Dec 05 2018
Freight Forwarder vs. Shipping Lines
Supply Chain Management Series – Solution #2
In 2017, total U.S. trade with foreign countries was $5.2 trillion, which includes exports and imports of goods and services. The items range from automobiles to medical equipment, industrial supplies to consumer goods, food and more. This massive amount of goods and services, and money demonstrates just how much cargo is moved globally from port to port. To better understand the staggering logistics, let’s start with the basic goal of how to ship goods successfully.
Freight Forwarder or Shipping Lines– what defines them?
Let me begin by explaining the responsibilities of a Shipping Line and a Freight Forwarder.. This is important to understand when shipping goods internationally – if not problems could arise.
- A Shipping Line is a carrier and accountable for any loss or damage of a shippers’ goods/cargo. Booking directly with the shipping line sometimes results in more competitive rates. Plus a shipper can also choose the vessel he wants his cargo transported on. The shipper/owner of the goods can also authorize the shipping line to sign on their behalf if needed to expedite any processes.
- A freight forwarder handles the movement of goods from one point to another for the cargo owner. With experience in road, rail, air and sea transportation, a freight forwarder advises and arranges cost effective and efficient cargo shipping solutions, storage for cargo (sometimes in their own warehouses), negotiates freight rates with the shipping line if needed and books cargo with the shipping line. A freight forwarder issues its own approved House Bill of Lading (HBL), processes documents, has knowledge of border crossings and arranges customs clearance.
So what separates Shipping Lines from Freight Forwarders?
- Flexibility: Freight forwarders can be more flexible than shipping lines in terms of customer service and rates -- a very important aspect for clients. Instead of going directly to one shipping line, a freight forwarder will negotiate on its customer’s behalf to get the best competitive deal and shipping arrangement for the goods.
- Service: A freight forwarder is a total logistics provider, which means importers can access a wide variety of services in one stop. A freight forwarder can offer different types of incoterms depending on the importers’ desired arrangement.
A freight forwarder can offer services a shipping line cannot like Ex-Works and airfreight.
- Rate: A Freight forwarder uses a shipping line to transport goods since they do not own vessels, however, they can negotiate between various shipping lines to get the best rate. The freight forwarder uses the extreme competition between shipping lines as leverage to negotiate the best rate. It also issues its own house bill of lading and other shipping documents, which saves time for its customer. Freight forwarders act as agents to and for their customers. Shipping lines act as the carrier of the customer’s cargo.
- Reliability: Communication is key when it comes to shipping goods from point A to point B. Most shippers of goods -- if they are new to the business -- claim it is hard to contact a shipping line at times and also hard to get consistent updates on the arrival of their goods. Freight forwarders, on the other hand, have a reputation in the industry as reliable service providers. They can handle problems along the journey like bad weather, custom errors, inaccessible routes, vehicle breakdowns and other mishaps that can delay the transport of shipments.
- Contract Agreement: In addition to negotiating the most competitive rates, a freight forwarder can offer demurrage, detention, ocean freight, credit terms and the ability to steer clear of general price increases. Besides offering a wide variety of shipping lines to choose from, a freight forwarder can offer its customer a service/contract agreement with a shipping line that provides extended free time and the waiver of unnecessary charges, therefore helping customers reduce overall shipping costs for their cargo.
The main difference between the two is that a freight forwarder gives advice and consults as an expert and tries to find the best pricing for a shipment of goods/cargo. A shipping line carries the cargo so the customer knows exactly where the cargo is, however the pricing may not always be the lowest and service offers not as varied.
Why Shipping Lines and Freight Forwarders’ rates differ
I have found freight forwarders to negotiate better rates from steamships because of their established relationships and the volume of business they conduct. For example, if a monthly contract between a freight forwarder and a steamship exists, the freight forwarder can check rates and negotiate lower pricing. Remember steamships want to carry a full load – if they are guaranteed ten containers each month they will provide better rates.
Ocean freight forwarding services deliver the capacity and routing shippers require. Options are sourced from all the major carriers with full knowledge of how to optimize schedules and load options for the shipper’s benefit.
Tying the knot: Freight Forwarder and Shipping Line merges
The best win-win scenario for supply chain management is when a freight forwarder merges with shipping lines. This is a trend that is becoming more prevalent in today’s supply chain management. A freight forwarder has asset based solutions – for example trucks, warehouses etc. — which offer control and reliability not to mention a financial commitment. A shipping line can negotiate better rates that directly benefit the shipper. This union between a freight forwarder and shipping line creates a one stop solution for all your shipping needs.
In closing, there will always be a need to have goods moved efficiently and cost effectively from one point to another. In my vast experiences I have found supply chain management is at its best when a shipper engages a company that offers both freight forwarding and shipping line services.