If you had to choose between a logistical solution where everything is scattered and unorganized versus one where even the time of arrival is jotted down on computers, what would you prefer? Your answers might differ but let’s look at the stats here.
In the year 2021, the global freight forwarding market was USD 186 billion. It will reach USD 207 billion by 2026, at a CAGR of 2.8%. It indicates that the freight forwarding market is rising thanks to e-commerce and SMEs worldwide.
In this article, we will look at freight forwarding, its services, process, dealing with deals, and even measures for choosing a freight forwarder.
What is Freight Forwarding?
Freight Forwarding is a process of organizing all shipments of commodities from various places to a single location. This process is usually done by any agency, company, or even an individual. When a company carries out freight forwarding, it necessarily takes the responsibility of forwarding the goods from one destination to another.
The need for freight forwarding was first observed in Canada in 1948 with the foundation of the Canadian International Freight Forwarders Association (CIFFA). They scrutinised that transportation of carriers, either via marine, air, or land, requires a thorough organization, control, and supervision while also being under a specific time duration to successfully deliver the commodities to the customers.
Freight forwarders, who carry out the process, ensure that everything has to be under set circumstances. They make sure that the goods arrive on time, and in good condition, carry out maintenance, shipment, and dispatch from the site, and many other activities. They maintain a whole logistics and statistics of each and every item present on their counter and take up the responsibility to run every service at ease. And what are these services? Let’s have a look at it.
Freight Forwarding Services
Freight forwarding has many things to handle in one place, such as planning and executing national or international goods on behalf of shippers. The main purpose of freight forwarding is to import and export goods (or cargos) in perfect conditions from one place to another.
The major portion of freight forwarding is handled by freight forwarders who look after shipment tracking, negotiation, scheduling, consolidation, and supply. But their services go far beyond just these.
Responsibilities of a Freight Forwarder
Freight Forwarder is the organizer of commodities on behalf of shippers and is one of the most pivotal assets to carry out the entire process. How does it feel to be a freight forwarder for a day? Let’s walk through a day in the life of a freight forwarder-
- Shipment Tracking: In this step, the freight forwarder carries a Transportation Management System (TMS) where each item’s details are stored.
- Customs Brokerage: This duty requires a special license, known as the customs brokerage license. Only a fully licensed, a qualified broker can manage and submit the extensive documentation which is required to complete the import/export process.
- Warehousing: This is a place where all your commodities are stored. Sometimes freight forwarders have their warehouse to shelter the cargo.
- Negotiating: This step requires the art of bargaining with carriers to facilitate cost-efficient shipping. They have to consider the cargo type, time flexibility, specific requirements of the commodity, and many other factors.
- Cargo Space Scheduling: This is one of the most crucial steps for a freight forwarder. This is where they show and use their skillset to plan and execute cargo space and also maintain logistics.
- Consolidating Freight: There are instances where the shipment does not require the entire container for transportation. In that scenario, forwarders use one container to load many cargoes. This leads to freight consolidation for a container load. The shipping cost is then distributed among all the customers.
- Supplying Cargo Insurance: In case the item is damaged or stolen, cargo insurance covers reimbursement of the payee’s loss. This is also known as freight insurance.
In 2020, there were 131 billion parcels shipped worldwide, according to Pitney Bowes, and it is expected to double in the next three years. That’s a lot of exports happened in one year. It gives you a clearer idea of how important the freight forwarder is to the entire process.
The Process of Freight Forwarding
Commodities can be differentiated into two types- one is the regular item that doesn’t require any specific documentation to be transported from one location to another. But then, some items require liaising with different parties or government agencies. Those items are generally restricted to transport or may contain different kinds of items (such as food products).
Freight forwarders must keep themselves updated with the laws, guidelines, and regulations of peculiar cargos. They need to have a good network and communication with different agencies. They should also be aware of every single step that comes under freight forwarding. Let’s have a look at the essential processes of freight forwarding.
A few ‘export documentations’ are required to ship the item irrespective of the type of commodities. The documents required differ in different countries. But some significant documents that are common worldwide are-
- Commercial invoice
It is an invoice that displays each and every detail of that item, such as the shipping address, type of item, quantity, contact number, name of the receiver, and many other essential details. The seller issues this invoice to the customer or buyer.
