Role and Function of Freight Forwarders
Introduction
Freight forwarding is essential for international business activity. A Firm will face many troubles if it does not take into account how the manufactured goods will be delivered to the marketplace. Goods can be delivered by sea, air, rail, and road. Freight forwarders were first introduced in the early 1970s. Since then, they have played a tremendous role for the global business world. “A freight forwarder is an agent who handles export shipments for a fee. Freight forwarders play a very important role for exporters. Here are few of the many activities that you will conduct as a freight forwarder:
International documentation and packaging
Carrier and routing information
Export license assistance
Marine insurance rates and coverage
Warehouse and distribution services
Hazardous materials shipping compliance information”. (Role of freight forwarders)
How and Why Should a Company Hire Freight Forwarder?
In every kind of business, the documentation process consumes significant time and needs to be done according to certain rules and regulations. Otherwise, a company can face serious costs. In marketing products to the international market, it is very important to hire an experienced freight forwarder. In this regard, the primary responsibility of any freight forwarding company is to deliver goods to the last destination in an efficient and effective manner. However, numerous factors are taken into consideration when selecting a freight forwarder. For instance, does the company provide a range of services that are required by a firm? Does the freight forwarder operate in a specific area? Is the company experienced in dealing with a same product manufactured in that company? What is the cost of services, safety, and security of goods? Does the company offer a variety of services such as handling and documentation of dangerous and non-dangerous goods? Does the freight forwarder disclose a list of all charges and so on?
Role of Freight Forwarder for Exporter and Importer
Usually, the major role of freight forwarders is simply to undertake transportation and other related matters on behalf of importing or exporting firms. Obviously, an experienced freight forwarder should provide a range of additional services to compete with others. Detailed roles of freight forwarder agents or companies for any manufacturing or other business concern are as follows:
Freight Forwarder
The role of freight forwarder is often undervalued as one of the most significant element in shipping. In shipping matters, the freight forwarder assures that goods will receive the priority they need. Moreover, documentation will be appropriately filled and goods will arrive on time.
Increasing Specialization
In transportation, exporters and importers of goods prefer to leave all formalities like damaging, cargo, insurance, etc. to freight forwarders in order to focus on their business.
Freight Forwarding Transaction Management
“Freight forwarders are entrusted with the delivery of goods from one party to another, who often does not know each other. As a result, it is essential that the freight forwarder follows the set procedure and prepares accurate documentation to facilitate the transaction process”. (Hoy and Steve, 2005,)
Efficiency in Work
An efficient freight forwarder gives advice on the special requirement of various nations and provides separate rail, sea, air, and road quotations for special consignments. Furthermore, Monahan said, “Freight forwarders specialize in moving large quantities of goods over large distances, and may use their own fleet of vehicles or hire service providers of transportation”. (Monahan, 2005)
Movement of Dangerous and Non-Dangerous Goods
Freight forwarders also play a significant role in facilitating the movement of dangerous and non-dangerous cargo by all modes of cargo. Freight forwarders acts on behalf of the consignor by providing services like generating commercial transportation documentation such as air waybills, arranging and negotiating cargo transportation, arranging a warehouse, and so on.
Important Activities
Important activities of freight forwarders include cargo route planning; booking of cargo space on vessels, trains, airplanes, or other types of goods/cargo transportation; collection and delivery assignment; insurance; packing; and so forth. In addition, freight forwarders provide various services that usually involve establishment of various inland depots and clearance of goods at the port for importers. Services also include delivery of goods to consignee’s doorstep, without really involving the consignee for this purpose. However, there are numerous factors which determine equipment shipment methods mostly related to commodity, economic stability, market trends, climate, geographical elements, and politics.
Moving Freight around World
The job of moving freight around the globe is a very interesting subject. Agents are normally specialized in the following fileds: (1) General commodities globally by sea air or land. (2) Sea-freight and Airfreight projects to define areas. (3) Domestic internal transport. (4) Sea freight or air freight consolidators globally. (5) Sea freight or air freight consolidators to particular areas. (6) NVOCC /Expeditors operators.
