A Push to Clean Up the Logistics Industry

Jim Kienbaum hauls produce from California for a five-store chain of high-end grocery stores in the Midwest. Like many truckers, he has horror stories about freight brokers, who act as middlemen between carriers and companies that need goods moved. One broker filed for bankruptcy before Kienbaum could collect $1,500 due him. Another’s $40,000 in checks to Kienbaum bounced. “I got really nervous because I have a truck and a family,” says Kienbaum, whose Stepping West is a single-rig operation based in Whitewater, Wis. “I had hauled for him forever, but he got a divorce and started drinking and gambling, and things just went downhill.” After weeks of hounding, Kienbaum finally got paid, but many other truckers didn’t. “One guy got burned for $18,000,” he recalls.

Tales of unscrupulous brokers who take payments from shippers and then don’t pay drivers for months, or at all, abound in the $160 billion third-party logistics industry. “A normal business would turn around and pay the guy, but they float the money and pay obligations out of future revenues,” says Joe Rajkovacz, director of governmental affairs for the California Construction Trucking Association, an Upland (Calif.)-based trade group with 1,200 members. That leaves truckers scrambling to cover fuel and maintenance costs, often with high-interest cash advances. Hauling companies are particularly vulnerable, because 97.2 percent of them own and operate 20 or fewer vehicles, according to the Transportation Intermediaries Association (TIA), a 1,400-member trade group in Alexandria, Va., that represents brokers.