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What Does a Freight Forwarder Do ?

If your business involves importing or exporting freight, you’re likely working with a freight forwarder.

What does a freight forwarder do?

These international shipping experts help you participate in international trade without having to master all the complexities involved – things like negotiating and booking freight capacity from carriers, reviewing all required import/export documentation, assisting with duty payments, clearing customs, arranging insurance, and tracking and tracing shipments.

What a freight forwarder doesn’t do is actually transport your freight. That work is done by ocean carriers, airlines, railway operators and trucking companies. The freight forwarder simply works out the most efficient method of shipping to meet your delivery requirements, then orchestrates the efforts of multiple providers to ensure cargo arrives on time, at the right place, for the right cost.

Here are a few other questions to help you and your staff better understand the role of freight forwarders in the supply chain.

How Do Freight Forwarders Differ from Third-party Logistics (3PLs), Fourth-party Logistics (4PLs) and Freight Brokers?

First, a quick explanation of all these “PL” terms. If you, as the shipper, own and run your own logistics operations, you are the first party. If you contract directly with asset-based carriers, they become the second parties (2PLs). 3PLs choose and manage the 2PLs on your behalf. 4PLs manage the 3PLs.

A 3PL can manage many aspects of your supply chain on an outsourced basis. While freight forwarding focuses mainly on transportation, a 3PL may offer warehousing and distribution services, as well as shipping. Many large freight forwarders, like Dimerco, are also 3PLs that can provide contract logistics and other services.

Very large enterprises who work with multiple 3PLs may choose to work with a 4PL. These strategic partners will oversee the operations of 3PLs and freight forwarders, managing all of a company’s logistics and supply chain requirements as a single point of contact.

Freight brokers are similar to freight forwarders in that they are intermediaries between you and the carriers. But a freight broker is typically associated with domestic transportation, whereas freight forwarders focus on international transport. When cargo crosses borders, it introduces a whole other level of complexity to the shipping process that many companies just don’t have the resources to manage effectively.

Can’t I Just Go Directly to the Carrier?

For air freight, you don’t contract with airline, you will need to use a cargo agent. With ocean shipping, steamship lines won’t contract with you directly unless you are moving large volumes of cargo. If you do contract directly with an ocean freight carrier, it will limit your options. Just like a business traveler wants to evaluate multiple options before choosing the most convenient flight, cargo shippers want that same flexibility. If you go direct, you’ll be limited to the schedules and prices of only the carriers you have under contract, whereas a forwarder will look across all their carrier contracts to best match your requirement.

What about Freight Marketplaces? Are They an Alternative to Using Freight Forwarders?

Freight marketplaces are the cargo equivalent of Expedia and Priceline. But international forwarding is much more complex than travel agency services. If you book a trip from New York to London, the only supplier involved is the airline. With cargo shipments, you need a trucker to pick up the load, a carrier to ship it, a broker to clear customs, a transload site to deconsolidate, and a trucker at destination to do the final delivery. Plus, every country’s rules and regulations are different. A simple booking software can’t solve for the complexity of the global shipping process.
Another potential downside: what if something goes wrong during transit and intervention is required? Software can’t automatically re-route a shipment or troubleshoot a delay at customs. For these situations, you want to be able to reach out directly to an expert that understands and can fix the problem.

To be clear, marketplaces for global freight don’t replace forwarders, who still do the work behind the scenes. The software is meant to make the booking process faster and easier by looking at quotes from multiple forwarders. But in doing so it can undermine the advantage of having a close working relationship with your freight forwarder.

What should I Look for When Choosing a Freight Forwarder?

Here are a few of the most important criteria you should look for.

  • Capacity in Your High-Volume Lanes. That means they will likely have strong relationships with carriers that service that lane, giving you access to capacity with good negotiated rates that other forwarders may not have. Dimerco, for instance, can ship anywhere in the world but has a strategic focus on the Asia-Pac region, connecting trading partners in Asia with those in North America and Europe.
  • Owned Local Office Network. Freight forwarders that rely on agents won’t deliver the same level of service consistency as an owned office model, where each office works on a common system and follows customer-specific SOPs. Staff at these local owned offices will have a good understanding of local market regulations and will communicate with local agencies and logistics partners in the local language to get things done.
  • Strong IT Integration Capabilities. You must be able to easily share data with your forwarder, but integrating systems can be a nightmare with the wrong partner. Many forwarders simply don’t have the resources to help, and certainly won’t customize integrations to suit your exact needs. Look for a forwarder with its own IT resources that can complete system integrations quickly without the time (and sometimes extra cost) of going through 3rd party solutions.
  • Multiple Service Offerings. This saves you the time and effort of arranging services that go beyond goods transport, like customs brokerage, insurance, and even warehousing services at the destination site.

What Are the Benefits of Freight Forwarding Services?

  • Save Money. You benefit from the good rates forwarders can negotiate with carriers based on large freight volumes. Also, forwarders can consolidate your cargo with freight from other customers for a far lower consolidated rate.
  • Access Freight Capacity. Because of the volume of freight they manage, larger forwarders have the purchasing muscle to secure the space you need.
  • Gain Flexibility. Forwarders examine a wide range of shipping modes and carriers to find the one that works best for your cost and service requirements.
  • Access Expertise. When importing or exporting products, it’s critical to have the most up-to-date information regarding customs regulations, duties and taxes. Without a reliable freight forwarding partner, you would have to develop that knowledge internally – and that comes with a cost.
  • Focus on Your Core Business. Every international shipment comes with a long list of document requirements and coordination points. Managing this complexity can easily deflect attention away from your business.

The Ultimate Role of the Freight Forwarder

Back to the question we started with: what does a freight forwarder do? In short, they provide knowledge of all logistical, regulatory and compliance requirements associated with international shipments – and execute against these requirements on your behalf. In the process, they make your life easier and allow your company to trade easily with overseas customers and suppliers.

To learn more about what a freight forwarder can do for your business, contact Dimerco today.