The Basics of Freight Forwarding

Quick and easy primer on freight forwarding

What is Freight?

Freight is defined as cargo or goods that are transported in large quantities via air, rail, sea, or air. The shipping process can be complex. One of the most important and initial components of freight activity is planning. Freight forwarders account for specific factors regarding goods when in the planning stage:

Type
Volume
Amount
Packaging
End Point or Destination

What is Freight Forwarding?

Freight forwarders are experts in managing logistics for companies, helping them to successfully navigate the world. In 1948, freight forwarding’s importance to global trade was recognized by Canada when the nation formed the Canadian International Freight Forwarders Association (CIFFA). CIFFA established that forwarding freight required management and control to ensure timely shipments of goods across the globe.

Freight Forwarders are pivotal to the logistics industry. They help companies streamline distribution operations using air, sea, road, and railway freight. Acting as liaisons, freight forwarders negotiate the most efficient and cost-effective transfer of goods between shippers and transportation services. They handle the planning, management, and paperwork for shipping companies and are tasked with mapping out and developing connections within the global supply chain.

What Are the Key Stages of Freight Forwarding?

In order to be successful in a globalized shipping market, freight forwarders must be specialists in managing logistics. As the experts, freight forwarders have identified six key stages of the forwarding process.

The stages of freight forwarding are:

1. Export Transport

– Often called export haulage. This stage occurs when a freight forwarder receives cargo from another company.

2. Export Customs Clearance

– Prior to an international shipment entering a country, the country of origin must approve its departure. Customs brokers are often hired to handle this step.

3. Origin Handling

– Also known as items checkpoint. During this step, cargo is unloaded and inspected for damage and proper documentation. It is also checked for restricted items such as:

– Flammable liquids

– Narcotics

– Alcohol

– Weapons

– Fresh food / animals.

4. Import Customs Clearance

– Customs agents confirm documentation and cargo as well as legal requirements for admission into the country. Freight forwarders pay any fines or costs for the shipper and charge them later.

5. Destination Arrival and Handling

– A shipping company hired by the freight forwarder receives the shipment once it passes customs. The shipment is then taken to the import warehouse.

6. Import Transport

– Many call this import haulage. In this final stage, freight forwarders hire transporters to deliver the cargo to the recipient.

Are There any Advantages to Using Freight Forwarders?

The role of freight forwarders was designed and operated to help other companies easily process and ship bulk orders. Freight forwarders provide solutions by solving storage and warehouse issues, obtaining necessary insurance and documentation for shipments, and communicating progress of each shipment. The single invoice billing that freight forwarders provide is also useful to clients. This type of billing allows companies to focus on other aspects of their business such as productivity and profits.

A lot of what freight shippers do involves bringing value to the customer. When companies choose to work with freight forwarders they are benefitting from their expertise. relationships, insight, and equipment. The relationships that established

freight forwarders have with carriers, shippers, port officials and other forwarding companies allows them to manage shipments in efficient and cost-effective ways.

Freight forwarders strive to mitigate as much risk as possible for their clients. By using IT software, freight forwarders are better able to fulfill customer needs. Inaccurate or missing paperwork can result in lost merchandise and fines. Sometimes tariffs need to be negotiated and customs regulations must be handled. By managing the logistics process, freight forwarding companies often avoid those mishaps. Forwarding companies understand the risks of shipping via land, sea, air, and rail and make it their business to manage those risks and be of benefit to their client.

Industries that Benefit from Freight Forwarding Services

Manufacturing
Pharmaceuticals
Medical
E-Commerce
Construction

Services that Freight Forwarders Provide:

Preparing documents for importing or exporting goods
Selecting transportation providers to move goods to their destination
Negotiating freight charges
Consolidating freight
Managing storage inventory
Filing insurance claims

Freight Forwarders are Rebalancing the Supply Chain

Without freight forwarding, the global supply chain would slow down and eventually fail due to a myriad of complications. The pandemic provided opportunity for freight forwarders to capitalize on providing companies safe and alternative shipping. With border closures and compounded supply chain issues, forwarders made sure that product shipment was seamless as possible. Post-COVID, freight forwarders have been working together to improve the interconnectivity of networks for more continuous cargo shipping amid a restructured supply chain.

Here are several other ways they are helping:

Customs Brokerage

– Thanks to the pandemic, many forwarders also became customs brokers. With the war in Ukraine raging, this is essential in managing logistical strategy, compliance, & packaging as international laws change.

