Is Your Cargo At Risk - The Hidden Dangers of Double Brokering
In the fast-paced world of supply chain management, efficiency and security are paramount in ensuring that the logistics process runs smoothly. But just like any complex system, vulnerabilities exist and threats can ruin it all. One such threat is double brokering.
What is Double Brokering
Double brokering is the unauthorized act of a freight broker or carrier transferring a shipment to another carrier without the knowledge or consent of the original shipper.
Double brokering is essentially an unethical practice where the initial contracted party acts as a middleman, outsourcing the transportation to a third-party carrier without informing the shipper. In fact, according to MAP-21, double brokering is an illegal offence.
If it goes unnoticed, there can be serious implications for ALL parties involved:
Shippers: Lose control over their cargo, potentially exposing it to increased risk of damage, delays, or even theft. They might face legal repercussions if the secondary carrier lacks proper licensing or insurance.
Brokers: Damage to reputation and credibility. There’s also a possibility that a lawsuit might be raised against the brokers for engaging in an illegal double brokering practice.
Carriers: May not receive the agreed-upon payment, leading to financial losses and strained relationships with shippers. Carriers operating without proper authorization can also be penalized or even go to jail for double brokering.
The entire supply chain: Suffers from disruptions, delays, and potential reputational damage due to the lack of transparency and accountability.
A common misconception is that double brokering is the same as co-brokering. Co-brokering is a transparent and ethical collaboration where multiple freight brokers and carriers work together with the original shipper to find the best solution for moving their goods.
How Double Brokering Takes Place
Due to the complexity of supply chains, double brokering is actually a very common occurrence. Although it usually happens with fraudulent intentions, at times it could happen unintentionally as well. But, regardless of the intention, double brokering cases are a very costly matter and it has been known to cause the industry to lose over $100m every year.
Example scenarios of fraudulent double brokering
Bait and switch: A broker secures a shipment at a competitive rate then secretly hires a cheaper, potentially unlicensed carrier to ship out the goods and pockets the difference earned.
Fictitious carrier: Works like the bait and switch scenario. But this time, the broker approaches a shipper using a fake carrier identity instead to secure a shipment deal at a premium, then subcontracts the work to a legitimate carrier at a lower rate.
Network of greed: This could apply to both carriers and brokers who are looking to “take on more” shipments than they can handle. They tend to promote themselves as consistent service providers at first glance but in actual fact, they outsource the shipments to other carriers within their network without informing or getting the consent of the shipper.
Remember. Every fraudulent case is an illegal act so be sure to report double brokering cases of such nature to the authorities if it happens.
Example scenarios of unintentional double brokering
Miscommunication: Misunderstandings between brokers and carriers can lead to double booking. For example, a broker might accidentally assign the same load to two different carriers.
Uninformed carrier substitution: Sometimes, due to unforeseen circumstances (e.g. a freight truck breakdown), a carrier may subcontract the load to another carrier without notifying the broker or shipper to avoid delays.
How to Identify Double Brokering Schemes
Like any other modes of crime, double brokering can be identified before it occurs. Here are some of the most telling signs of double brokering schemes to look out for:
Lack of information to verify
Shady brokers and freight carriers tend to not have tallied information when you ask for it. In fact, they will be hesitant to provide them and respond with tons of excuses in return. It’s a definite red flag that signals time to look for other brokers or carriers.
Unusually low freight rates
Brokers that quote way lower than market rates are usually too good to be true. There’s a high probability that the broker is operating on a bait and switch scheme to acquire your load before outsourcing it to a cheaper carrier to earn the returns.
Pressure to book quickly
There is no need to book a shipment as soon as possible if there is no compelling reason to do so. Legitimate brokers and carriers will understand that shippers will need time to evaluate options instead of chasing them to agree with the quotes. Not only is this disrespectful but it’s also a sign that there is a need to prevent you from finding out about their schemes.
Best Practices to Safeguard Against Double Brokering
To guard against becoming a victim of fraudulent or unintentional double brokering, it’s also wise to learn some of the best practices from supply chain professionals around the world.
Vet the carrier or broker
Do your due diligence before engaging a carrier or broker. Sources of credibility could include their business registration statuses, licenses, insurance or even reviews online. Government body sites such as the FMCSA website are some of the most trusted sources of information to see if a carrier or broker is registered to operate legally.
Establish clear communications at all times
Miscommunication is one of the causes for unintentional double brokering. One of the best ways to foster clearer communication is to establish a centralized communications platform, where all stakeholders can exchange and retrieve information in the most efficient manner.
Most supply chain professionals today use freight management systems to communicate, manage freight rates and execute shipments, all in a single screen platform.
Work with only trusted carriers
Trust is paramount in the supply chain and logistics industry, especially when it involves time-critical shipments where errors can be costly.
Hence, working with carriers you can trust to deliver and be transparent at all times is key. Apart from doing due diligence at the start, it’s also important to monitor and measure the performance of your freight partners over time to ensure they are reliable.
Invest in a Transportation Management System (TMS)
Today’s Transportation Management Systems (TMS) come with many features that give shippers more control and visibility over their freight rates and shipments. With compliance checks in place, you can limit your exposure to double brokering.
Cargobase TMS offers a user-friendly interface for you to work with your trusted logistics providers. It also ensures consistency and compliance across all quote requests and shipment orders. All communication with freight forwarders is captured and tracked on-platform to minimize the risk of miscommunication.
Furthermore, you can monitor the performance of your logistics providers and rank them by metrics like On-Time Performance (OTP) and Proof of Deliver (POD).
As a holistic transportation management solution, Cargobase TMS is designed to enhance every aspect of a shipper’s freight procurement strategy. To find out more about how Cargobase TMS can drive value for your business, be sure to contact us to find out more.