Freight Brokers, freight agents, and dispatchers all play a pivotal role in our global supply chain. There is a lot of confusion regarding the difference between a freight broker and a dispatcher, so in this article we are going to cover what those differences are and how they effect that way your freight gets moved.
As a freight broker of over a decade, I have worked with a fair amount of dispatchers, and I want to start this article saying that partnering with the right dispatcher can be an incredible asset to a small carrier or owner operator. But for those of you who don’t know, what is the difference between a freight broker and a dispatcher, it is a simple answer.
A freight Broker is licensed by the FMCSA and connects shippers with carriers and owner operators while a dispatcher is unlicensed and works directly for a carrier. Dispatchers do not carry any licenses or insurance and lack many of the abilities freight broker’s have.
What is a Freight Dispatcher?
Like we already established, a dispatcher works directly for a carrier to connect trucks with loads and provide a degree of back office support. This can include accounting, invoicing, tracking and other office duties that independent drivers do not have the time or willingness to carry out.
Dispatcher’s have relationships directly with a carrier or independent truck driver. Since they are not licensed by the FMCSA they lack the ability to contract directly with shippers or broker’s unless it is under the carrier’s behalf.
It is the job of a dispatcher to negotiate rates in favor of the carrier so that they can maximize their profit on every load they run. Carrier’s will give dispatcher’s directions about what lanes they prefer, which commodities they like to haul and which regions to avoid so that their dispatcher can make an informed decision about which loads to take.
How do Freight Dispatcher’s find loads?
Dispatcher’s find loads a few ways, with the number one method being from a reliable trucking load board. Load boards are full of postings of available loads that carriers can call to negotiate. Load boards help dispatcher’s route trucks so that they minimize the time a truck has to drive empty.
How do dispatchers get paid?
Since dispatcher’s are not licensed, insured or bonded, they are not permitted to move loads under their company directly for a shipper or broker. Dispatchers must operate under the authority of a carrier. Their contract is typically between themselves and the carrier company with an agreement of a set percentage per load covered.
Dispatchers on average earn between 3 and 10 Percent of a load paid as a commission from the carrier.
What is a Freight Broker?
A freight broker is someone who is licensed by the FMCSA, bonded and insured with the ability to move freight for shippers. They are responsible for connecting shippers loads with carriers to move around the US. Freight broker’s primary goal is to make a profit by charging a small premium on top of a quoted price by a carrier.
Key Differences Between a Freight Broker and Freight Dispatcher:
1. Becoming a Freight Broker is More Expensive
It is considerably MORE expensive to start a freight brokerage vs. starting a freight dispatching company. The primary reason for this is the up front expenses needed for licensing bonding and insurance as a brokerage. While a dispatcher can operate from a phone and a laptop with a load board subscription, Freight broker’s require much more software to perform their duties.
This make’s the cost to start a freight dispatching company overwhelmingly cheaper than that of a brokerage.
2. Dispatcher’s are not licensed
Freight broker’s have to follow regulations set forth by the FMCSA, DOT and other transportation governing bodies. A dispatcher on the other hand does not have to abide by these same regulations and can operate with very minimal knowledge of freight laws.
3. Dispatcher’s work directly for carriers
Freight dispatchers serve as contractors directly to carrier’s. This means that all contracts, payments etc. to dispatchers come directly from a carrier in exchange from their services rendered. Freight Broker’s on the other hand have a different relationship with carriers. Carriers are the vendors of a freight broker, and freight broker’s are their customers. Freight broker’s pay their carriers for the work they do directly.
Which is best for you? Freight Broker or Freight Agent?
When deciding between coming a freight broker vs. becoming a dispatcher, it is important to evaluate these differences and see which is more in line with your goals as a business and individual. If you prefer financial independence but do not wish to be subjected to many laws and regulations, you may find being a dispatcher more enjoyable.
However, if you can handle the regulations and want an opportunity to make uncapped profits from your business, then being a freight broker may be better suited to that goal.
After reading this, I am curious your thoughts. Which of these sounds more appealing to you and why?
