BASIC GUIDE TO FREIGHT FORWARDING

Whether you're an experienced freight forwarder/shipper, or a business that's new to the industry and have no clue what freight forwarding is about, this series is going to help you in solidifying some ground work before you decide the best options for your business.

A bit about Whale Logistics Australia - we are a Sydney & Melbourne-based freight forwarder who specialises in freight forwarding (including air, sea, road freight), and customs clearance. We also provide custom packaged solutions such as warehousing or e-commerce solutions. We are advocates for service-driven, digitally empowered freight forwarding, so we invest a lot towards our people and services (read more about our culture here...)

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A freight forwarder is someone that provides support services to the freight transport industries. A freight forwarder may be involved in forwarding freight from origin to destination, customs and freight brokerance, stock consolidation, and handle goods and cargo.

What is involved in each of these services?

• Obtain the best routes for your cargo / shipments, including transit time, etc.
• Obtain competitive rates options for transporting your cargo
• Arrange best transport modes (air, road, ocean, rail)
• Comply with regulations and customs
• Arrange destination clearance and delivery

Transporting & Forwarding Freight

Freight forwarders such as Whale will primarily contract the transport of goods for other
enterprises, using a combination of road, air and sea freight transport organisations to complete
these contracted services. In these cases, the forwarding unit takes on prime responsibility for the
entire transport operation specified in each contract for a charge that covers the total operation,
and in turn pays the carriers for transport services rendered.

Customs Clearance & Brokerage

These services provided by freight forwarders are those such as documentation preparation for
imports and exports, such as air cargo reporting, export clearance, and sea cargo reporting, but
exclude freight forwarding, border control and surveillance. Having a good customs broker will
allow you to save time and resolve problems quickly should they arise.

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First, a few definitions: 

• Shipper: a person/company dealing with shipment at supplier end.
• Consignee: a person/company dealing with shipment at receiving end.
• Freight Forwarder: the logistics provider (for road, ship or air transportation).
• Shipping Line: company carrying product related cargo.

Step 1. Export haulage

The first step involves the movement of the products’ cargo from shipper’s to forwarder’s premises. Products usually get transported by road or railways or a combination of both.

Step 2. Export customs clearance

A type of official regulatory formality involving submission of valid and required documents to the concerned authorities.

Step 3. Origin handling

This step covers all physical handling, inspection, and loading of the cargo; at the supplier End’s warehouse. This is coordinated by the freight forwarder.

Step 4. Ocean freight 

To meet the required timeline for shipments, freight forwarder schedules shipping line for transportation. This step not only covers costs involved in shipping from port-to-port but also the levied surcharges like currency adjustment factor, exchange rates, etc.

Step 5. Import customs clearance

This process can begin even before the arrival of cargo at the US. This clearance is performed by customs house broker appointed by the consignee.

Step 6. Destination handling

This involves transportation and unloading of cargo from port to destination warehouse.

Step 7. Import haulage

The final step of actual delivery of the product to the consignee and ultimately to the consumer.

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If you are involved a business, big or small, when do you determine whether to use a freight forwarder to help streamline your business?

Ecommerce is a large part of many consumers' lifestyle today - it was much harder to set up shop
a few years ago. Ecommerce businesses are booming, and with that, comes the large question mark of how to transport product from your supplier to your customers, as fast and efficiently as possible.

The answer to that question relies heavily on:

1) The type of products you sell

Do you have a jewelry, clothing, toys, furniture, or even a phone case business? The type of product you sell will affect what suppliers you need and what lead times they have. Keeping lead time within your control is crucial to running a efficient supply chain for a ecommerce business.

2) The customers you sell to

Where are your customers located? Are they all within the same vicinity or spread out across multiple regions? Are they located internationally? If so, an efficient shipping method will be important.

3) The type and quantity of product you need to ship.

Going straight to a courier (e.g. Australia Post, China Post) can be a good idea if you ship more than 10 shipments a day. However, a courier usually specializes in a set of services, type of equipment and region. So, by signing a contract with just one courier , you are limited to the services and network that they can provide.

