A Guide to Freight ForwardingJuly 11, 2019
It’s a $1.4 trillion — and growing — industry with diverse subsectors and worldwide reach. It links air, water, ground and rail transportation across an organized, integrated chain. It coordinates in-transport storage and services nearly every type of manufacturing operation, domestic and abroad.
It’s professional freight forwarding, and it plays a starring role in moving cargo to and from markets every single day.
The freight forwarding process is specialized and multifaceted. In this beginner’s guide to freight forwarding, we’re breaking down what professional freight forwarding is, how freight forwarding companies work, how to go about choosing a freight forwarder for your merchandise movements, delivering better solutions and much more.
What Is Freight Forwarding in Shipping?
The most straightforward definition of freight forwarders is individuals or agencies that manage the transportation of merchandise from the point of production through the final point of distribution.
Otherwise known as non-vessel operating carriers, freight forwarders manage these distribution networks for both imported and exported goods. Professional freight forwarders are the individuals or companies helming these end-to-end transportation and delivery services, handling the significant logistics, insurance and compliance concerns that come with long-distance cargo freighting.
One significant distinction between freight forwarders and other material-handling and shipping operations is that freight forwarders do not typically own the transportation vessels used during organized transport. Instead, professional freight forwarders act as third-party intermediaries between producers and carriers, ensuring a producer’s goods get where they need to be, when they need to be there. They also take care of the considerable import and export logistics that go with ground, rail, sea or air distance shipping — including documentation, regulatory compliance, insurance, carrier billings and much more. And unlike the broader logistics and supply chain management industries, freight forward is only concerned with the couriering of physical commercial goods.
The Role of a Freight Forwarder
Experienced freight forwarding manages a few core responsibilities.
- Speed: Freight forwarders pick the most economical carrier route to get your merchandise to market. They consider every point along the entire distribution route, selecting appropriate land, air and sea carriers offering the best prices at the most efficient delivery timetable.
- Security: Freight forwarders manage many aspects of cargo security, beginning with adequate insurance against freight loss, damage or theft, as well as compliant cargo inspections, declaration documents and en-route oversight.
- Cost: Freight forwarders function by finding the best level of services for your transportation needs among today’s web of national and international shipping carriers. Their knowledge of carrier networks primes them to find the best deals through contract negotiations, load consolidation strategies, bulk shipment deals and much more, all cutting down your freight charge expenditures.
- Reliability: Freight forwarders select the carriers with the most direct, intuitive routes, modes of transportation and port access for your shipping arc. Professional freight forwarders offer guaranteed arrival times in their service contracts, consolidate your goods into single loads of transport whenever possible and monitor every stop along a route until your merchandise reaches its endpoints.
- Peace of mind: Expert freight forwarders handle the majority of your compliance and regulatory requirements related to international and domestic shipments. These are significant, with many manufacturers choosing to outsource this aspect of transportation logistics from an economical perspective as well as for their peace of mind.
A freight forwarder’s main functions include the following services.
- Tracking: Experienced freight forwarders track cargo across the full transport route, with knowledge of where that cargo is at all times, en route or in temporary storage.
- Packing: Freight forwarders prepare your merchandise for optimal transportation conditions, beginning with crating. Crate-packing strategies ensure merchandise is padded and secured while still configured for optimal spatial usage. Shipped cargo also gets properly labeled and itemized according to import and export packing lists.
- Documentation: Freight forwarders offer complete inventory management and payment documentation, including documents for declarations, import and export lists, commercial invoices, certificate of origin statements, inspection documentation, licenses, the bill of lading contract plus more duties, customs and clearance papers that may be involved in your shipping process.
- Warehousing: Professional freight forwarders oversee any necessary in-transit merchandise storage in warehouses or distribution centers across the transportation route. Most do not own the storage warehouses used across transit, relying instead on existing warehousing networks and partnerships.
