What is the meaning of freight forwarding?
Freight forwarding involves planning and coordinating the movement of products, goods, and materials across international borders, on behalf of shippers. It also involves warehouse planning, supplying cargo insurance, and customs brokerage.
It is basically about strategic logistics planning and execution to enable the international movement of goods, on behalf of shippers. Freight forwarders will take care of freight rate negotiations, container tracking, customs documentation, and freight consolidation, as well as other tasks.
Importing and exporting opens up rather lucrative opportunities for businesses that have what it takes to execute strategic logistics plans. However, the logistics of international shipping tend to be particularly complex. It calls for expert knowledge of customs standards and protocols, which tend to vary across countries and even across ports. It also requires agile problem-solving skills for situations where weather, technology, or human nature cause delays to the delivery schedules. You would also need to have a knack for network building, due to the fact that in many ways, a supply chain will only ever be strong as the parties and links propelling it. You would also need to have a license for it.
Freight forwarding is rather important wherever customs brokerage, warehouse planning, cargo scheduling, and cargo insurance are required.
How do you become a freight forwarder?
Here are the steps involved in becoming a freight forwarder:
Figure out what type of entity you are
Are you going to be a sole proprietor and operate your own freight forwarding business? Would you rather start a freight forwarding business as a partnership or corporation? This determines the name that you enter on your application.
Choose your mode of transportation
Freight forwarder licenses depend on your mode of transportation. You need different licenses if you want to work on the sea, in the air, or on roads.
Figure out whether you also want to be a carrier
If you want to be a carrier, you’d have additional requirements like obtaining a USDOT number and operating authority (MC number). If you don’t want to be a carrier, you’ll only need to obtain Operating Authority.
Register for freight forwarder licensing
After deciding how you want to operate, you need to register as a freight forwarder. You’ll need to provide the information required and pay a registration fee.
Submit insurance policies
You’ll now need to submit proof of your insurance policy to the FMCSA along with some forms. The forms that you have to submit depend on how you intend to operate.
Acquire a freight broker bond or trust fund agreement
You’ll now need to decide whether you want to get a freight broker bond (BMC-84) or trust fund agreement (BMC-85). Most up-and-coming brokers and carriers who don’t have much working capital tend to opt for freight broker surety bonds.
What is the role of a freight forwarder?
The primary responsibility of a freight forwarder is to plan out and organize the delivery path of their clients’ goods, employing strategies to save time and money, figuring out shipping by road, sky, sea, or rail is the best option for a particular shipment, etc. They also deal with reviewing receipts, commercial invoices, bills of lading, and the shipper’s export declaration.
Here’s a breakdown of some of the tasks that freight forwarders handle:
Freight forwarders employ a Transportation Management System (TMS) to make every stage of the ship’s voyage more transparent and visible.
This needs a special license. It can’t be done without a customs brokerage license. Only customs brokers have the qualification to manage and submit the extensive documentation that is required to finish off the whole importing and exporting processes.
A few freight forwarders have their own warehouses that they use to store the shipper’s commodities or parts of the commodities. But most freight forwarding companies would offer to arrange to store your goods at warehouses that are owned and operated by conveniently located affiliates.
It isn’t really easy to bargain with carriers to get yourself cost-efficient shipping rates. You need to play to your carriers’ interests by balancing the pros and cons of your cargo type, time flexibility, credit status, space/tonnage requirements, and more if you want a good deal. It isn’t really a task that you could handle on your own without much experience. The good news is that you don’t have to handle the negotiations on your own because you can get your freight forwarder to handle them for you.
Cargo Space Scheduling
Efficiently and effectively coordinating and scheduling cargo space is an area where freight forwarders really shine. It’s a major part of their skillset and is where you can really see how important they are.
It takes a lot of thought, expertise, and experience to figure out whether it is profitable to consolidate a shipment, to secure timely sailings, and to even weigh the feasibility of intermodal shipping options. You would not really be wrong to say that cargo scheduling is all about figuring out the logistics of your logistics activities.
Freight forwarders work with several customers and a lot of them will need to transport shipments that won’t really take up an entire container. These freight forwarding companies offer a service known as freight consolidation for less than container load (LCL) shipping in which several small consignments are all booked aboard the same container.
When they offer these services, the shipping cost is distributed across all participating customers on the basis of the cargo’s space requirements.
Supplying Cargo Insurance
Freight forwarders can offer you a cargo insurance policy that is also referred to as freight insurance. The whole point of this cargo insurance is to reimburse the loss payee in the event that goods are damaged or get stolen in transit.
The cargo insurance does not cover tangential losses that are related to the inciting incident.
How does freight forwarding work?
Freight forwarders work to facilitate the transportation of goods to their destinations by making use of several types of carriers such as road freight, air freight, railway freight, and ocean freight. They act as middlemen between the transportation services and the shipper and hold the responsibility of taking care of the entire process, even the storage and shipment of goods. Freight forwarding companies will even negotiate the cost of the transport and pick the most reliable, quick, and economical route