What is freight forwarding?
Freight forwarding is the strategic planning and coordination of the international movement of goods via air, sea, rail and/or highway transportation. In this guide we take a deep dive into the world of freight forwarding. We explain the major role played by freight forwarders in the shipping industry, before outlining how the freight forwarding process typically works. Finally, we provide our top tips when it comes to selecting the right freight forwarder for any job.
What is a freight forwarder?
A freight forwarder is a company that arranges the commercial transportation of cargo, working as an intermediary between companies that import/export goods and the businesses that need them. They plan each step of every shipment on their client's behalf, from storing goods before they are shipped to ensuring they pass customs. While a freight forwarder does not physically transport shipments themselves, they are experts in logistics management and work with rail, road, air and maritime transport providers to ensure products arrive on time and in good condition.
While each project will differ, freight forwarders usually carry out a combination of the following tasks for clients:
- Choosing the best transportation route and conditions for each individual shipment.
- Advising on the packaging, labelling, loading and stowage of products.
- Selecting the best carrier(s) and booking consignments to get the goods to their destination.
- Tracking shipments and keeping the client updated of their whereabouts (often using a Transportation Management System).
- Customs brokerage, managing and submitting all relevant import/export documentation on the client’s behalf.
- Arranging any warehousing required during the shipment’s journey.
- Optimising costs at each stage of a shipment’s journey, including freight charges, special documentation costs, customs duty, and negotiating preferential rates with carriers.
- Delivering environmental reporting with key metrics including carbon footprint KPIs.
- Supplying cargo insurance, often with advantageous conditions and competitive premiums.
- Filing insurance claims on behalf of the client as/when necessary.
- Cargo space scheduling to consolidate freight into fewer shipments (where possible) in order to reduce costs.
Using a freight forwarder offers a number of benefits for clients, including:
By consolidating multiple smaller shipments that would not fill a truck/container by themselves, freight forwarders can split transportation costs across multiple consignments, resulting in cost savings for the client.
Importing and exporting can be costly and very time-consuming. Using a freight forwarder helps clients streamline their activity for improved efficiency.
Quicker, easier customs clearance
Many freight forwarders are Authorised Economic Operators, meaning they benefit from simplified customs clearance, such as deferred payment of import duties which avoids goods getting held until after payment.
Clients can use one company for all their freight requirements and so only pay one invoice from the freight forwarder, rather than deal with multiple suppliers.
Lower administrative workload
Freight forwarders provide storage and transport solutions, as well as taking care of all necessary documentation and insurance requirements. This frees up time for clients to spend on other areas of their business.
How does freight forwarding work?
Let’s take a step-by-step look at how freight forwarding works – from origin to destination:
1. Export haulage
This involves moving products from the company of origin to the freight forwarder’s warehouse. Usually done by truck, a different mode of transport might be used depending on the nature of the product being moved and how far it’s being transported.
2. Export customs clearance
Before the goods are allowed to leave their country of origin, customs agents may check the products are legal and safe, as well as verifying any related paperwork. Freight forwarders often use specialist customs brokers to take care of this.
3. Origin handling
The goods are unloaded into the warehouse and inspected to ensure the correct products have arrived and that they are not damaged. The freight forwarding team will also check for any restrictions and requirements for the products to reach their destination country.
4. Import customs clearance
The goods need to pass through customs again – this time in their destination country. Once they arrive in the destination country, customs agents will check the products are legal, and have all the relevant paperwork. There are also sometimes import fees to pay, which are usually covered by the freight forwarder who then bills the shipper at a later date.
5. Destination arrival and handling
After the goods have cleared import customs, a transportation company (chosen by the freight forwarder) will gather all paperwork for the shipment, inspect the shipment and then load it, ready to be transported to the import warehouse.
6. Import haulage
This involves transporting the goods from the import warehouse to their final destination. As with export haulage, the type of product(s) and distance travelled will determine which type(s) of transport the freight forwarder decides to use.
How to choose a freight forwarder
Freight forwarding involves complex logistics and extensive regulation. As such, it is crucial that you work with the right freight forwarder. Below we set out seven key questions to help you choose the best freight forwarding company for you and your business:
1. Does their expertise align with your needs?
Get clear on your specific transportation needs and check the freight forwarder can provide the services your business needs at the volumes you need them. Let them know your strengths and challenges as a business and find out how they can support your growth.
2. Do they have well-established networks?
A supply chain is only as strong as the connections it is made from. Look for freight forwarders with local expertise in your specific market and well-established global networks so they can continue to support your business as it grows.
3. What is their approach to risk management?
Choose a freight forwarder with the skills and knowledge to handle any issues in a proactive, timely manner. Ask about their risk mitigation strategies, including what kinds of cargo insurance they offer.
4. How do they communicate?
Open, transparent communication is essential. Check whether the freight forwarder provides online tracking, timely notifications, and personal calls when you have questions or concerns.
5. What services do they provide?
Discuss all aspects of your supply chain with the freight forwarder and check they can provide support with all the services you may need (e.g. multi-modal shipments or warehouse storage).
6. How flexible are they?
Look for a freight forwarder that can quickly respond to last minute changes (e.g. switching to a different mode of transport which requires different documentation). Whether changes are caused by weather, technology, or people, you need a flexible freight forwarder who can find solutions fast.
7. Do they have the relevant licences, certifications and permits?
Check the company you’re working with has all appropriate licences and can comply with any product-related regulations relating to the transportation of your shipment.