Freight forwarding is a service that involves organizing the movement of goods from one location to another, often internationally. Freight forwarders don’t typically own the transportation assets they coordinate. Instead, they’re intermediaries between shippers and transportation services (trucks, airplanes, ships and railways). They manage the logistics involved in the process, including route planning, documentation, customs clearance, transportation booking and freight consolidation.
Even though they don’t own the freight or transport, their operations involve risk that requires insurance.
The main functions of freight forwarding operations
When a business or manufacturer needs to ship their product to a destination, a mail service like the United States Postal Service might be fine. But when shipments involve borders, large volumes, specialized goods or oversized products, the shipping process can be complex.
Freight forwarders know how to help businesses get their cargo where it’s needed. They provide services that go beyond finding cargo carriers, including:
-
Coordinating shipments across multiple carriers and modes of transportation
-
Preparing documentation like certain bills of lading (BOLs) and customs declarations
-
Combining smaller shipments into larger shipments to reduce shipping costs
-
Managing temporary storage and assisting with onward distribution points
-
Advising clients on risk mitigation strategies, including proper packaging, insurance and route efficiency
-
Providing real-time updates on shipment locations, delays and arrivals
The markets freight forwarders serve
Freight forwarding is a big part of the international trade supply chain. Businesses rely on their logistics expertise to navigate complex global regulations, customs procedures and trade barriers. Freight forwarders cater to various industries, including:
-
Manufacturing
-
E-commerce and retail
-
Autos and auto parts
-
Food and agriculture
-
Pharmaceuticals
-
Construction materials and heavy machinery
These are just a few of the industries freight forwarders serve. If you need to import or export something, a freight forwarder probably can coordinate it for you.
How freight forwarders benefit transportation
Importers and exporters use freight forwarders to simplify transportation logistics, allowing them to focus on core operations. It can be a strategic move to achieve cost efficiencies, streamline processes and ensure compliance.
Small and midsize businesses use freight forwarders as affordable and scalable transportation solutions to compete in global markets.
Supply chain stakeholders and trucking operations use freight forwarders to optimize transportation routes and schedules, control costs, offset risk, and maximize the profitability of each run.
Direct consumers use freight forwarders for residential moves across long distances.
International shippers use freight forwarders to streamline border crossings. Regulatory compliance is critical when crossing borders. Experienced freight forwarders know how to get shipments through customs efficiently and avoid cargo impounding and other complications.
Bills of lading
A BOL is a legal document critical to the shipping industry. It serves as a contract of carriage, a receipt of goods and proof of ownership. It outlines key shipment details, including the cargo, its origin and destination, and handling instructions.
For shippers, the BOL is essential for organizing shipments, managing liability, ensuring proper documentation and facilitating proof of delivery for clients. But it can be a complex process for smaller businesses. Some freight forwarders issue BOLs on behalf of shippers and coordinate with transportation carriers.
For independent truckers and carriers, the BOL is crucial for verifying the goods they transport, providing proof of delivery and securing payment for completed shipments. They also need BOLs for roadside inspections, border crossings, weigh stations and police stops.
Errors or omissions on a BOL can lead to liability issues, delayed payments, cargo confiscation, shipping delays and disputes over damaged goods. Even if they don’t issue BOLs, freight forwarders can help prevent BOL snafus and verify their correctness.
A U.S. -Canada cross-border example
Imagine you’re an agricultural equipment manufacturer in South Dakota. You need to deliver tractors and combines to an operation in Saskatchewan. The shipment involves oversized cargo requiring specific customs documentation, specialized carriers and compliance with cross-border regulations. You hire a freight forwarder to coordinate the shipment, including:
-
Booking a transportation rig for oversized cargo
-
Preparing required documentation for customs clearance, including invoices, packing lists and certificates of origin
-
Submitting electronic customs declarations with the Canada Border Services Agency
-
Providing real-time tracking updates to you and your client at all stages of the route
-
Securing insurance for liability and cargo damage
You can focus on manufacturing and sales, knowing that a reliable and knowledgeable freight forwarder is helping you increase your sales territory.
A small business, small cargo example
Let’s say you have a less-than-container load (LCL), a load that doesn’t fill a standard container. LCLs are tricky. One trucking company passes on your load in favor of other exporters with a full container load (FCL).
You find another trucking operation that agrees to ship your cargo, but charges FCL prices. This will cut your revenue, forcing you to increase client prices to recoup profits lost on shipping. It seems like a losing situation for everyone.
You decide to call a freight forwarder. They match you with truckers who are willing to take smaller loads of your cargo type. They coordinate LCLs with truckers looking to share their container space with multiple companies’ shipments.
They also issue the BOL, assemble the documents and provide tracking information. They even offer the option to insure your cargo. You call your insurance agent to ensure you have the right door-to-door protection. You call your lawyer to review the contracts before you sign the deal.
Call your insurance agent
Using a freight forwarder can be a valuable solution to business expansion. If you’re breaking into new shipping and transportation areas, make sure you’ve got proper insurance coverage. Once you have drafted a contract, ask your agent and lawyer to review it before you sign. Also let your insurance agent know when you’re expanding your business operations, because it can create new liability. Your agent will review your coverage to make sure you’re adequately protected.
