Freight Broker Business Models: What Are They, and What Are the Pros & Cons of Each?

Freight brokers have a lot that they must balance and maintain in the course of their everyday operations. The way each business model approaches issues such as freight tracking and how they implement tools like digital freight matching can have a huge impact on their utilization within the market today. Of the freight broker business models used today, the two most popular are the cradle to the grave (C2G) and the buy/sell (Chicago) model. According to Entrepreneur, these distinct approaches to the freight industry allow for improved profits and greater accessibility within the market today. Like everything else in the supply chain and shipping industry, each model has benefits and drawbacks. 

Understanding the Two Major Freight Broker Business Models Used Today

Unraveling the complexities involved in freight brokerage comes down to understanding the form and function of both models and how they work within the modern-day market of digital freight management. These include:

Buy/Sell (Chicago model) – Named after the region that made it so famous within the mainstream, this powerful freight broker business model has continued to impact the industry in powerful ways. The approach with the Chicago model involves splitting sales and operations into unique and distinct roles. Sales focus solely on signing new shippers and increasing interactions with current customers. The secondary carrier sales team manages everything involved with transporting and managing loads and shipments.

Cradle to the Grave (C2G) – Known as the original freight broker business model, this approach leaves the management of every step in the chain up to the broker, from start to finish. Each broker oversees every part of business operation, including sales, customer relationships, capacity locating, and recordkeeping.  This approach gained popularity by maintaining focus on the overall network rather than any one aspect or area. The C2G approach often remains very internally focused, and brokers often tailor their services to meet consumer needs. 

Breaking Down the Pros and Cons of Each Model from a Management Standpoint

Understanding the pros and cons of these popular models remains vital for continued growth and success within the modern-day market. Approaching this comparison from a management standpoint makes it easier to get a clear and complete picture of the benefits and disadvantages that become anticipated with each freight load model. 

PROS 

Chicago model – This model allows for more effortless scalability within the network by clearly designating sales and operations as two separate teams.  The dedicated focus within the freight broker business provides for the rapid growth of the customer base compared to the C2G model. Keeping sales and operations separate allows for more growth within each key area.

C2G – Total account ownership is the driving concept behind this freight broker business model. One point of contact handles all aspects of a shipper’s account and interactions with customers and clients. Unlike the Chicago model, everything falls under one roof and remains influenced and managed by a single integrated team, including loads, freight rates, tracking, and disputes. 

Maintaining a streamlined and functional freight carrier network also relies on careful consideration of significant drawbacks to these business models.

CONS 

Chicago model – While keeping sales and operations works well for general managerial tasks, it presents a challenge for implementation and execution. The biggest issue with creating two separate teams instead of managing just one remains that it essentially doubles initial setup costs and adds to overall operational costs. A new freight broker business may struggle with this at first. 

C2G cons – The concept of one team managing every part of a freight broker business opens the door for issues when disruptions occur within the team member base. With this business model, if a critical team member leaves and another takes over in a new role, getting up to speed can take time. Specialized functions work until someone must shift gears and serve in another position. 

Improving Transportation Relationships with the Right Tools and Freight Broker Business Approach

Ultimately, pros and cons need careful consideration and all internal and external factors closely examined. Brokers must decide which freight broker business model works best for their truckload carrier and shipper arrangements. And newtrul follows a broker business model that carries a strong C2G footprint. By integrating with TMS platforms and providing a single touchpoint for carriers, it’s easier than ever to enable end-to-end management without all the hassle of traditional brokerage interactions. 

That amounts to a transactional model with a flat amount of percent charge per transaction, which will allow for additional functionality and scalability when combined with a future subscription premium. The right technology and capabilities will improve relationships and maximize profits with a new and innovative approach to freight brokerage and management. Request a newtrul demo to get started. 

 

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