A Thorough Assessment of Brokers

A Thorough Assessment of Brokers

Copyright 2008, Traffic World, Inc.

Q:

Like many companies, we do a pretty thorough job of vetting out asset based motor carriers, both before using their services under contract and periodically on a set schedule through the course of the contract term.

We use a trade organization self-assessment form very thorough in its scope, and then do semi-annual updates with a more abbreviated version of the form.

In the truckload and bulk truck area we predominantly utilize the services of contract carriers, with which we have specific individual contracts (after the assessment process and other tools and methods).

We use brokers for a small minority of shipments, but there are particular niches where we find brokers are a good choice. There does not seem to be any standardized form for assessing the fitness-for-use of nonasset-based brokers, to tell us such things as whether or how the brokers research their underlying truckers, check the underlying carrier insurance, etc.

In other words, we want a means of vetting whether the brokers are doing due diligence in selecting their carriers. Are you aware of any such assessment form for truck brokers?

We are in the process of developing our own abbreviated form for this use, but would like to incorporate "best practices" if someone or some organization has already developed such a form.

A:

I''m unaware of any such form; but neither would I put a great deal of stock in it if I were.

At one juncture some years ago my late mother was recuperating from hip replacement surgery and needed round-the-clock home nursing care. We hired one service partly on the basis of its nursing director''s pledge that, should they be unable to cover a shift with contract nurses, a supervisor or even she herself would take it.

Shortly thereafter one contract nurse came to the end of her shift with no replacement on hand. She departed with an airy "good luck" to my mother, and calls to the service produced excuses but no nurse. After (naturally) firing the service, I made the nursing director admit her promise of supervisory coverage was a flat lie.

My point, of course, is that self-assessment forms will get you the answers you want to hear, not necessarily those that are true. And their value is especially small for nonasset-based providers such as nursing services or, in your case, truck brokers.

The questions you suggest are good ones. You might also ask what minimum liability limits (if any) it requires of its carriers, whether the broker itself maintains contingency cargo insurance, and how promptly the broker pays its carriers. But unsupported answers, which is all you can expect, are of little worth.

Your key is obviously independent research. As much as possible self-assessment forms should ask questions the answers to which may be verified; and you certainly shouldn''t limit yourself to those forms.

For brokers you first want a copy of their Federal Motor Carrier Safety Administration registration and proof of the FMCSA-required bond (verifying its currency with the bonding agent). If they claim to have contingency insurance, you want to see and check that, too.

(Don''t, by the way, trust FMCSA on these points; their database can be weeks, months, even years out of date. The agency doesn''t really try or put many resources into this part of its assignment.)

Then you want to check the broker''s credit rating. And don''t stop there, get the name(s) of its principal(s) and run them, too; some unsavory individuals open and close broker operations with remarkable frequency, simply milking each successive entity for as much as they can and then moving on.

As you would with any new hire, you should also require references - customers you can contact to speak of their experiences. Then do so. You''ll get a list of their most satisfied customers, of course, but warning signs may appear if those customers offer only lukewarm praise or most or all of them are comparatively new to using the broker.

Google the relevant names - the broker and principal(s). You''d be astonished how much information may be had on just about anybody from the Internet, such as past legal troubles and the like.

Check the names with the Transportation Intermediaries Association. They may not be able to say much, but you can at least verify claimed membership and gain a little further knowledge.

Finally, ask around. Traffic clubs, Delta Nu Alpha and American Society of Transportation & Logistics chapters and so on are excellent places to float names and wait for feedback.

Before I get a flood of ire from unhappy brokers, let me say I''m not singling them out. It''s a good idea to take such measures with any provider you''re considering.

But nonasset-based economic sectors are especially susceptible to pollution by scammers or simply the incompetent. I''d also include in this category any provider identifying itself as a "freight forwarder" and "truckers" who don''t own or operate any equipment but work exclusively through contracted owner-operators; the difference from brokers is mostly legal form.

You''re off to a good start with the self-assessment forms, but it''s only a start; there''s a long way to go from there.



-- Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, (843) 559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping. Later compilations by request.