trade Expansion Act of 1962—the 25 percent tariff on steel and the 10 percent tariff on aluminum. The Motor and Equipment Manufacturers Association claims that this piece of the agreement chokes the United States’ ability to invest in more manufacturing and workforce development, which then affects the transportation industry. Many are calling on the Trump administration to include language to exempt Mexico and Canada from Section 232 to keep those channels open and running.

While there’s no other language that concerns supply chain experts, everyone is still well aware that unforeseen issues could arise once USMCA officially goes into effect. That won’t happen until the agreement goes through the Trade Promotion Authority procedures and Congress signs off on the bill.


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China and the United States

As of December 1, 2018, President Trump and President Xi of China came to a verbal agreement that brought cautious relief to those following the situation. Trump and Xi have agreed to try to come to a compromise regarding treatment of intellectual property and technology transfer issues by March 2, 2019. A new compromise will then allow for renegotiation of tariff rates for both countries. Until then, the U.S. has paused the tariff increase for the New Year and will keep the 10 percent rate, and China has promised to begin purchasing from the U.S. agriculture sector. Considering the fact that China was our main export for soybeans in 2017, it is a welcomed relief, but we’ll believe it when the orders come through. We might be able to expect to see China source the US for pork, as outbreaks of African Swine flu are hitting their herds hard. That is still an unknown, but should agricultural exports pick up, that will help relieve serious economic pressures on small farms and rural communities.

Effects of ELD Mandate

Speaking of unknown effects until implementation, the ELD Mandate has been in effect for a year now and we pretty much saw real-life consequences as early as Q1.

Earlier this year the load-to-truck ratios were significantly higher than the previous year. Tie that into the trucker shortage, and it means a lot of freight was sitting around waiting to be moved. This forced shippers to up their rates, which they then passed that cost along to consumers. The last half of this year did see a down-turn from load-to-truck ratios, but consumers shouldn’t expect price decreases.

A few companies who raised prices are familiar names: Amazon increased their Prime membership due to hiked shipping costs. Grocery store name brands like Hormel Foods, General Mills, Tyson Foods, Betty Croker, Haagen-Dazs and PepsiCo have all raised their prices, and others such as Hershey, Procter & Gamble, and Mondelez are slated to raise their prices as well.

The ELD Mandate also messed with paychecks. Drivers aren’t willing to sit around for more than 2 hours to be unloaded while miles are money and their time window is limited. This has created a new culture of drivers/carriers who purposefully avoid specific chains or manufacturers who are notoriously disrespectful drivers’ time. While comfortable lounges are nice, all the free soda and available showers don’t make up for eating into 5 hours of a shift.

The ELD Mandate has had some positive influence. Since the data is now digital, truckers are able to prove beyond doubt that they’ve been kept waiting at warehouses and are now more likely to receive compensation. And about 60 percent of drivers do believe the safety implications the mandate was intended to enable have been reached.

The other 40 percent feel like safety measures are getting worse, with drivers plowing on through bad weather, driving while exhausted for every last available minute, and speeding to cover more miles. ELD actually has reported that following long unloading detainments, drivers do drive an average of 3.5 miles faster. Clearly, some adjustments need to be made.

There has been talk that rather than repeal the ELD Mandate, the Federal Motor Carrier Safety Administration revisit and update the Hours-of-Service (HOS) of Drivers Rule. Ideally, the 30-minute break rule will be nixed, and drivers will be allowed “to use multiple off-duty periods of three hours or longer in lieu of having 10 consecutive hours off-duty.” Since nearly 75 percent of drivers reported they’re detained at a warehouse for longer than 2 hours at least once a week, this should help make that time work as breaks rather than count against drivers allotted driving window. The public call for concerns has closed, and we should have more information about the results of what might happen to HOS later in 2019.

The restrictions the ELD Mandate has placed is overall not so terrible. In fact, the limitations it’s put on shipping goods in a timely manner has brought about the biggest positive of 2018:

Increased Pay for Drivers

The pay for over-the-road drivers has not been great, with the United States averaging about a $40,000 salary. The shortage of drivers and the restrictions of the ELD Mandate has caused some companies to drive up sign-on bonuses as much as $6 grand and increase salaries.

Unfortunately, even with these salary increases, when adjusted for inflation, drivers are still making about 50 percent less than they were in the 1970s. But it looks like we can expect these pay increases to continue as long as the ELD Mandate stays in effect. For those who are going into truck driving, or intend to stay in the game for a few more years, they should experience some better compensation. The US is already short about 60,000 truckers, and ForeignPolicy expects that in less than a decade that number will be about 174,000.

2019 will hopefully provide us with some happier numbers about salaries. Maybe the future of over the road truck drivers will be as attractive as it once was.

Stay Tuned to LDI’s Blog Feed

We’ll be revisiting these topics and surely much more each quarter throughout 2019 to update you on the state of affairs in transportation.

The end of Q1 will undoubtedly have some interesting tariff updates with China and some real-time transportation data about the US/Mexico/Canada border. 


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