Rate Cons That Prevent Surety Bond Claims | Final Mile 136

Nate Cross & Ben Kowalski answer your freight brokering questions and discuss:

⚖️ Fining Carriers The Right Way vs Wrong Way

🚛 Dispatch Services: Pros & Cons

🌴 Florida Peak Season Strategy

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Transcript

Q A Kickoff And How To Ask

SPEAKER_01 0:19

All right, it's QA time, the final mile. If you guys have a question that you want us to answer, make sure to either send it to us through our website. There's a contact us option. Um, you can leave a comment on YouTube. You can join the Freight Uh Freight Brokers and Dispatchers Facebook group. There's a link down in the show notes. We got some of them from uh there. Um check out the sponsors as well to help support the channel. Let's get into it today, Ben. First question is what is the appropriate way to find a carrier for service failures, such as failure to turn failure to track, late to pick up, etc. Um, this is like a this question, depending on who you ask, you can get wildly different answers. I'll give you I'll give you a couple examples of my train of thought and my experience with it, and then I'm curious yours. So actually, I had this conversation uh earlier this week with one of the guys at our company, but here's generally how I look at it, and there's case-dependent you know, variations here. But if a customer is finding you for the carrier's service failure, in that scenario, I normally get documentation of that. So, like let's say, hey, it was late to delivery by four hours, they're gonna dock you 200 bucks. All right, I'm gonna pass that through to the carrier in the event that it was 100% on them. Like maybe they broke down or whatever, right? The other example is this is where it gets kind of nuanced, is if a like let's say a carrier doesn't send you paperwork on time and the customer requires it, or the carrier doesn't track properly, you know, like you required them to do, or something like that, and you want to push a deduction through to them. I've had scenarios where, you know, I think we had one where they the even the rate confirmation said here's the rate, it requires a team drive, two team drivers, and here's the delivery, you know, date and time. Truck was late, we docked them for whatever because they drove solo and they literally couldn't make it on time. They filed, they were like gonna file on the bond, and we were gonna lose because we didn't have a fine listed for not having a team driver or something. It was something it was like crazy. So what we ended up having to do is to make sure we we basically had to go to an itemized rate confirmation, being like, all right, if we want to pay them two grand, and here's all the expectations, like they have to track, they have to have a team driver's, etc. We listed it out as like line haul, one thousand dollars, team drivers deliver on time, five hundred dollars. Successful tracking from dispatch to delivery, five hundred dollars, subtotal, two thousand. And if they didn't um if they didn't meet one of those criteria, like if they sent a solo driver and delivered late, well then they they can get they don't earn that money. Another option is to have the the fines listed. If your customer has a set like a list of like, hey, if you're late, it's here's the the you know the rate reduction per hour that you're late or something like that. Um because I've I mean it just depends, but like I have seen brokers lose that battle when the carrier truly caused a service failure, and um they tried to deduct it, and it's like, well, yeah, you didn't state anywhere that you could find them for this. So uh people will put wording in there just their the rate confirmation contract part as well. But I'm curious, what is your what are your thoughts on it? Because there's a lot of like back and forth people like oh, they're ripping me off, blah, blah, blah. But what kind of what's your take on fines or rate deductions, et cetera?

SPEAKER_00 4:14

So I totally agree. The first thing that I've seen is like I have seen that too, where like the way to do this, I think, appropriately and to make sure when the carrier, if they wanted to argue, and it's legitimate. Let's just start with that, right? Whatever the issue is legitimately wasn't done correctly. And let's start with the scenario that like your shipper actually requires this and will literally deduct money from you as the broker. So it's not a profit center, it's literally just aligning the carrier's pay and expectations with what your shipper pays you for this or would pay the carrier directly, right? So it's really common. We do like a lot of cold storage and a lot of these warehouses. They will nickel and dime and fine across the board. I've seen$350 deductions for like missed appointments. I've seen$250 deductions for missed appointments, like super high numbers that literally the customer will just take out of the invoice if these things aren't true. So we're not in any way suggesting like this is a way for a broker to make money. This is just making sure the broker gets paid for what's done and the right amount, and the carrier gets paid for the service that the shipper needed, the customer, right? So it definitely needs to be in the rate con. Um, the broker carrier agreement, I don't think is much, but definitely in the rate con, it should be itemized in there what the expectations are and what the deductions would be, right? And I think you should go a step further, which I don't see many brokerages do because it's more work. But the I would say foolproof way or the most correct way is you itemize the rates for those things. So it's not just a flat rate where I will reduce it. You literally have on the ratecon two, if it's a$3,000 earning each slide on$250 for tracking every day, right? Because you even need to be specific in your Raycon. Because I've seen carriers argue that, like, well, my tracking went down because I went into a dead area and I couldn't get it back on. But then the customer's like, I didn't know where this truck was for two days. I'm deducting money from you. So you very much want to be specific on the tracking piece, for example, like needs to track continuously from pickup to delivery with no dead spots or like no mist tracking for more than like a couple hours, whatever that is for you. Three hours, four hours. Yeah, like more specifically.