- Packing list
This is a physical description of goods that is to be shipped by the seller. It contains dimensions, width, weight, harmonized system code, etc., which makes it easy for both buyer and seller to recognize the good.
- Export shipping bill
This is one of the most crucial documents as it requires endorsement or agreement between an exporter and a customer before exporting the item. Ships reject the item if it does not have an export shipping bill.
- Bill of lading
It is proof that the cargo has been received by the customer successfully. The testament issued by the shipping company contains a few details about the consignor, consignee, cargo, etc.
- Certificate of origin
It is an international trade document that states that the goods are being manufactured, produced, and processed entirely in one country where it belongs. Authorized government officials usually issue this certificate of origin, which can vary from country to country.
- Letter of credit- if applicable
The bank issues this letter to give assurance to the seller about the payment that has to be made by the customer. Any failure in payment would be taken up legally by the bank.
- Insurance Certificate
It is coverage provided to cover the loss of cargo in case of natural calamities and accidents. The buyer may agree to ensure the goods in case of CFR (Cost and Freight) and CIF (Cost Insurance Freight) terms
- Hazardous Cargo Declaration
The cargoes which are not easy to handle and require a proper way to handle need declaration from the government. It confirms that the export item contains hazardous substances such as combustible solid or liquid, corrosive metal, radioactive substance, or anything else.
What to Look for in a Freight Forwarder
Seeking the best freight forwarder is the same as looking for a perfect companion. You must be well aware of all kinds of factors and risks associated with it. And why is that so important? It is because almost 80-90% of the freight forwarder’s work is supervised and carried out. You shouldn’t take any chances while looking for a nearly perfect freight forwarder. Before choosing one, you can always look for-
- The need for a freight forwarder means that you have to consider the company’s need to appoint a freight forwarder. Importing and exporting is a cumbersome task to take up as it requires continuous logistics and an abundance of paperwork. But at the same time, some companies might want to handle it independently. Therefore, it ultimately boils down to how much trading your company does and how much they can do it themselves.
- Experience Matters– Among a bunch of different freight forwarders, selecting an experienced one is a talent in itself. Freight forwarding comes with many obstacles, such as port shutdowns, warehouse issues, dock workers’ strikes, and many more. Only an experienced freight forwarder would know how to tackle the situation without compromising the delivery.
- Global Network and forwarder– An ‘experienced’ or well-versed forward has global network connections as the shipment is handled at both ends, from origin to destination. Forwarders should have a good connection even at the destination so that the entire trading process remains uninterrupted.
- Presence of variety of services– Always try to choose a forward who has more perks to offer in order to maintain a long-term relationship. These services could include freight consolidation, customs clearance, insurance, packing, storage, etc.
- Go for the best– The best freight forwarder fulfills all your requirements, and getting the best freight forwarder is not easy. But you can always make your forwarder the best by treating them as a part of your company and not as a third party. A good forwarder provides you with a high level of response, regular checks on cargo, and direct access to managing agents.
However, even with all the resources, you may still face some trouble while transporting. One of the major problems could be delays in export/import. According to project44, the average delay in shipment in China, America (by 6%), and Europe rose in 2022 and is expected to rise even more. Let us now look at the ways in which you can tackle delays.
Dealing with Delays
Delays in shipment are among the most common problems the import-export industry faces. And the cases have risen, especially after the COVID-19 pandemic. Josh Brazil, the vice president of supply chain data insights at project44 states that “Blank sailings will continue well into 2022, as ports work down backlogs and consumer spending remains strong”.
There are some ways to deal with delays. These are-
- Inform the customers– It is always important to inform the customers beforehand if there’s any delay that is going to happen. Customers may become furious if they are not informed about the delay.
- Keep track of your shipments– There are multiple applications or websites available online that can help you with tracking your shipment. This gives you a clear idea about where your cargo is, how far it has reached, and what is the expected date & time of arrival.
- Take authority of the delays– Even if the delay has happened for whatever reason, own it. This could be one of the most challenging tasks, but once you take responsibility for your problem, it shows the customers that it could happen to anyone and that you can win over anything.
- Consider other forwarders– If the delays persist, try to go for some other forwarders or maybe more ‘experienced ones’ to eliminate the obstacle. You can have domestic and international forwarders to make your process easier.
When to Use a Freight Forwarding Service
- You’re scaling up
- You’re importing and exporting Internationally
- To increase ROIs
- You want an expert