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.