- Bookings: Freight forwarders handle the often complex booking chain associated with reserving cargo space on carrier planes, ships, trains and trucks. They compile the necessary booking documents alongside contract management of carrier reservations.
- Pricing: As your import and export shipping partner, freight forwarders negotiate your overall freight charges, as well as documenting billings through transparent invoices and bill of lading contracts.
- Consolidation: The freight forwarding process seeks ways to safely yet functionally consolidate relevant freight along shipment routes, which results in cargo discounts, streamlined freight collection and overall reduced fares.
- Insurance: Freight forwarders acquire appropriate levels of cargo insurance for your shipped merchandise. In the event of an accident, it is also the freight forwarding company who files and manages insurance claims. Cargo insurance can be a complex and time-consuming domain for businesses to manage internally, particularly once international shipping operations — and the subsequent customs, inspections, taxes, licenses and more — come into the picture.
What Industries Use Professional Freight Forwarders?
Any organization producing goods that require cargo transport will be involved in some aspect of freight forwarding. In particular, merchandise producers and manufacturers whose products demand international shipping benefit greatly from working with a freight forwarder, as that forwarder handles the vast network of shipping carriers and vendors necessary to get items to their final destination.
You’ll find professional freight forwarding services participating in the transportation and warehousing of:
- Consumer goods
- Furniture and appliances
- Agricultural products
- Manufacturing components
- Metal ores, minerals and fabricated metals
- Coal and petroleum
- Industrial machinery
- Time-sensitive shipments
- Temperature-controlled cargo
- And much, much more
How Does a Freight Forwarding Company Work?
The freight forwarding process is multi-stepped and involves many parties. The role of the freight forwarder is to step in and act as a simplifying mediator, managing the complete shipment of your cargo across multiple transportation carriers, customs officials and handlers.
This multi-staged freight forwarding process flow chart generally breaks down into seven stages.
1. Export Haulage
Export haulage is the first action in freight forwarding and consists of your goods being moved from their point of production to the initial distribution warehouse. These distribution warehouses may or may not be owned by the freight forwarder themselves, depending on initial transportation distance. Overall, the export haulage stage is typically still domestic, involving truck or train merchandise transport.
2. Items Checkpoint
Items checkpoint is when the freight forwarders or their field agents formally receive and itemize your cargo. This step triggers proper packaging, itemizing and labeling activities, as well as early-stage documentation of import and export lists, plus any extra cargo insurance coverage. Now, cargo will get packaged and prepared for domestic or extended international transport.
3. Export Customs Clearance
As its title suggests, export customs clearance is when international shipments of cargo receive official permission to leave their country of origin. Freight forwarders procure the necessary certificates of origin for this clearance after submitting cargo-detailing paperwork to customs agents. They can then move onto negotiating carrier reservations and final contracts.
4. Origin Handling
Origin handling is the process by which carriers along the transportation route open, reseal, inspect and validate cargo, as well as reviewing booking documents.
Origin handling occurs during extended cargo transport, since different transportation vendors across trucks, ships, planes and trains load and unload cargo multiple times.
5. Import Customs Clearance
Import customs clearance occurs when international cargo arrives at its final country of distribution. Local customs agents inspect physical cargo as well as cargo documentation. Approved merchandise can legally get transported off ports and through smaller, regional distribution networks.
6. Destination Arrival and Handling
Destination arrival consists of the administration and movement of cargo once it’s cleared customs. Most notably, this means shipments can now travel to relevant import warehouses and distribution channels along its transportation route until they reach their destination.
During the destination arrival and handling phase, freight forwarders also receive all carrier-related documents, including carrier bills, outstanding inspection documents and any remaining transportation invoices.
7. Import Haulage
Last but not least, import haulage delivers the cargo to its endpoint recipient. It is the final stage of the freight forwarding process and signals the completion of a successful extended freight shipment.
When to Use a Freight Forwarding Service
There are several scenarios where businesses stand to benefit from partnering with a professional freight forwarder.
1. You’re Scaling Up
Producers who need access to more modes of transportation are prime candidates to begin vetting freight forwarders.