Freight Forwarders are Not Courier Companies
According to Corlley, “Freight forwarders are not courier companies, which are often associated with words such as parcel, express, package and air. A prudent exporter will find that a forwarder offers more options and usually better rates than a courier for anything other than documentation and small parcels- even if the forwarder book cargo space on a courier’s air craft”. (Corlley, 2002)
Nowadays, both kinds of freight forwarders are providing services. Some provide services working with appointed agents and others have international offices. Nonetheless, in any case, a freight forwarder is usually a key link between the vendor and purchaser and an agent to carrier, both sea and air. From logistics point of view, freight forwarders have helped greatly in churning the wheels of industry, while working along with carriers or their representatives.
Functions of Freight Forwarders for Exporters
Quotation of Expenses
Firstly, freight forwarders have to provide exporters with an early quotation of expenses such as port charges, cost of special documentation, counselor fees, cost of freight, fee of freight forwarder, insurance costs, and so forth. In addition, the most important function of any freight forwarder is to recommend safe, economical, and timely routing and book space with a carrier.
Labeling, Packing and Containerization.
Freight forwarders advise on or arrange for suitable labeling, packing, marketing, and containerization. Besides, they give advice on stowing and container usage.
Timely Report of all Activities
While providing services freight forwarders stay in touch with their clients and see that their shipment of goods, once delivered to the carrier, do indeed shift out and arrive at their destination.
Insurance of Transport
It is a duty of a freight forwarder to insure transport if not done by the exporter. Obviously, it is a function of freight forwarder to ask about insurance, its coverage, limitations, etc.
Distribution and Storage of Goods
For the storage and distribution of goods, freight forwarders arrange warehouses. These warehouses are arranged either soon after the clearance of goods from Custom or while goods are in possession of clearance agents. Furthermore, freight forwarders give advices about services, procedures, and charges.
Handling of Dangerous Goods
“To tackle the problem of hidden dangerous goods (DG) inside air cargo consignment, ICAO has imposed a requirement that staff of freight forwarders, regardless of whether they involved in the direct processing of DG, should receive DG training commensurate to their functions.” (International Freight Forwarding in Canada, 2006) In light of the aforementioned law, while providing services to clients, it is the most important function of freight forwarders to work according to the law.
Consolidation services
According to Brooks, “Provide consolidation services to small shippers without dedicated capabilities, as well as to shippers of all sizes that have opted to outsource all or part of their logistics functions”. (Brooks, 2007)
“A freight forwarding service generally provides one or more estimates to the client along with advisement, when necessary. Considerations that effect price will range from origin and destination to special requirements, such as refrigeration or, for example, transport of potentially hazardous materials”. (What is Freight Forwarding, n.d.) Assuming that the customer accepts the forwarder’s bid, the freight is prepared for shipping. Afterwards, the freight forwarder undertakes the responsibility of arranging the transport from point of origin to destination.
Degroupage Agents and Groupage Agents
As most freight forwarders have worldwide networks with correspondents or branches in all important cities and major ports, they act as degroupage agents or groupage agents. Moreover, working for exporters and importers, they work as a consolidation or groupage. In this regard, they also provide services in circumstances when smaller shipments have to be shifted into a trailer/carload, load container.
Freight Forwarder Acts as an Advisor
The most significant function of a freight forwarder is to act as an advisor and agent for the shipper. For transportation of dangerous or non-dangerous goods from one place to another over a long or short period of time and distance, a fundamental function is material handling, which includes many complexities in international cross border transportation, such as large number of documentation required while shifting goods.