Networking

– Cultivating and sustaining positive relationships with import and export shippers, port officials, and other forwarders is beneficial to the global supply chain. A good network can help to lower costs, speed shipments, limit tension and add to a company’s value.

Modes of Transportation

Being able to correctly navigate the globe by air, over the sea, and across the land by rail or truck is essential to the successful delivery and distribution of goods. The actual process of moving goods from one place to the next is called freight shipping. Freight shipping can be a transport by air, land, or sea.

The five most common methods of transportation are: roadways, railways, airways, waterways, and pipelines

Road

The most common mode of transportation for freight is trucking. Trucks can reach most destinations across the supply chain and because of the relatively low cost are often used to transport substantial amounts of cargo.

Types of Truckloads

Full Truckload (FTL): 53 feet of cargo room is needed to move freight. FTL shipments are the fastest shipment because cargo goes to the destination from the point of origin.
Less Than Truckload (LTL): If there is not enough cargo to fill all available cargo space, freight is usually consolidated with other shippers and routed through a network.
Intermodal (ITML): Cargo is shipped using multiple modes of transportation.

– Chassis: A specialized trailer that is necessary to move ocean containers on roads. Requires a chassis payment fee.

– Multimodal: When more than one mode of transportation is used after an ocean container is opened and the goods are delivered.

Rail

Railroads and railway freight plays a crucial role in supply chains across the world. They make for efficient & convenient ways to transport freight and are more environmentally friendly than trucking. The EPA projects that by 2025 shipments of U.S. goods will grow by 23.5% and in 2040 by 45%. Conversely, projections show that air emission from freight shipment will exceed the growth in emissions from all transportation, passenger transport included.

Railroads are extremely important to the globe and the global economy. By reducing fuel use, greenhouse emissions, and helping to lower the costs of goods, the low costs of railroads are improving the supply chain. Technology has also played a huge role in continued railway success by improving safety and productivity.

Here are some products often shipped via Rail Freight:

Intermodal: Shipping containers and truck trailers of retailer goods
Energy: Fossil Fuels and other commodities (crude oil, ethanol, coal)
Chemicals: Products including fertilizer and corrosive substances such as caustic soda.

Sea

Most the world’s cargo shipments are sea freight (ocean freight). According to OECD, approximately 90% of all goods are carried in the open sea. The ocean keeps international trade alive. As a business practice, the shipping sector purchases ships and supports ship building production. It also utilizes IT logistics services, harbors, and terminals, adding value to the economy in the form of employment and commerce.

Shipping containers are used for sea freight. The containers are rectangular metal structures that can be freely moved from one mode of transportation to the next. The intermodal and multimodal modes of transport help to enhance the efficiency of goods, making for safer and swifter transportation.

Container Fundamentals

Full Container Load (FCL)
Less than Container Load (LCL)
Standard Container / Dry Van / High Cube (STD/DV/HC)

Air

Everyone wants fast shipment and often the fastest way to get cargo shipped is via air transportation. If cargo is high value or needs to be expedited, air freight is the typical mode of transportation.

Air Freight is valued in industries including:

Automotive
Aerospace
Electronics
Pharmaceutical & Healthcare

What is an Air Freight Broker?

For many shippers, choosing the best shipping option can be difficult, especially when packaging for air freight. Air freight is complex and has a range of options.

Air freight brokers assist shippers and help them to make the best shipping choice at the best price. By managing the entire shipping process and organize exchanges between multiple carriers or delivery stops, air freight brokers are better positioned to negotiate the best rates for factors such as space and speed.

Why is Air Freight Preferred?

Speed
Reliability
Improved inventory carrying costs

Freight forwarders simplify the air freight shipping process and take away the responsibility of exchange as product are shipped on cargo or passenger aircrafts.

Due to international and domestic air cargo being severely structured, many shippers use freight forwarders who wholly manage logistics operations for air freight. Air freight forwarders also specialize in producing the nine key documents that assist with insurance and customs.

Key Freight Documents

Shipping quote
Commercial invoice
Material safety data sheet
Shipper’s letter of instruction
Booking confirmation
Packing list
Letter of credit
Certificate of origin
Bill of lading / Air waybill

Freight Forwarders Have Several Shipping Options for Cargo:

Next Flight Out
Consolidated
Deferred
Air Charter

Differences in Air Freight Rate and Sea Freight Rate

The cost of air freight is calculated by weight, the cost of sea cargo is calculated by volume.
Sea freight normally has minimum weights and measurement cargo requirements.