Most business today have customers spread across vast geographical area even within the country, if not internationally. Hence for success of any business, it is important that the product reaches its customers unharmed, in timely manner and at a reasonable cost. If this does not happen, the business will fail, even if it has a great product.
Now imagine that a company has to ship a large package across the Atlantic Ocean (Say from the USA to some land lock country in Europe). For it, the business has to first send it to the port via truck then choose between air or sea route to cross the Atlantic. Further, it must get the product onto the ship or aircraft, (after clearing all the customs and regulatory requirements), get the delivery at the landing port across the Atlantic, clear the customs of the landing country and then again move the package by road (or another means) to the customer. For a small business, this is very daunting. This is where freight forwarders come in.
What is a freight forwarding business.
A freight forwarder is simply a business that arranges the movement of the goods for a customer from the manufacturer to the end distribution point, or to the end customer. They are the intermediary between the business and the point of delivery (end customer or distribution point). They do not move the cargo themselves; they arrange for the shipment to be picked up, transported through various modes and by different transportation providers, customs and clearing houses till it reaches the endpoint. They specialize in coordinating between various such agencies for minimum cost and speediest movement of cargo. In a way, they orchestrate between multiple service providers. They have established relationships with transporters, ocean liners and the likes, which they use to negotiate the best possible price for their clients. They use their relationship network to identify the shipping options, find the standard shipping routes and cost associated with each and select the best possible combination of available options for the shipment. All these tasks may look as formidable or complex for a simple business who just wants to get his product across, to the customer.
Services Offered by freight Forwarders
The freight forwarders generally offer a few more associated services required for the freight, which require specialized skill which may not be available with the business.
Packaging. If the cargo is going to be loaded and unloaded at several points, it needs robust packaging that can take rough handling. If the cargo is taking sea route, then the packaging must protect the cargo from sea corrosion. When shipping through air, the low air pressure and low temperatures may be a cause of concern for some of the products, and they will need sealed packaging for same. Many such specialized packaging requirements come with the transportation and other logistical options. Since freight forwarder understands the requirements and risks associated with the chosen mode of transport, they also provide (usually), the packaging that is most suitable for that mode of transport. The shipper does not have to manage additional packaging needs. This is most helpful, when there are several types of products destined for several locations with multiple modes of transportation.
Labeling. Cargo passing through various checkpoints usually has strict regulatory labeling requirement. Typically a cargo label would indicate following:
- Type and quantity of product.
- Handling instructions
- Hazardous material information
- Country of origin
- Hazard and handling instructions in local language (at source and destination)
The freight forwarder would generally know the labeling requirements and can fulfill them more easily and precisely.
Documentation. Domestic and international cargo requires lot of documentation that may be daunting for a regular business. Freight forwarders have developed their expertise in knowing exactly what kind of documentation is needed for which kind of product and destination and from where and how to procure it. Some of the typical documents required for international shipping are:
- Bill of Landing. The contract between the shipper and the owner of the goods.
- Invoice. The regular commercial invoice for the product
- Inspection certificate. (clearance from required agency to ensure that product meets the quality as required)
- Export License.
- Customs documents. To ensure that product can be legally sent out from the origin country and received at the destination country and is not prohibited by either of the countries.
- Tax papers. To ensure all the required taxes have been paid
Freight forwarders typically don’t have any capital equipment of their own. But the service they bring in can be quite valuable even for established players. They run the supply chain show, holding all the thread of various sections of the chain. The business can leave all the transportation and its related handling, packaging, documentation and other requirements to be handled by the freight forwarder and focus on what they do the best, That is making a quality product.