Using a freight forwarder is a good option if you import and export goods and need someone to arrange storage of your products or materials. A freight forwarder will negotiate prices with couriers, consolidate your freight, and ensure customs clearance for you. They are the middle-man between your supplier (shipper) and various couriers. A freight forwarder is beneficial when you have large cargo, have large quantity to transport, as they have extensive network and experience negotiating with local couriers to get you better rates.

Using a 3PL (third party logistics) is suitable if you need to combine a lot of services and types of products into one package. For example, if you need a warehouse to ship your products from, many logistics provider will combine this service with shipping your products from the warehouse to your customer. However, if you choose to use a 3PL provider, make sure to do your research as to where their responsibilities end and when yours come in.

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When you are ready to choose a freight forwarder, here are a few tips to get started on which freight forwarder you should go for and approach to get a quote.

1. List your requirements

The first step to selecting the right freight forwarder is to know your own requirements. What business are you in? What sort of freight do you need to transport? What are the distances required? What mode of transport - sea, air, rail, road, or any other? What volume will you be shipping at? Determining these requirements will help you be prepared before reaching out to a freight forwarder.

2. Research your options

There are many freight forwarders in the market, consider narrowing your search based on your requirements, and research what freight forwarders can do for you. Here are a few ideas:

• Read up and understand industry terms
• Read various blogs to understand what each party is responsible for..
• Put together a checklist, including volume, time frame, speed of delivery, special packaging requirements, etc.

When considering between freight forwarders, price should not be your only factor. Several other factors are also very important in choosing a great freight forwarder for your business:

• Do they have experience with your type of cargo? There are many different types of cargo – everything from garments or machinery to chemicals or even hazardous waste. It’s essential that the freight forwarder you settle on has experience with the type of goods that you’re exporting. Once your cargo ships, it’s out of your control. That’s why you want your freight forwarder to know how to handle your products, and to be able to anticipate any potential problems along the way.
• How extensive is their network? A robust international network is going to facilitate your cargo getting where it needs to go. The biggest companies will have contacts all over the world. Just remember – all you need to focus on is the country you are shipping to. If you’re preparing freight for export to Australia, it doesn’t matter how many contacts a particular forwarder has in, say, China. This may sound painfully obvious, but far too many inexperienced exporters don’t stress the importance of networking.
• How do they manage their account? This relates to who will be your point of contact / account manager for submitting documents, coordinating the shipment and who to ask for when there is a problem. It can be a dedicated person or a team that handles your account. Point of service is very important when irregularities exist - you want someone who you can trust to manage these problems for you. 
• What freight management systems are available to you? Visibility is important - as an importer, you may want to know where your cargo is at times. A highly visible freight management system will help you stay at ease about where your shipments are and help you plan for its arrival. Digital technology can provide excellent value added to the traditional methods of freight management.

3. Reach out for quotes and questions

After you have made a checklist and narrowed down some options, it's time to reach out to some freight forwarders and ask them some questions. It's a personal business, so don't be alarmed if they ask for additional information, such as your company name or your type of shipments. Have a conversation, identify your needs, and assess each freight forwarder's suitability based on your requirements. Remember, it's a long-term relationship, so also consider the soft skills that they have.

Why go global?

International logistics can take the form of shipping to customers overseas, sourcing from global suppliers/manufacturers, and transporting goods by various methods, to name a few. Below we identify a few drivers that are crucial when considering international logistics.

• Suppliers are located all over the globe - The accessibility of suppliers thanks to technology today, such as Aliexpress, makes it much easier to contact and access suppliers all over the globe.
• Multiple supply chains with varying management approaches - International logistics is difficult to manage as there are multiple industry practices and management approaches that are in place. 
• Lead times and delivery dates vary - Again, your suppliers may be located in various areas, have varied production lead times, and use different methods to delivery and transit. 