SPEAKER_01 6:41

But if like all of a sudden your phone, if you're GPS tracking in your phone um loses permission for whatever reason and you don't re-grant it when you're in a good area, or like if you're ELD, you turn it off, like the tracking for it, like yeah, those are issues.

SPEAKER_00 6:57

So you should itemize the Raycon, right? Tracking 250, right? Team driver, thousand fifteen hundred dollars single, five hundred dollars for the team driver. So it's basically the deduction that adds up to the total number that would be the flat rate. Um the appointment one is probably I've never seen anyone actually like break out the appointment deduction on a Raycon, but theoretically, you could then take a$3,000 rate and be like, all right, there's a$250 payment in that three grand that is for on time at pickup, on time for delivery, and you can break that back out.

SPEAKER_01 7:30

Pretty often, yeah.

SPEAKER_00 7:32

Because there's a lot of shippers and receivers that for sure will take that amount of money if trucks are not on time or need to reschedule. So, like, again, definitely on the rate con. And I think if you really want to CYA, you should itemize the actual rates in line with each of those. Because when they're done that way, I've never seen any of them get pushed back against by the bond. Because it literally shows like I'm paying you$200 to track from pickup to delivery.

SPEAKER_01 8:00

If you have good documentation, you're you're safe for sure.

SPEAKER_00 8:03

Yeah. And I do want to add again, you and I say this a lot, but like these aren't these should not be used to make money. Um finding carriers, these should be passed through. So, like, your brokerage shouldn't earn money on this. And the paperwork thing is not an insignificant thing either, because both customers require this and brokers for a very good reason. Like, if it takes two weeks to get to the paperwork from a carrier, that significantly impacts both the brokerage and the customer to getting this documentation back for the customer and the brokerage to be able to do this in a reasonable time frame.

Dispatch Services Pros And Risks

SPEAKER_01 8:38

Yep. Agreed. All right. Next question. Uh, give me the I guess it's a statement. Uh, give me the pros and cons of a dispatch service. Um, you want to handle this one? Yeah, I feel like you you've probably used dispatch services more than me. Um yeah. And then I can add my two cents in it.

SPEAKER_00 8:58

I'll say like the common ones, like, why I'm gonna use a dispatch service is because usually they have access to a number of different carriers or carrier types that benefit me. So, like the most common one I used, which I also don't even know is technically under the guidance anymore for what should be, was like drayage carriers, like in Chicago. There was one I worked with for years because she was a dispatcher, and all of her cousins and all of her brothers all were owner-op drayage drivers. So they all had one truck, they all had their MCs, but they all used their sister or their cousin as the dispatcher. So I had capacity from like 25 different trucks every day through one person. So it was super helpful for me instead of me calling each one of them, and she managed all of them. So she knew what they had, their workload. So it made my job a lot easier because I got access to a larger network of carriers through one person, which ironically is the value of a broker to a shipper. So it's very similar in that sense, right? Or maybe you have a dispatch, a dispatcher you work with that like has a bunch of reefer carriers that align with one customer, and maybe a bunch of dry van carriers that work underneath them that work for another customer, and maybe a flatbed carrier that this dispatcher works with. And you have customers that need three different types of equipment, and one dispatcher can get you capacity on different places. And now I don't need a co-brokerage, like I'm still booking your MCs, I'm just doing it through one person, and it reduces my workload because I'm just sending all my invoices to you, you handle all that, you get me all the updates for all the trucks, which makes my life a little easier.

