The Ultimate Guide to Choosing a Freight Forwarder
What Is A Freight Forwarder?
A freight forwarder is a service provider that arranges shipments. Think of them as travel agents for freight. Freight forwarders are the experts who understand how the end to end shipment process works.
Freight forwarders come in many shapes and sizes. Some of the smaller forwarders are essentially trucking companies or trucking brokers and are not involved in international freight forwarding. Some specialize as ocean freight forwarders or as air freight forwarders. Small freight forwarders typically limited their reach to a few popular countries where they have a working relationship with a local freight forwarder. At the far end of the scale, the larger freight forwarders are essentially global freight forwarders.
What Services do Freight Forwarders Provide?
When it comes to the shipment, here’s a shortlist of the service that freight forwarders provide:
Freight forwarders prepare all the paperwork, make the bookings, and arrange payments required for each sector of the shipment that they are responsible for.
- They act on your behalf with numerous other parties involved in the shipment, air cargo carriers, any other freight forwarders involved in the shipment, and trucking companies.
- Most freight forwarders provide a customs brokerage service, that is they are both a clearing and forwarding agent, and may act on your behalf with customs agents.
- If something goes wrong, or is at risk of going wrong, freight forwarders step in and troubleshoot.
When it comes to working with you, the freight forwarder customer, here’s the service you should expect:
- When you first make a booking with a freight forwarder, they will explain what you need to know, for instance on key freight documents and on how the shipment will progress, They are the experts, and can inform you on anything else that you’d like to know, about freight.
- Where required, they will discuss options and give advice.
- As the shipment progresses, freight forwarders should keep you informed, especially if at any point, the shipment faces a significant risk of delay.
Why Do I Need A Freight Forwarder?
The extent to which you can get by with or without a freight forwarder can be broken down into the four following scenarios.
1. Going It Alone Without A Freight Forwarder
Much fewer people use travel agents these days, so why not skip the middleman and arrange the shipment yourself, or with just the help of a customs broker?
This is where the analogy with travel agents breaks down. For most shipments, it simply isn’t possible to arrange international freight online with ocean or sea carriers.
And even if it was possible to do without a freight forwarder, it is a risky game for non-specialists to play. A lot of things can go wrong in freight, and they often do. You need to cover your bases with freight insurance.
2. Your Supplier’s Freight Forwarder Arranges The Entire Shipment
Your supplier may be an expert in manufacturing or trading, but they will not be freight experts.
If they have an arrangement with a local freight forwarder who can manage an entire international freight shipment, it is unlikely to be that much better a deal than you can arrange. When it comes down to it, the supplier will be looking to recoup their costs.
- If they on-cost the freight charges, they have little incentive to secure a good rate. That means you will probably be paying inflated freight charges.
- If they offer a sale/freight package, they are likely to inflate that price.
3. Your Supplier’s Freight Forwarder Arranges The Shipment As Far As The US
This is a classic trap that sees inexperienced importers falling into all the time. Many suppliers offer to arrange the shipment as far as the port in the US. If you only add on local trucking costs, it seems like a great deal. But there are other costs involved.
This shipping arrangement usually uses one of the “C” incoterms, especially the CIF incoterm. These incoterms have several flaws for an importer including a common scenario where the importer is held hostage to inflated costs.
4. You Engage A Freight Forwarder To Arrange The Shipment From Either The Factory Or Foreign Port
If the idea of wading through four different options seems like too much information, that’s precisely why you should be letting a freight forwarder manage the shipment. You need a partner to take care of it for you. That partner is your international freight forwarder.
How do I find the Right Freight Forwarding Agent?
Maybe you know everything about your business, the best tools, even the latest in consumer shopping habits. But chances are, you get blindsided by freight. There’s a lot of that going around. You need a trusted ally in the freight industry, an agent working on your behalf.
Whether you know them as freight forwarders, clearing and forwarding agents or just simply as forwarding agents, there are too many to count (probably over 100,000 currently in the world). That seems like being spoiled for choice. However, that’s often not the case for an industry often described as being opaque, meaning customers get little visibility into pricing and service levels.
