Definition
Freight forwarding is a service used by businesses that deal in international or multi-national import and export. It involves a freight forwarder, who acts as an intermediary between a shipper and various transportation services. These forwarders negotiate the best possible price to move the goods along the most economical route by working out various bids and choosing the one that best balances speed, cost, and reliability.
Key Takeaways
- Freight forwarding refers to a service used by businesses that deal in international or multi-national import and export. It involves a freight forwarder, who acts as an intermediary between a shipper and various transportation services.
- Freight forwarders handle the logistics and paperwork necessary for transporting goods, saving businesses time, resources and confusion about legal and transportation requirements. They organize the transport and tracking of the freight from one point to another using multiple carriers.
- Freight forwarding agencies handle a multitude of shipping services including packing and storage, customs clearance, insurance, inventory management, and international import and export documentation. It is a comprehensive solution for businesses dealing with international trading and shipping.
Importance
Freight Forwarding is a crucial finance term, primarily in international trade.
It pertains to the process of organizing shipments for corporations or individuals to transport goods from the manufacturers or producers to a market, another final point of distribution, or directly to the customers.
Freight Forwarders are indispensable intermediaries that negotiate the best possible price across various carriers and choosing the most reliable route.
They handle all comprehensive logistics including storage, packaging, and documentation such as customs paperwork, thereby speeding up the process and reducing costs.
By understanding Freight Forwarding, businesses can optimize their supply chain operations, minimize logistical complications, ensure the safe and prompt delivery of their products, and therefore increase global business efficacy, customer satisfaction, and profitability.
Explanation
Freight forwarding is a service widely used by businesses that deal in international or multi-national import and export. The main purpose of a freight forwarder is to act as an intermediary between the client who is hiring them and various transportation services that move goods.
Freight forwarders utilize established relationships with carriers, including air freighters, trucking companies, rail freighters, and ocean liners, to negotiate the best possible price to move clients’ goods along the most economical route by working out various bids and choosing the one that best balances speed, cost, and reliability. A freight forwarder serves the dual purpose of ensuring that your shipment adheres to all local and foreign country laws and Customs procedures, and ensuring the fastest, most cost-effective route and carrier for your freight.
They also handle the logistics of these operations and carry out necessary shipping and budgeting decisions, providing documentation and conducting transactions with the carriers on the client’s behalf. In essence, freight forwarding ensures that products get to the proper location within the desired time frame and cost parameter while maintaining compliance with laws and regulations, thus strategically supporting businesses in their operations.
Examples of Freight Forwarding
FedEx Trade Networks: FedEx is a well-known name when it comes to international shipping and delivery services. But another side of their business is FedEx Trade Networks which is essentially a freight forwarding arm. They handle customs brokerage and take on the logistics of shipping goods from one point to another anywhere in the world. They arrange all necessary documents for international shipments, estimate the cost and track the goods until they reach their destination.
DHL Global Forwarding: DHL’s Global Forwarding division is one of the world’s leading providers of air, ocean and road freight services. They offer comprehensive freight transportation and logistics services, including customs clearance and warehousing solutions, to businesses of varying sizes across multiple industries.
Kuehne + Nagel: This is one of the world’s leading freight forwarders, headquartered in Switzerland. They offer a wide variety of services ranging from seafreight, airfreight, warehousing and distribution, customs brokerage, and integrated supply chain solutions. They operate globally, handling all the logistics and difficulties that come with moving goods internationally. In each of these examples, the companies represent the interests of the shippers, arranging every single detail related to shipping their goods from one place to another, ensuring the entire process is as seamless and cost-effective as possible. By doing so, they relieve the shippers from the complex and often stressful process of managing international logistics.
Freight Forwarding FAQ
What is freight forwarding?
Freight forwarding is a service used by companies that deal in international or multi-national import and export. A freight forwarder doesn’t actually move the goods itself but instead acts as an intermediary between the client and various transportation services.
What does a freight forwarder do?
A freight forwarder works out the best possible route for transporting the goods. This involves a number of different carriers and modes of transport. They negotiate with cargo carriers to achieve the most economical, reliable and fastest route.
Why use a freight forwarder?
A good freight forwarding service can save the client untold time and potential headaches while providing reliable transportation of products at competitive rates. They also provide a level of flexibility and personal attention that airlines and carriers cannot.
What are the ranges of freight forwarding services?
Freight forwarders typically offer a range of services including: tracking inland transportation, preparation of shipping and export documents, warehousing, booking cargo space, negotiating freight charges, freight consolidation, cargo insurance, and filing of insurance claims.
How do I choose a freight forwarder?
When choosing a freight forwarder, you should look for a wide range of services and a reputation of excellence in logistics and transportation.
Related Entrepreneurship Terms
- Shipping Documents
- Bill of Lading
- Freight Charges
- Customs Clearance
- Consignment
Sources for More Information
- Investopedia – A comprehensive resource for terms related to all things finance, including freight forwarding.
- Journal of Commerce (JOC) – They have an extensive coverage on freight and logistics, including freight forwarding.
- Flexport – A modern freight forwarder and logistics platform that regularly publishes content pertaining to the industry.
- Transport Topics – A premier source for news and information in the freight transportation industry.
