Freight Forwarder

A freight forwarder may be defined as a consolidator that collects small shipments from shippers, consolidates them into large loads, and uses a basic mode to transport them to a consignee destination. At destination, it breaks the load down into individual shipments and delivers them to the correct consignee. Freight forwarders have been compared to wholesalers in the marketing channel or to high street travel agents, except that they arrange transportation for freight, not people.

Before describing the activity of a freight forwarder, it is important to clarify what are shippers and carriers. The shipper is the party that requires the movement of the product within the supply chain. The carrier is the organization that moves or transports the product. For example, haulers or trucking companies carry freight on trucks.

Freight forwarders can be classified as domestic or international (foreign), depending on whether they specialize in shipments within a country or externally to other countries. They purchase transport services from any of the five basic transportation modes—motor, rail, air, water, or pipeline. For instance, the domestic surface freight forwarder presents the consolidated shipments to railroads or haulers for intercity movement. Foreign freight forwarders, now designated in the United States as ocean transportation intermediaries under the U.S. Shipping Act of 1998, deal with the forwarding of an export shipment.

Advantages

Due to advances in information technology and relaxation of customs barriers (mainly in EU and NAFTA spaces), companies are outsourcing their noncore functions and freight forwarders have become a viable shipping alternative for many firms. Freight forwarders consolidate a large number of small shipments, from a number of customers or shippers, into large shipments in order to fill entire truck trailers or railcars that transport items at truckload or carload prices. Due to consolidation efficiencies, freight forwarders are able to offer shippers lower rates than the rates they could obtain directly from the carrier, because small shipments generally cost more per pound to transport than large shipments. Freight forwarders provide, for that reason, valuable services to both the shipper (lower prices and faster and more complete service) and the carrier (consolidation). The freight forwarder makes its revenue from the difference between the higher less-than-volume rate the shipper pays and the lower volume rate it obtains from the carrier. Freight forwarders procure transport services from a range of carriers, although today they may own the vehicles themselves.

International freight forwarders may have a central role in the export strategies of many firms and most companies can benefit from utilizing their services. This is mainly true for companies new to the international trade field, with small or irregular export activities, and for those located far away from the main exit or entry ports of their country. Freight forwarders have a strong knowledge of transport alternatives, can prepare and provide the required international documentation, are able to offer a lower transit time for small shipments, special freight handling, and customs clearance, and, because they are regulated carriers, are liable for cargo damage. Even global companies, with their own export department, may use the services of an international freight forwarder, which helps coordinate shipments at the port of exit and activities at the final destination.

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