For every product businesses and consumers buy, there is often a complex process that goes on behind the scenes in order to get supplies or finished products from one place to another. Companies such as freight forwarders and third-party logistics companies (3PLs) can help businesses get shipments from one place to another so they ultimately get in the hands of buyers.
While freight forwarders may work with a variety of different kinds of businesses, from agriculture to energy to manufacturing, here we will focus on when it may make sense to use a freight forwarding agent in your ecommerce business, as well as how freight forwarding can help your business grow.
What Is Freight Forwarding?
Freight forwarding is like a travel agency for products. These firms coordinate the transportation services and paperwork that go into moving a product from point A to point B while trying to make the process as hassle-free as possible for the customer that uses their services.
Just as a travel agent doesn’t own the bus or plane you’ll take to get to your destination, the freight forwarding company doesn’t own the trucks, planes or boats that products will be transported on. Instead they will coordinate shipments through various carriers and work to help you find the right solution for your business.
If your supply chain involves moving items between countries, you will likely work with both an international freight forwarding company and a customs brokerage firm to make sure your goods arrive on time and with their proper documents. You may also work with a logistics company to take care of additional steps in the fulfillment process as we’ll describe in a moment.
Freight forwarding companies offer services that often include:
Arrange cargo pickup and dropoff
Work with shipping companies to arrange transport for the cargo, including:
Arrange specialty transportation (such as refrigeration)
Help you navigate customs regulations
Prepare import and export documents
Bills of lading
Certificates of origin
Note that while the freight forwarder will likely carry freight liability insurance, it protects the carrier or freight forwarder. You may also want to explore cargo insurance to protect you from loss.
What Is The Difference Between Logistics and Freight Forwarding?
Logistics companies often offer a range of services. Some of their services may overlap with those of freight companies, but they will often go beyond what’s available. For example, they may handle commercial invoices as well as payments.
They may offer services such as warehousing, packaging, labeling and shipping to the customer when a purchase is made. They may also handle customer returns and restocking.
Logistics companies often have expertise in certain types of businesses, and so it is helpful to identify providers that serve your unique niche. In ecommerce, for example, food products that require refrigeration will be handled much differently that clothing, for example.
What Is The Goal Of Freight Forwarding?
A company will usually hire a freight forwarding company to save time and/or money. A business could potentially hire an employee to manage this but he or she will have to know what documents are needed at the final destination, what trucking companies cover their routes, the different transport cost options, etc.
In many cases it makes sense to outsource this to a company with deep expertise. Also keep in mind that smaller businesses may not have as much leverage as a freight forwarder if there are bottlenecks or problems.
Freight forwarders often have relationships with different shippers,and can get discounts on domestic or international shipping. They know what documents are needed to get items through customs and where current hold ups are, they can advise whether consolidation of your shipment with another is possible for a price reduction and much more.
While your business does pay for the freight forwarders services, you may ultimately save money in terms of labor, freight shipping costs, help with customs clearance or any number of other benefits.
Businesses that are just starting to reach the point that they may need a freight forwarder may also particularly benefit as they may not yet have the staff or internal systems set up to handle the myriad tasks involved with domestic and international trade/shipping.
How Does Freight Forwarding Affect Ecommerce?
It’s easier than it ever has been to start an ecommerce business. However it’s not always easy for small businesses to navigate the logistics of getting supplies or products to sell, and then fulfilling sales, especially when consumers often expect fast, free shipping.
As just one example, competition for space in ocean freight containers can be intense, and that problem has been exacerbated recently by supply chain disruptions. Freight forwarding services will be in a better position to know which Non-Vessel Operating Common Carriers (NVOCC) have space to get items transported across the ocean.
Rather than trying to become an expert in supply chain management, it often makes sense to outsource some or all of the process to freight forwarders and/or logistics services. As an added advantage, using these services can also help ecommerce businesses grow by expanding into global markets.
Some ecommerce companies use a combination of freight forwarding and 3PL. For example, let’s say you have a business selling products you source in China on Amazon in the U.S., and perhaps other countries. You may use a freight company to help manage your international shipments to get the product to warehouses. And then you may use Amazon FBA or another 3PL to package and ship items to customers when they purchase them.
Whether you are starting or growing your ecommerce business, choosing the right freight forwarding company or logistics firm can make a big difference in your long-term success.