What is Double Brokering and Why Should Manufacturers Beware?

Logistics is the backbone that keeps manufacturing operations running smoothly, which is why the practice of double-brokering is especially concerning. 

Tracy St. Clair, Sales and Marketing Specialist for Integrated Logistics Services, a transportation and logistics company, and D+S Distribution, Inc., a warehousing and storage company, led the #USAMfgHour chat community on X in a crash course in double-brokering. Host St. Clair’s teaching resulted in an engaging discussion that touched on the concerns and risks of double-brokering and how manufacturers and freight brokers can mitigate or avoid them.

Understanding Double Brokering: Problems and Concerns

The chat kicked off with host St. Clair asking participants to define or explain the term “double brokering.”

“We’re gonna be honest, we have no idea,” admitted Anna and Susannah Scheller of Capri Temporary Housing. “Time to settle in and get ready to learn!”

Many other participants were unfamiliar with the meaning of double brokers.

“This is the first I have heard this term! I am excited to learn more,” Whitney Koch from Keystone Click said.

“I would have to look this up…,” confessed Nigel Packer of PelaTis Online.

“[N]ot quite sure,” said Kirsten Austin of DCSC, Inc. “[I]f it’s like a double helping of ice cream it might be good 🍨, but if it’s like a double-cross it might be bad 😵.”

“No idea. Would love to hear from you,” said Ruby Rusine of Social Success Marketing. 

According to host St. Clair, double brokering occurs when a freight broker tenders a shipment to another broker without the knowledge or consent of the cargo owner or original broker. This raised concerns among participants about legality, ethics, and the potential for theft or loss of goods.

“I had no idea!” exclaimed Kendie Farbo of Snaptron.

“How interesting! Doesn’t sound particularly helpful…,” the Schellers noted.

“Ah-ha! I was thinking something along those lines but am shocked it would be without consent,” said Koch.

The lack of consent initiated a thread about ethics and legality.

“Is there an implied consent, or hidden in the legalese consent, or is this illegal (or just unethical)?” wondered Amy Anderson.

“There is no consent,” responded host St. Clair. “The action is not communicated.”

“Hmmmm…is that even legal?” asked Rusine. “Or is that the norm?”

“It seems deceptive and open to bad practices,” remarked Packer.

“You are absolutely right, Nigel,” replied host St. Clair. “It is unethical but not illegal.”

“[U]nbelievable that it isn’t illegal,” said Austin, amazed.

“Wow!” marveled Rusine. “Integrity comes to mind (doing the right thing [and well] when no one’s looking). I’ll stop there.”

Navigating the Regulatory Landscape: Broker Authority and Compliance

Host St. Clair then asked participants to share the cost and duration of registering a broker authority.

“Best guess is 4-6 weeks and $300.00?” Farbo speculated.

“Not really sure on this one again,” said the Schellers. “But it sounds expensive and like it takes quite a while!”

Koch was of a similar mind as the Schellers.

“No exact answer, but I am guessing there’s a significant registration fee and some red tape that makes the process take a while!” she predicted.

Host St. Clair responded to Koch with a shocking answer.

“No, that is why it is so easy and why you do not want to work with someone who hasn’t had their authority very long,” she cautioned.

“I have no idea on this one either,” said Jim Palmer of Buy Direct USA. “Guess I will learn some things.”

“I am learning lots,” commented Packer.

According to host St. Clair,  the application processing for broker authority costs $300 and can take 4-6 weeks. The relative ease of obtaining authority poses risks, as it enables unscrupulous individuals to enter the industry and engage in fraudulent practices.

“Being so cheap makes it easy for criminals to get a new authority to steal from you,” host St. Clair elaborated

“I didn’t know that was a problem. Yikes,” remarked Palmer, shocked.

“Unfortunately, it’s a huge problem,” host St. Clair emphasized.

Ensuring Carrier Reliability: Vetting and Due Diligence

Knowing how easy it is to obtain broker authority and how bad actors use this to steal from brokers and their freight customers, host St. Clair asked participants what guidelines brokers should follow to vet their carrier partners.

“No idea again,” commented Palmer.

“It seems like the list could go on for forever, but definitely some sort of background check to ensure that the carriers have a proven history of ethical commerce!” exclaimed the Schellers.

“Confirm licensing, look up business history to see how long they’ve been in operation, check for complaints with the BBB, and read online reviews,” Koch added.

“Yes, those are all good ways to vet a carrier,” affirmed host St. Clair.

“For any typical business, I’d look at historical performance, including reliability,” said Rusine.

“Yes, you have to build that trust,” host St. Clair concurred.

“Make sure they’ve had their license for a long time and that you can check their references!” declared Austin.

“Yes! Exactly,” host St. Clair replied to Austin. “Unfortunately, a lot of people do not do that and go straight to price.”

Noting that the issue of price and quality has come up in other recent #USAMfgHour chats, Koch brought up the concept of the unattainable triangle.

“[I]f you go for the lowest price, then you have to sacrifice speed or quality,” Koch asserted. “Not a great outlook.”

“Sounds to me like, ‘The higher the price, the more secured your package will be,’” surmised Rusine. 