Freight across borders

Before shipping, you may want to understand a few challenges that freight forwarders and companies face when bringing freight across borders:

• Custom and border protection - in many countries basic regulations such as type of packaging (i.e. wood), documentation and clearance processes are the core of timely logistics management. Expertise can help a lot when you deal with a port or country frequently and want to be as efficient as possible in getting your freight quickly and safely.
• Ownership - in freight forwarding, the issue of ownership is also a large responsibility, which falls into custom brokerage and clearance. Again, having a customs broker who has expertise in the area or are capable of dealing with the respective authorities will save you a lot of time and effort in hauling your cargo.
• Time and Cost - Of course there's also cost, which refers to what method of transportation is the most economical and efficient for the type of shipment and distance traveled - see our previous blog post for more details.

These are only some of the challenges that you may deal with while starting out in international logistics. Other more complex issues, such as digital freight forwarding, managing visibility of cargo, and managing shipping lines, are also notable, and are covered on our blog.

Some useful tips to start with

• Check with local government body what is allowed/not allowed and the custom requirements for import/export.
• Know your business and what type of transportation method is best for your product, quantity, and distance.
• Avoid unnecessary custom charges by researching them before shipping.
• Consolidate your freight if necessary.
• Use a customs broker if you're unsure or unfamiliar with custom clearance processes.

Current Trends

Supply chains have become more sophisticated over the period, as clients have been matching their inventory with real-time demand. Top global freight forwarders of the world are starting to adjust to the changes in the industry. Here are 3 lessons to learn from these global logistics trends.

• More frequent but smaller deliveries have allowed industry operators to continue providing load consolidation services in the supply chains of major markets.
• Continued growth in consumer expenditure and international trade are expected to increase industry revenue by an annualised 2.6% over the five years through 2016-17, to reach $9.1 billion.

Technology

“The world’s major forwarders are way ahead of the curve on compliance and technology,” says consulting firm Armstrong and Associates. “That’s a big reason why they are so successful,” adding that this trend will only gain more momentum.

We at Whale Logistics Australia know that technology can transform processes and customer experience as it is a key pillar in our operations. Key issues such as being able to anticipate logistics plans and have information transparency across multiple silos is slowly becoming the norm for global freight forwarders.

For these three leading players in the rankings, “anticipatory logistics” has become a new part of their strategic plans. “The logistics industry is undergoing rapid and profound changes,” says Matthias Heutger, DHL’s senior vice president of strategy. “This is especially true when it comes to multi-channel retailing or predictive purchasing.”

Rates

At the end of the day, rates are one of the most important aspects of any global freight forwarding market. And while sea freight is on the rise and air freight is seeing a decline due to overcapacity, rising fuel prices, and other operational costs; erratic rates for ocean freight still remain a top concern for many shippers.

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Automation and digitization in the freight industry

For many freight forwarders, the ability to offer new, value-added services such as warranty processing, returns management and light manufacturing is now a differentiator, as is providing services such as customs and insurance brokerage, and trade and transportation management. In other words, the ability to become a “one-stop-shop provider” is emerging as a way to achieve differentiation and capitalize on cross-segment opportunities.

One of those value-added services that has garnered attention is digital supply chain management, such as Maersk and Alibaba's partnership that offers online booking of shipments. The importance of digital systems, such as online tracking, freight consolidation, and other communication tools in the freight industry is apparent as globalization drives freight to more places in the world.

• Research shows that supply chain visibility remains a top operational priority for global businesses today.
• Optimization of resources is also another key driver for the presence of automation and digitization in the freight forwarding industry.
• Flexible business model, using IT to maintain 360-degree control, & utilising data to boost competitiveness and value are the best ways to incorporate digital elements into your business.

Freight forwarders can play an important role in transitioning traditional supply chains to one that's more responsive, competitive, and valuable. As one of the few players in this space, Whale Logistics Australia is strengthening our abilities to provide customers with offerings that are built on ease of access, transparency, and in swift, near real time integrated service. (To see how Whale incorporates technology into our productivity system, click here).

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Download our pdf with full articles and even more tips and tricks to read later here!