Florida Peak Season Rate Strategy

SPEAKER_01 10:37

Yeah, the the one caution I'll give you we had this happen earlier this year, is if a dispatcher, first of all, I agree with all you said, there's a lot of value they can add. But there's here's here's where you might have some some danger is like we had a load where we booked a carrier. Um, we verified the person was an authorized user on highway. Um, and then a different truck showed up. And we're like, what? And then we found out is that the carrier authorized his dispatcher on highway. She used his login and his credentials to accept the load and then threw it on a different carrier on unknowingly to him. And we got it all figured out, but the the danger there if you're not verifying like this is the MC that's going to be showing up, right? If you're not doing that, then you're risking like, what insurance does the actual truck that's being loaded have? Right? Is this person gonna there's also the the risk of like potential back solicitation and things like that. But I just always want to caution you that there's there is risk there. So just make sure that you're very clear in um you know which carrier, actual you know, motor carrier is gonna be assigned to that load. So um last question here how to handle rates during peak season in Florida. So this is uh, I mean, we're we're we're into spring, man. We're hitting the uh produce peak season all over. And I'll kind of we can just kind of generalize it depending on you know the part of the country and the time of year. Um but really here, like expectation-wise, here's what happens. So if you have a if you have a produce commodity that tends to ship for let's say three to four months out of the year, and then the rest of the year it's pretty slow, you're gonna see rates if you look at like a a you know, a 12-month calendar on DAT, you're gonna see like low and then high and then back to low, right? And what that means is to get a truck in the off season is gonna be fairly cheap because there's not a lot of demand there, and um it's you know fairly easy to get somebody to do that. Whereas if there's a ton of demand there, you're competing against a lot of shipments and you know, not as many trucks, so you're gonna be paying more money. So, and then vice versa, to send somebody in to an area that's slow is gonna be more expensive, and to send somebody into an area that is very busy, you can usually get them cheaper. So, like to give you the example of Florida, you might be able to send somebody into Florida during peak season for like a buck and change a mile because they know they're gonna make their money hauling back out of Florida, right? And vice versa in the off season. Um, would you add anything in on that?

SPEAKER_00 13:32

Yeah. Here's a few things. One, being aware of when and what causes peak season is very helpful. Okay. So you should be aware of what commodity you're shipping and how and what equipment is associated and what peak is. Because peak is different for reefer than vans or flatbeds. They're all very different based on produce, mostly for Florida. So mostly it's reefer, but also vans, because like watermelons and those things will shift both equipment types, reefers and vans. So being aware of the seasonality and also not just when it typically happens, but you can get even better information of when it actually does happen, which are very different. Like because when I worked at a very large brokerage that did a ton of produce, we knew when it was supposed to happen every year, but there would literally be messages that would go out like in the middle of an afternoon on like a Thursday, like, hey, Florida just flipped. And all the produce guys would tell everybody like literally all the farmers have just started to push out their harvest literally in the middle of the day, and the market would literally shift as soon as all that freight became available. So knowing generally and specifically are very helpful and what your equipment type and when. The second thing is being able to let your customer know what you're keeping an eye on and when, right? To give them as much of a heads up as possible. Like they know this will shift, but you giving them more information on when it may and is happening is very valuable on service. And then I would add, like the last point, like the holy grail or like the pinnacle of how to handle this is ultimately you would want shippers, like you said, that are shipping the opposite lane into Florida and when you're shipping out. So if my rates go up to ship out of Florida, my rates go down shipping into Florida. So if I've got a customer that ships into Florida and I got a contract for six months, I will make more money when that rate drops inbound to a bucker rate, right? A dollar a mile. So my margin will go up when it gets cheaper to come in, but then I'll lose money on my customers when it goes out. But from the brokerage point of view, the margins will look pretty consistent. Like I'm not making a killing or losing a killing on either side. I will average about where I need to be because one will go down and one will go up, right? So most brokers don't really look at it this way. Brokerages will look at it this way, and so do trucking companies. But even as a broker with a book of business, you can prospect and go after customers that over time will create that synergy where where you're losing, you're winning. And you see this in very big bids with even a broker's book of business, where some of their lanes per season are always underwater and a portion of them are profitable, but together they kind of just end up averaging at that 10, 12% give or take now. So you're always trying to offset the timing of a very expensive area with one that gets very cheap. And hopefully they kind of meet as close as possible within a calendar year.

SPEAKER_01 16:34

Good stuff. All right. Great episode. Final thoughts.

SPEAKER_00 16:37

Whether you believe you can or believe you can't, you're right.

SPEAKER_01 16:41

And until next time, go Bills.