Freight Brokerage Business. The Staff of Entrepreneur Media, Inc.
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government; through defaults on the part of the shipper; or for losses resulting from the nature of the goods.
Whatever the reason for the loss or damage, you need to understand the process of dealing with claims and be prepared to assist your shippers when necessary. If the driver does not review the bill of lading and inspect the freight before the shipment is loaded, the carrier doesn’t really have any options other than to pay a claim if the cargo is damaged or short when it arrives at the destination.
There will be times when the loading crew makes mistakes but realizes them after the fact and initiates a bill of lading change, which relieves the driver and carrier of potential claim responsibility. But you cannot rely on them to do so, and drivers should examine each load to be sure the documents match the shipment and sign for exactly what is received.
tip
If a particular driver or carrier repeatedly incurs damage claims, especially if they are filed by different shippers, find out why. The drivers may be doing a sloppy job of securing the freight or they may be stealing some of the goods they haul. You need to identify and correct the problem at its source or stop using that driver or carrier.
There will be times when it’s impractical or impossible for the driver to thoroughly inspect a shipment. For example, if the carrier drops a trailer at the shipper’s location to be loaded by the shipper’s employees and then picked up later for transport, the driver won’t know what went on the trailer. Or if the shipper assembles and shrink-wraps pallets of boxes, the driver may not be able to precisely count the number of boxes on each pallet. In those cases, the driver should write “shipper’s load and count” and/or “contents and condition unknown” on the bill of lading, which shifts the responsibility for shortages, overages, and concealed damage back to the shipper.
At the destination, the consignee’s receiving person should also inspect and count the shipment and note any discrepancies or visible damage on the delivery receipt.
When you learn of a potential claim—possibly from the shipper, consignee, or driver—immediately notify the carrier and dispatcher. Sometimes they hear of a possible problem from the driver making the delivery and let you know. Or you might not find out about a claim until you receive the proof of delivery and bill of lading with damage notations.
Not every damage notation results in a claim. For example, it’s possible for the contents to be fine even though the exterior of a box was damaged.
How the claim is handled often depends on the amount in question and the history and reputation of the shipper. For a small claim where damage was clearly noted on the delivery receipt, the carrier will probably pay without a detailed investigation. For a larger claim, the carrier may send out an inspector to take a look at the damaged goods. A carrier can decline to pay a claim if it determines that the cause of the damage was inadequate packaging, so consignees should keep the damaged items and the packing materials until the claim is resolved.
Shippers usually have standard forms used to file their claims. All you need to do is provide the shipper with the name and address of the carrier in question and, if necessary, assist them in reaching a fair and prompt settlement.
If your shipper is not familiar with procedures for filing a claim, explain that he or she will need to submit the following information to the carrier on a signed form:
• Carrier’s name and address
• Total claim amount
• Date of pickup
• Date of delivery
• Claim history
• Shipper’s full name and address
• Consignee’s full name and address
• Damages or shortages
The shipper will also need to attach any required or appropriate supporting documentation, including:
• Freight bill
• Bill of lading
• Invoice
• Inspection report, if any
• Itemized statement of loss
The carrier has 30 days to either pay the claim or acknowledge the claim and advise the shipper what else it needs to process the claim. Federal law requires carriers to investigate claims promptly and either settle the claim within 120 days or advise the claimant of any delay and then continue advising the claimant of the status of the claim every 60 days.
It’s possible for you to lose a customer over a service problem that wasn’t technically your fault. In most cases, though, you’ll find that shippers understand when things go wrong—when drivers do not show up, when equipment breaks down, when crashes occur on the highway, and so on.
What’s critical is that you don’t ignore problems or try to hide them from your shippers or carriers. Be proactive. When you find out about a problem, make sure everyone who needs to know is notified immediately, and then do everything you can to get the freight back on the road.
One of the most appealing aspects of a freight brokerage is that your physical startup requirements are relatively small. Unlike a carrier or freight forwarder, you don’t need a warehouse or loading dock, nor do you need to invest in a fleet of trucks. Your customers aren’t likely to come to your location, so you don’t need to worry about an impressive reception area or elegant offices.
While there are some definite advantages to a commercial location, a freight brokerage is an ideal business to start and run from home.
stat fact
More than 70 percent of all communities in the United States receive all their products and goods by motor carrier.
Cathy Davis started MCD Transportation from home, but the company grew enough to move into commercial space after just eight months. Chuck Andrews works from a commercial location in Indianapolis, but has agents around the country who work out of their homes. Where you operate depends on your resources and goals for your company. Many brokers start from home with the goal of moving into a commercial office space as soon as they are established with a few clients, and this is an excellent strategy.
The major benefit of starting a homebased business is the fact that it significantly reduces the amount of startup and initial operating capital you’ll need. There are also some tax advantages, based on the amount of physical space within your home you dedicate to being your office. Be sure to consult with your accountant about this as you prepare your annual tax returns for yourself and your business.
There’s a lot more to consider than simply the upfront cash requirement. Do you have a separate room within your home for an office, or will you have to work at the dining room table? Can you set up a comfortable workstation with all the tools and equipment you will need? Can you separate your work area from the rest of the house so you can have privacy when you are working—and get away from “the office” when you’re not?
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