What is freight forwarding?

Alibaba.com MAY 07, 20215 MIN READ
What is freight forwarding?

Running an e-commerce platform takes a lot of work and focus. You want to ensure that you deliver goods on time and in good condition, and this can be relatively complex - especially if you're moving cargo across borders.

To wit, you could hire a freight forwarder to help you out. This piece dives into freight forwarding and how your business can benefit from it.

What is freight forwarding?

In its simplest sense, freight forwarding is a logistics component that deals with planning and executing the seamless shipment of goods across international borders. Specifically, a freight forwarder will need to carry out several functionalities and duties to ensure that goods can move easily on behalf of their clients.

Most times, dealing with a freight forwarding company provides benefits like convenience and speed. However, you will also need to find the right international freight forwarder if you hope to expand your business. This fact is especially true if you run an e-commerce platform and want to reach customers beyond your borders.

Freight forwarders take charge of your cargo and organize their successful shipment. They also handle tasks like loading and unloading, documentation/customs paperwork, and much more. As expected, the convenience factor that they provide is essentially why they are in such high demand.

Today, it is relatively lucrative for companies with the resources to import and export goods. However, if you're a small company looking to scale, you might not have the resources to allocate to such an activity. There is also the fact that the transfer of goods beyond borders can be pretty complicated. In a nutshell, it involves the following:

  • Proper knowledge of protocols and regulations set by customs authorities across the world. These standards vary between countries and cargo types, and they change from time to time.
  • Quick problem-solving capabilities, especially when there are faults in technology, weather, and personnel. These faults tend to happen, clogging up the supply chain and increasing transit time.
  • The right network of partners, which can determine the strength and speed of your supply chain over time.

Beyond all of this, you will most likely need to get an export license to become an international freight forwarder as well.

International supply chains are the very definition of global trade. Wherever you need tasks like inventory management, customs clearance, warehouse planning, and more, working with a freight forwarding company takes a great deal of work off your shoulders and allows you to move much faster.

What does a freight forwarder do?

Whether it's a freight forwarding company or an individual freight forwarder, these professionals are at the heart of several supply chains. In general, entering into a business relationship with one means you will have a professional who handles the following:

a. Shipment tracking

Forwarders employ a Transportation Management System to ensure transparency as the cargo moves from origin to the international destination.

b. Customs brokerage

Forwarding requires a customs clearance or customs brokerage incense. A licensed broker is the only one qualified to submit and manage documents necessary to import and export goods.

c. Warehousing

A freight forwarder will also work to ensure proper warehousing. Some might have their warehouses available to hold shipments. However, most tend to arrange storage at warehouses owned and run by affiliates.

The forwarder will also need to notify the shipper of the warehouse's location and arrange the loading and unloading of the goods at the location.

d. Negotiations

An international freight forwarder negotiates with shippers to ensure affordable shipping rates. Even on the surface, this task isn't easy. The forwarder will need to appeal to the shipper's interests by highlighting the nuances of your cargo's transit time, credit status, space requirements, flexibility, and more.

Whether it's for ocean freight, rail-freight or air freight, negotiation is a critical aspect that can save you a lot of money.

e. Cargo space scheduling

The forwarder will also need to coordinate and schedule cargo space where your shipment will stay. This is one of the primary areas where a freight forwarding company shows its mettle.

A lot of work goes into consolidating a shipment, from securing the timely transfer of goods to weighing the different carriers and their pros and cons. This step is the nitty-gritty of logistics itself.

f. Freight consolidation services

Forwarders have different customers who they work with. When they have several small shipments all booked on the same container, they will need to engage freight consolidation for less than container load (LCL) shipping.

In this case, the shipping cost is spread across the different customers based on the cargo's spatial requirements.

g. Cargo insurance

You could also get a freight forwarding company that offers a cargo insurance policy - also known as freight insurance. This is intended to reimburse you if the goods get stolen or damaged on their way to the destination.

Pros and cons of freight forwarding

A lot of business owners wonder whether to work with a freight forwarding company or not. The truth is that as an e-commerce company with foreign customers, you need to keep track of customer demand and orders while ensuring that your cargo can move to destinations safely.

Doing all of that yourself can be arduous, and freight forwarders help with this process. However, there are also demerits to these professionals. Here is a breakdown of what you might want to consider.

The pros of freight forwarding

a. Cost efficiency

Freight forwarding companies transport goods in large quantities. This means that their cost per unit is usually much lower. So, if you don't have many large shipments to transport and can't pay high ocean freight charges, these professionals can help you out. If you want to pay the best possible price, freight forwarders are ideal for you.

b. Speed

Speed is another area where freight forwarding helps you out. By choosing a professional freight forwarder, you can rest assured that your goods will be delivered promptly.