This article sets out how to go about selecting a forwarding agent.
- First, consider whether your shipments have special requirements.
- Then weigh how much your shipping might narrow down agent selection.
- What to look out for if you are driven by price.
- What to look out for if service is more important to you than price.
- And finally, how to search for both great service and a good price.
Consider Whether Your Shipments Need Specialized Support
There are some commodities which many forwarders don’t deal with, such as vehicles, household removals, and bulk commodities like wheat. Not all forwarders deal with oversized shipments, either, so you’ll definitely need a large or specialized forwarder if you want to ship a full subway train. A more common group of exceptions that many smaller forwarders won’t deal with is hazardous cargo. Don’t be fooled by the name, as it includes some seemingly tame products, like toys with batteries.
Another important consideration is geographic coverage. Not all forwarders ship to all parts of the world. Smaller freight forwarding companies often have a quite limited network of forwarding companies in other countries that can act as agents for local delivery or pickup and customs clearance. They’re bound to cover your country’s most common trading partners, but if you import, say, from Bhutan as well as China, you should clear this first with a prospective new forwarder.
How does the Size of my Business Affect my Choice in Freight Forwarder?
Working with name-brand global forwarders has its advantages. They have the muscle to secure good rates and preferential treatment from the big air and ocean carriers. But being popular means that the larger forwarders have to make choices. Their larger customers bring in more business, and it’s only natural that in busy periods, larger customers will get preferential treatment to the detriment of smaller customers. Only 35% of large forwarders responded to a small business’s quote request in a recent mystery shopping survey.
Let’s face it, you need to be able to rely on contacting your forwarding agent when necessary. If your primary point of contact is going to be a 1-800 number, that’s an indication of how valued your business is to them.
Of course, the reverse is also true. Although local forwarders can usually give their small customers more width and are faster to respond, they may not be as competitive on price. This is something to consider should your strategy be to go for the cheapest price.
Is Price the Most Important Factor?
Most forwarders will claim to provide superior service, but they are all aware that winning a new customer generally comes down to price.
However, making a decision on price alone can be deceiving. For instance, some forwarders discount the first shipment to win the sale but make up for it with on subsequent shipments. Also, some forwarders hide charges in the terms and conditions to make their quote price look more attractive than those from more honest competitors.
There are of course forwarders who lead on price. That almost certainly means a reduction in service. Depending on the services they cut out – for instance, some forwarders specialize in only one trade lane or only in air freight – that may not affect your business. But, be aware, some forwarders cut back on general customer service levels. Many things can and do go wrong in international shipments. That cheap price may come back to bite you. If you get a quote that is significantly cheaper than other requested quotes, see if you can find out how they were able to undercut their competitors.
Or Is The Forwarding Agent’s Service More Important?
Your shipment is worth more than the shipment value, it’s needed to grow your business, so you want someone you can trust to handle your valued goods.
The stories you’ve heard about the number of containers lost at sea are urban myths. In fact, only a very small percentage of containers go missing each year. Much more commonly, shipments do get lost, stolen, damaged and delayed. If this seems to happen frequently with your shipments, it’s time to start looking for a more reliable forwarder.
Many larger forwarders are also 3PLs (third party logistics providers) who specialize in providing broader support (contract logistics) for their customers. They can provide useful services for importers, like superior shipment tracking and warehousing. The tradeoff, of course, is likely to be on price.
But service isn’t just about breath it’s also about quality. Good old-fashioned customer service. Freight forwarding takes a lot of coordinating. Airlines, ocean carriers and especially customs agents aren’t forgiving of incorrect, incomplete or late paperwork. If your forwarder isn’t on top of your shipment, it risks being delayed and incurring unnecessary additional charges.
As a logistics service provider, your forwarder should communicate regularly and transparently with you. If you wait a week to get a freight quote before shipping, that might be a good indication that you could be waiting to get status updates on delayed cargo. A good forwarder will provide status updates, quickly alert you of any problem, and just as quickly work to resolve them, for instance, if a glitch occurs at customs or the warehouse, or when a shipment is behind schedule. If this isn’t happening, then it’s time to start looking for a new forwarding agent.
