What do Freight Forwarders actually do?

Bob, my client, was back. After our conversation about international logistics he wanted to discover more. 

Bob’s company imports about 200 containers a month from Asia and they book their shipments directly with the ocean carriers. Bob is a smart man, but newer to his global transportation responsibilities. He wanted to learn more and get a better understanding of international shipping and logistics. His goal was to explore alternatives to the sentiment This is how we have always done it! to allow him to make informed decisions in his new role. 

As Bob learns the ropes of his new responsibilities, he gets very little information from his boss who advises that their company tries to do carrier direct shipments. After Bob’s inquiry to the reasoning behind the decision, his boss advised “This is how we have always done it!”, explaining that it is a good way to save money by cutting out the middle man.

Bob has not worked with a 3PL (3rd Party Logistics Provider) before. His question this time was “What do Freight Forwarders actually do?” 

Freight Forwarding companies are considered service providers. They arrange international transportation on behalf of their customers, who outsource the complex piece of international transportation. 

Generally, US companies require raw material from overseas so it can be refined, assembled, or used in a different way for production of goods that are sold to the US market. Many US companies focus on production and sales, not the importing process. 

Bob agreed and confirmed that his company outsourced the entire manufacturing process overseas, because the labor cost is lower than in the US. He added: “My focus was on warehousing and distribution within the US market. I was also tied in with sales and finding new customers.” 

We discussed Bob’s responsibilities and tasks. Bob concluded that he does not “have the time to deal with everything that goes into the import process”.  

I explained that companies with regular business (to and) from overseas work with freight forwarders because they trust them as experts in international transportation. Bob interjected: “Could we run through my company’s scenario?”

We defined Bob’s company’s scenario: The US-based company sells to US clients and sources products overseas. Their manufacturers and suppliers are based in China and Taiwan. Bob’s company is good at planning and forecasting product needs. Chosen mode of transport: sea freight imports (slowest, most cost efficient).

“Okay”, Bob said, “what happens if I tell a freight forwarder to handle my shipment?”

Freight forwarders actually coordinate the involved parties, such as the supplier, the ocean carrier, the customs broker, and the final recipients. In Bob’s case he would provide shipment details to his service provider. A transportation plan would be established. 

For Bob, that could mean picking up a container at his supplier in Taiwan, arranging the ocean shipment to the US, coordinating the required customs process, and arranging delivery from the US port to his warehouse. Throughout the journey, the freight forwarder coordinates the different parties and keeps Bob informed until the container arrives.

That's why I like to say Freight Forwarders are your travel agency for freight.