More specifically, organizations whose end-to-end shipping needs — even certain domestic ones — now require the use of air, rail, ground and waterway passage can navigate these new transportation modes more straightforwardly and cost-effectively through the assistance of a freight forwarder. Rather than take on transportation vendor management alone, a freight forwarder vets your burgeoning transportation carriers, makes bookings and handles billings, all so you can concentrate on scaling up quality outputs.
2. You’re Importing and Exporting Internationally
Introducing your merchandise to foreign markets is an exciting development for any business. Getting those products there, however, can be a different story.
A freight forwarder’s expertise takes care of the complete gamut of international shipping and trade operations. They manage the logistics of customs regulations, port controls, paperwork, licensing and inventory inspections, which are formidable undertakings and can take years of field experience to properly navigate.
3. To Increase ROIs
Specialization saves producers money. In today’s ever-competitive manufacturing marketplace, the shipping discounts alone make freight forwarding services a game-changer for commercial goods manufacturers, even after factoring in forwarder’s rates. What’s more, expert freight forwarders offer additional services like cargo consolidation consulting and methods of international payment management.
When these domains are off your plate, your business can prioritize increasing production without sacrificing quality or integrity. As a result, businesses can see per-unit fixed costs of production run decrease — all while expanding market reach.
4. You Want an Expert
Freight forwarders handle both the primary and secondary services associated with the international shipping industry. From one convenient vendor, your business has a cargo partner offering guidance and administration into end-to-end cargo long-distance imports and export operations, including:
- Cargo insurance
- Customs inspections
- Customs documentation
- Compliant packing and itemization
- Bills of lading services
- Banking and international payment services
- Guaranteed date of delivery
- And more
A freight forwarding company’s thorough shipping expertise also provides strengthened risk assessments and risk management. These are premiums in the international shipping industry, where businesses lose between $15 to $30 billion annually to see less than 20% of all stolen cargo ever recovered. Businesses protect their goods as well as their reputation with the services of a good freight forwarder.
Choosing a Freight Forwarder
How should your organization go about selecting a freight forwarder?
Consider the following selection best practices when vetting and picking a freight forwarding service.
- Specialization: Does the freight forwarder specialize in a specific kind of cargo? What about a subsector of the manufacturing industry, such as textiles, plastics or apparel? What about international market specialization, which could be particularly beneficial if your business is entering into a new country? Many freight forwarders will focus on one of these categories, either cargo, industry or market. Identify freight forwarders who fit your exact market niche or merchandise shipping needs.
- Warehousing network/storage capacities: Larger forwarding companies may own a warehouse, which comes in handy during the destination arrival and handling step of the freight forwarding process. However, this isn’t always the case. Other forwarders outsource all storage and warehousing to their network of partners to maximize their asset expenses and use. Depending on your distribution routes, a freight forwarder with regional warehouses may be more attractive than those without.
- Agents and business partner network: Given the global emphasis of the industry, many freight forwarders operate a network of field agents stationed in various international markets. These location-specific agents provide country-specific import and export expertise, as well as represent your freight forwarding partner to customs. It’s imperative for a freight forwarding service to have connections in the appropriate markets you wish to import or export your goods.
- Freight broker bonds: International forwarders must hold a freight broker bond to obtain and renew their licenses. Appropriate regulatory authorities issue these bonds after a complete financial and operational vetting of the freight company. Bonds assure companies are financially stable as well as legally compliant in their shipping operations,
Experienced Freight Forwarding and Logistics Company in NYC
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- Full-service merchandise crating and packing
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Mitchell’sNY Logistics is one of New York City’s premier delivery and logistics services. With more than 70 years of experience under our belt, we offer crating and freight forwarding services as well as complete supply chain logistics for companies with shipping needs in all 50 states. We pride ourselves in Delivering Better Solutions, so much so that our clients regularly call us logicians! Contact one of our customer care representatives with questions or to request a quote.