Good communication is important with freight charges as well. Freight quotes shouldn’t require deciphering. They should not have hidden charges or include unfair terms and conditions that get the forwarding agent off the hook.
Can I Get Both – Great Service And Price from my Freight Forwarder?
Until now, freight forwarding has largely been offline.
Getting prices from forwarders generally takes days. You’re not going to get a schedule of rates, only a response to a specific quote request. Understanding how competitive a forwarder is on service is also difficult. It’s generally come down to experience because there hasn’t been anything in the way of online forwarder ratings. With importers having little visibility into pricing or service, it’s not surprising that many of them are paying through the nose for an inferior service.
But this is changing. The Freightos Marketplace, which supplies instant online quoting from a wide range of forwarders, also provides price and service comparison. That is, it is now possible to sort and select quotes by price, transit time, or service rating. This is what it boils down to when looking for the right forwarder for your business. First, consider whether you have any unusual shipping needs. That will weed out some of the smaller forwarders. Then consider how important your business may be to the forwarding agent. What you consider next depends whether you are driven most by price or service. Finally, there is now an option that lets you go for both service and price.
A great partnership requires each partner knowing what is required of the other. Soon after selecting a new forwarder, meet up with them to discuss what you both expect in the way of communication and. Your forwarder needs you to quickly be on top of any documentation they send your way. You’ll probably want to know more about the process, the key documents required, at what points along the shipment you will get updates. You’ll want to agree on what point you wish to be notified of potential problems. This way, you can ensure you get better freight service.
The digital forwarder is a new breed worth considering. They compete for smaller importers by providing a better service. They can do this because process automation enables them to run a leaner business, it reduces errors and speeds up internal processes. The integrated customer interfaces deliver a superior user experience. There are few of them still, and they are still building capability. In particular, not everything is automated yet, and they are still building up their geographic coverage.
How do I Request a Freight Quote from my Freight Forwarder?
Have your goods and ready to ship? Time to get a freight quote.
Following this quick list to make sure you’re taking a good look at all your options.
Depending on your forwarder you email or speak to, they may not remember to ask for all the data upfront. Which slows down their turnaround to give you a quote. Beat them to the punch by coming to the table with the following information:
- Make sure that you have the full addresses for pickup if the shipment is door to door, including postcode (go back to Alibaba if necessary for this), and full destination address. Zip codes are sometimes enough but the more information, the better.
- You may need to provide the name of the port of origin. All airports and seaports have an international code (e.g USLAX for United States, Los Angeles airport if it is port to port or port to door (surprisingly, one of the largest forwarders asks for this for door to door too).
- If someone other than your company is receiving the shipment, have their contact details ready too.
Weights And Measures
- Provide the total weight of the shipment. You can probably still get by in pounds, but suppliers and increasingly forwarders think in kilograms. You can get this information from the packing list.
- If your shipment includes a mix of boxes, pallets, etc, you will need to itemize how many of each type.
- You will have to provide total cubic volume, also called “CBM”. Use this simple cubic meter calculator. If there is a Total Volume field on a wizard type form, you will probably need to round to the nearest whole number.
Actual Weight vs Dimensional Weight
This isn’t something extra that you should prepare before requesting a quote, but it’s better to find about this now than when you call to query why you have been quoted for the “wrong” weight.
Shipments that are comparatively light for their volume are often uneconomical for carriers to ship. The freight industry came up with a formula to charge light shipments at a profitable weight based on the shipment’s volume. This deemed weight is called the dimensional or volumetric weight. Use this chargeable weight calculator to see what wish weight your shipment will be quoted at.
- International freight works off HS Codes – basically a global index of product types. The official product name and code should be on the commercial invoice but it’s best to check anyway, using an HS Code lookup tool. It pays to check this because an uncorrected error could lead to delays in customs clearance later on.
- Businesses exporting shipments need to know the Schedule B code, although the same large forwarder that asks for port of origin for door to door shipment also asks for the Schedule B code for imports to the US as well.