Archive for June, 2009

Thinking of Using a Freight Broker – Buyer Beware

Monday, June 22nd, 2009

Shippers looking to save money during these difficult economic times are turning to freight brokers as an alternative for reducing freight costs. However, using brokers doesn’t come without its own share of risks. All you need to become a broker is a $10,000 bond, a phone, and a client.

Before you sign up with a broker you need to be aware of the additional exposure your company has using brokers vs. carriers or an established lead logistics provider. A rule of thumb is to use the same standards in selecting a broker as you do in selecting a carrier. Why?  Regardless of size, a broker doesn’t have the same responsibility for the load as you, the shipper, the carrier, or lead logistics provider.  Worse yet, most don”t manage the carrier selection process beyond “can you cover the load” and you probably also treat them differently. This means you are open to significant risk. That is why you should use the same steps for qualifying a broker that you use to qualify a carrier or lead logistics provider. You should therefore at a minimum verify their:

  • Financial viability
  • Carrier selection process
  • Process for on going management of carrier financial viability
  • Broker Cargo and Errors and Omissions insurance

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Broker”s financial viability - Red Dawn rip How big are they? How many carriers do they have under contract? Have they given you a client list? Have they provided you with references? Have you done a credit check? Remember that if they don”t pay the carrier you could wind up covering that cost.

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Does the broker verify carriers have proper insurance, a satisfactory DOT safety rating, do they have a written security plan for each carrier on file with the broker, and does the carrier have the authority to handle your load (how do they verify Hazmat Authority). If they do have a process is it manual or automated, and how timely is the information.

On Going Management of Carrier Financial Viability -With 4000 carriers closing their doors during 2008 financial viability is an important question to ask and be on top of. That is why the broker needs a proactive approach for re-verifying insurance, and DOT safety rating before they assign your load to a carrier.

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What happens if the carriers insurance has lapsed, the broker didn’t know it, and there is an accident? Is the broker covered by a substantial “Errors and Omissions” insurance policy or are you on the hook for their mistake? In contracting with a broker demand the same insurance standards you use in contracting with a carrier or lead logistics provider. Read their contract carefully and remember to treat them as a carrier. If you don”t and there is a claim the broker will side step the claim by telling you it is between you and the carrier. If the carrier has gone bankrupt that leaves you and your company owning the claim.

Should you have no choice but to use a broker that doesn’t mean you need to put your company at risk. Do your homework and protect your company from possible financial exposure.

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Trouble in Mexico Causes Havoc when Shipping South of the Border.

Wednesday, June 10th, 2009
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The narco-wars in Mexico are all over the news these days and are causing US shippers to re-think how they get goods to and from Mexico. Lost in the attention grabbing headlines are some other issues that are wreaking havoc with trans-border shipping including the US govt’s refusal to allow Mexican truckers on US roads, increased delays with customs at the border, bandits along the north-south trucking routes as well as atrocious road conditions.

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There has to be a better way to move products between the US and Mexico, no? Well there is, and for the life of me, I can’t figure out why more shippers aren’t using it. It’s intermodal in-bond on the railroads. Basically, it just means putting your goods in a container and shipping via rail from a US point to a Mexican point (or vice versa) without stopping at the border. It eliminates the worries that shippers have regarding all the issues at the Mexican border towns as well as the customs delays. And to top it all off, it’s cheaper than trucking! Transit time on the rail from Chicago to Mexico City is between 4 and 6 days, so taking into account all the delays at the border, it’s actually about the same transit time as truck.

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We’ve been using this service for over a year and it has been flawless. We take loaded containers to the UP railroad in Chicago, send the appropriate customs docs to the railroad’s forwarder, it clears US customs and starts down to Mexico City. Four days later the container arrives at the Pantaco yard in Mexico City, where it clears Mexican customs. No delays at the border, no loss of product to highway accidents or to hijackers. This mode of trans-border transportation works well for bulk commodities in tank containers as well as traditional packaged freight in box containers. We have an easier time doing these cross-border deliveries than we do for some intra-US moves. One other positive gained from shipping products this way is that it is much kinder to the environment 28 Weeks Later .

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So to sum up, shipping intermodal inbond between the US and Mexico is cheaper, safer and cleaner.