“Not necessarily,” host St. Clair replied to Rusine. “It’s all about vetting and the reputation of the carrier. We need to make sure we know who we are dealing with. You should think of it like this. You will have a low and high-end quote. Choose the middle quote.”

This led to an aside about the importance of vetting carriers and brokers.

“Wonder how often do you get ‘bad apples,’” Rusine inquired.

“It all depends on how well you vet your carriers,” replied host St. Clair. “Without proper vetting, they can put a small business out of business.”

“Do you do the vetting yourself or do you work through an agency [THAT would require another vetting]?” Rusine asked host St. Clair.

“We personally do all our own vetting. We do utilize a paid service,” replied host St. Clair.

So how do brokers ensure the reliability of the carrier they are considering partnering with?

Here’s a short checklist from host St. Clair brokers can use to verify carrier reliability:

• MC number
• SAFER Rating
• Insurance Coverage
• Equipment Age & Condition

“Good call on checking the equipment!” Koch replied to host St. Clair.

“Yes, and you want to make sure they have the equipment,” host St. Clair elaborated.

“Oh my!” exclaimed Austin. “[T]hat really would be unethical 😳.”

Potential Outcomes of Double-Brokering

Having established that double-brokering is not good for brokers or their customers, host St. Clair then asked chat participants to share possible outcomes of having a shipment double-brokered.

“It sounds like some potential is for products to be lost, costs to be raised, and transparency to go down,” answered the Schellers. “Not sure if there’s an up-side to it based on what we understand so far.”

“Loss of your shipment and angry customers!” declared Koch.

“Seems like theft of your goods would be the worst one,” said Austin.

“Yes, you are absolutely correct!” confirmed host St. Clair.

“Is that common?” Rusine asked host St. Clair.

Replying to Rusine, host St. Clair answered: “More common is held for ransom or the load, not the product, is resold.”

“This is a job for statistical analysis,” proclaimed Packer. “I can do that… where is the data?  1 in 100?”

“Problem is a lot of it goes unreported,” host St. Clair replied to Packer. “No one wants to admit they were scammed.”

“There are so many industries that when scammed they do not report it for reputational sake,” Packer noted.

“It’s definitely a sobering and disconcerting thought,” added the Schellers. “How do you trust what a company says after something like that happens? Reputation has to come second to integrity.”

To conclude, host St. Clair listed possible outcomes of double-brokering. 

The freight could 

• Go missing.
• Be held for ransom.
• Be delivered as expected with the wrong carrier.

Mitigating Risks and Protecting Assets

Having your freight double-brokered is a legitimate concern for brokers and those needing freight carriers. Though one can use a thorough vetting process to safeguard against double-brokering, host St. Clair asked how one could limit the risk of double-brokering altogether. 

“I think this is the part where you ask pertinent questions,” said Rusine. “Any suggestion [as to] what companies should ask for when vetting?”

“How long in business?” host St. Clair replied to Rusine. “Verify their MC#. Check their credit score. Review the rate confirmation. Build a relationship with established brokers and carriers.”

“Get the proper insurance?” Austin suggested.

“Get your own fleet of trucks and deliver across country?” proposed Packer.

“If a company has been burned before, I imagine they might feel like they want to do that, Nigel,” Austin replied.

“All the manufacturing companies that I worked for had their own transport and driver. Never lost a load,” confirmed Packer.

“Long-term relationship with a broker who thoroughly vets the carriers?” mused Anderson.

“I would say going with larger, well-known brokers, but in the long run would that hurt competition and potentially make shipping more expensive?” questioned Koch.

“Yes, it could. Larger doesn’t always mean better,” said host St. Clair.

“Good point,” Rusine replied to Koch. “And we’ve seen that happen many times with monopoly and oligopoly.”

“We’re not really sure, but everyone else has some really great answers!” the Schellers responded. “Such a hard thing to do it seems.”

Host St. Clair concluded the chat with this strong statement:

“Double brokering is illegal, unethical, and becoming more common. It threatens the transportation industry with inadvertent or criminal intent, leading to significant business risks.” 

With this in mind, host St. Clair implored participants to ask themselves this question: “Are you limiting your exposure or just going for cost?”

Conclusion

Double brokering poses significant risks to the manufacturing industry, threatening the integrity of supply chains and exposing businesses to potential losses. Through open dialogue and collaboration, industry professionals can navigate these challenges effectively, implementing robust vetting processes, establishing trusted partnerships and prioritizing integrity in all aspects of logistics operations. By staying informed and proactive, manufacturers can protect their assets and ensure the smooth flow of goods from production facilities to end consumers.

About #USAMfgHour

Anyone who champions U.S. manufacturing can join in on a new conversation each week on X using the hashtag #USAMfgHour. The chat starts at 11 a.m. Pacific Standard Time/2 p.m. Eastern. Share positive blog posts, helpful articles, news, important information, accomplishments, events, and more with other manufacturers and supporters from throughout the country.

Are you interested in hosting a #USAMfgHour chat? Contact organizers @DCSCinc, @SocialSMktg, and @KeystoneClick.

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