Proforma Invoice and LC (Letter of Credit)
“Estimate complete Export transportation and related costs for quotes (on Proforma invoice) and L/C. Advise of drawback opportunities for previously imported cargo being exported. Can put exporter in touch with experts in the fields of trade financing, international marketing, government export requirements, international banking, and marine insurance”. (Freight Forwarder’s Functions)
Functions of Frieght Forwarder on Behalf of Importers
Record of Received Material
When goods are received, the freight forwarder, on behalf of the importer, establishes appropriate records, which normally include the detail of shipper’s address, date of receipt of goods, condition of packing (when container arrived at the destination), inland freight charges, number of pieces in shipment, NSNs (national stock number), on hand holding location, delivering carrier, and so forth.
Payment of Inland Freight Charges
“Some freight shipments are delivered to the freight forwarder on a collect commercial bill of lading (CCBL). Prompt settlement of these charges must be made by the purchaser/freight forwarder or the purchaser must establish a credit arrangement with the delivering carriers”. (Freight Forwarders – ExportAssistance.com)
Inspection of Shipping Containers
It is a function of freight forwarder to inspect shipping containers when received from delivering carriers. In inspection of work, the importing party’s freight forwarder inspects for any kind of damage, overage, shortage, or misdirected shipment. However, misdirected and damaged goods should be held in an assigned area until a claim is filed in accordance with the abovementioned loss against the carrier.
Custom Clearance Documents and Making of Movement Documents
The freight forwarder, on behalf of the importer, prepares all custom clearance documents, which include (1) The BL bill of lading for the movement of goods by the selected surface or air carrier. (2) Ocean or air manifest. (3) Delivery of dock receipts for the surface material. (4) Certificate of cargo for explosive and dangerous goods. (5) Custom declaration and other custom related documents.
Preparing Material for Onward Movement
When preparing material for movement of goods for the buying country, the forwarder usually marks and labels shipment of goods for processing and identification. Other related services of freight forwarders for importers include filing of claims against the delivering carrier, identifying shipper discrepancies, storage charge before transshipment, staging and processing material for onward movement, shipment consolidation, control of shipment, reporting system, cargo insurance, and so on.
Conclusion
Lastly, since the birth of this industry, it has played a tremedous role for both importers and exporters. More than 90 percent of manufacturers use services of freight forwarders. In today’s business world, freight forwarders offer many services that make economic activities faster and cheaper for import and export. Business partners, while trading outside the country, can save money and time because most registered freight forwarders have a wide range of network all over the world that makes it possible to trade manufactured goods globally. According to Buisson, a researcher in this area, “I recommend using freight forwarders instead of carriers because a good freight forwarder will shop several carriers to get you the best rate.” (Buisson, 2005) Furthermore, if exporters have insufficient volume of goods to send, the freight forwarder can consolidate his goods with others for delivering purpose and hence it costs exporters less..
References
Brooks A. Bentz, (January 1, 2007), Journal Article, Logistics Management, Global Logistics Forward thinking on freight forwarding
Buisson, Paul. (2005, May 15), Journal Article, International Shipping/Freight for Beginners
Corlley William, (2002), Journal Article, An Introduction To Forwarding, Trade Logistics 101
Freight Forwarder’s Functions
http://www.hcbennett.com/Freight%20Forwarder’s%20Functions.htm
Accessed, May 21, 2007
Freight Forwarder Functions
http://www.bcbfa.org/FF_Functions.htm Accessed, May 21, 2007
Freight Forwarders – ExportAssistance.com
http://www.exportassistance.com/exportfaqs/ef-freightforwarder.html
Accessed, May 21, 2007
Hoy, Steve. (2005, August 22), Journal Article, Freight Forwarding
International Freight Forwarding in Canada, (June 2006)
Monahan, James. (2005, December 07), Journal Article, Freighting Around the World.
Role of freight forwarders
http://resources.alibaba.com/article/6321/Role_of_freight_forwarders.htm
Accessed, May 21, 2007
What is Freight Forwarding?
http://www.wisegeek.com/what-is-freight-forwarding.htm