Keep in mind that you will need to do your homework before selecting a freight forwarder. The best, most professional companies might charge you a premium, but you will find that the superior quality of their services and short product transit time will make the cost worth it.

c. Experience

Most experts recommend that you work with professional freight forwarding companies who are experienced in the field. Like every other industry, experience plays a significant role in determining a freight forwarding company's ability to serve you. These firms understand the many issues that could arise in the supply chain, and they will be able to ensign contingencies that will ensure optimal operation.

While mishaps still happen, you will find that the chances of these occurring with a professional and experienced company will be much fewer.

Experience also plays a part in a freight company's ability to deal with customs clearance certifications and other critical documents that pertain to document delivery. When it comes to delivering goods to foreign lands, you can't afford to have incomplete papers or customs paperwork. If this happens, transit time gets extended, and regulators could even seize your cargo.

With an experienced freight forwarder, these issues are less likely to happen. These professionals can take care of the necessary documentation and ensure that your transaction is as seamless as possible.

d. Business protection

As a small company, you can't afford to face lawsuits and a flood of customer complaints. Considering that shipments will be a significant part of your process, you need to ensure that this is in top shape.

You should also consider how shipment delays can affect your standing before customers. One of the many areas where customer satisfaction hinges on is delivery time. When your transit time is too long, customers will get dissatisfied and will be less likely to shop from you in the future.

While no freight forwarder promises a 100 percent guarantee, you can at least reduce the chances of issues occurring during transit by letting them handle your shipment.

e. Convenience

With a freight forwarder, you get to let someone handle shipments and cargo - two of the most critical aspects of your entire business. So, you get to focus on the other business aspects that require your attention.

Instead of staying up late at night worrying about whether your shipment is safe, let someone else take that stress.

f. A Relative guarantee

Freight forwarders spend a great deal of time planning and strategizing on how they will like to move cargo from origin to destination. By fine-tuning their processes, they can deliver a relatively accurate estimate of how long the shipment will take.

In turn, you can let your customers know when they can realistically expect their deliveries. This guarantee helps improve your standing with customers.

The cons of freight forwarding

Despite the many benefits, freight forwarding has several drawbacks. These include:

a. Trust issues

No matter how excellent a freight forwarding company's reputation is, there is never a total assurance. You're entrusting goods with strangers and hoping that they get it to a specific destination at a particular time.

It is only human nature for you to worry. That's just business.

b. Data efficiency challenges

There is always the chance of miscommunication between the carrier and the forwarder. This can happen due to different issues. When these data gaps become large, the shipment gets affected.

Data deficiencies are especially critical in ocean freight. Language translation and much more can cause data management issues, and you could essentially lose credibility in your customers' eyes.

c. Pricing

Freight forwarders could be marking up your prices. Some could charge higher fees compared to the deal you could have gotten elsewhere.

Do I need a freight forwarder?

In truth, freight forwarding isn't a must-have. However, given its benefits, it's easy to see why it has become so popular.

A freight forwarder is usually familiar with the shipment process. Having one handling your logistics will be critical to your success. You can prevent additional fees, expanded transit times, and possible breaks in your supply chains with a freight forwarder.

A smaller company might be able to manage shipments, but freight forwarders can streamline the entire process and save you both time and money. When you consider this convenience, you will find that freight forwarding is a necessity.

Freight forwarders could even offer door-to-door cargo solutions, taking a significant amount of logistics off your placate. From clearing paperwork and handling customs to taking care of goods and storing them, these professionals make your work much easier.

How do I find a freight forwarder?

The best way to get a freight forwarder is usually via the internet. You could easily check on Google to find freight forwarders near you. Most of these companies or individuals tend to market themselves on the internet, so you won't have any trouble finding one.

However, you will need to keep some qualities in mind:

  • Reputation: Ensure that the forwarder you work with is reputable. They should also be licensed and qualified, so be sure to ask about these.
  • Experience: Experience plays a significant part in finding the right forwarder. You want to ensure that the partner you choose has seen it all and can handle any unforeseen circumstances.
  • Network: Your partners should also have a reliable network of carriers, handlers, exporters, and much more.
  • Pricing: It goes without saying. You shouldn't pick a partner with a non-transparent, exorbitant pricing structure. To that end, you might want to compare prices before you select one.
  • Knowledge: You should pick a forwarder that understands the best practices, regulations, and customs procedures for freight and how to handle cargo across countries.

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