Are imports and/or exports the bread and butter of your business’ product life cycle? If your answer to this question is a resounding yes, you might want to consider working regularly with a freight forwarder. This is not the only question you should ask yourself, though. There are actually a couple more you should consider before making a decision.
But before all that, what do freight forwarders do, anyway?
Freight forwarders are companies that manage the transportation of other companies’ cargoes. They do this by arranging cargo pickups, booking air and sea freight shipments, and fulfilling cargo deliveries. This is made possible by their fleet vehicles, in-house logistics professionals, and a wide network of similar logistics partners worldwide.
Forwarders can also offer other services such as customs clearance. In fact, a well-rounded freight forwarding company will also have its own customs brokers. This is so they can provide comprehensive logistics solutions to their customers.
So…do you need one?
Companies with existing logistics partners value the expertise freight forwarders bring to the table. It’s more efficient for them to leave cargo transport to actual logistics experts while they focus on their own company operations. After all, why bother with ineffective logistics management when you can have someone more experienced do it for you?
The question is, are you one of these companies who will find value in outsourcing logistics work? Ask yourself the questions below, and by the end of this article we hope you will have found your answer.
Are you dealing with a large volume of cargo?
Maybe you import and/or export regularly. One shipment can be as small as just a couple of boxes shipped via air, but it can also be as big as five or more containers per bill of lading (BL). If your case is similar to the latter, things can get pretty hectic. Do you have the capacity to make sure that all your containers will leave and arrive on time? If you’re dealing with multiple shipments at the same time, can you spare the effort to track them all?
The larger the volume of your cargo, the heavier the management of your shipment(s) becomes. If you’re confident that your company can shoulder all these responsibilities alone, then there might not be a need for an external logistics partner. Otherwise, you’re definitely better off with a forwarder.
Do you ship to/from multiple countries?
Do your imports come from more than one country? Do you have plans to export to multiple locations? True, it’s not too difficult to find a forwarder abroad if you ship to/from only one country. However, betting everything on that sole option can be limiting. Moreover, it can cause supply, revenue, and diversification problems later on. This is why we recommend businesses to gain access to more than just one supplier (for imports) and more than just one buyer (for exports).
To effectively diversify your supply chain, however, you will need a logistics partner who has easy access to any country you’ll set your eyes on. Whether it be importing from Europe or Africa, or exporting to the countries of South America, a well-connected freight forwarder will be able to help. You don’t have to locate logistics companies from your target countries by yourself. You can leave the work to a local forwarder who already has global long-term partners. Your forwarder will be able to vouch for their performance and credibility.
Do you have both manpower and capacity?
There are companies with an in-house logistics team. Getting logistics professionals that will solely focus on your shipments is great, after all. But for most other companies out there, the additional labor cost might not be worth it. In most cases, this setup is recommended only for businesses that ship unusually huge volumes of cargo at regular, short intervals.
Manpower is not the only consideration here, however. There’s also the availability of equipment and facilities. Does your company have trucks, storage capacity (warehousing), and heavy-lift equipment? Can you look after their maintenance requirements?
If you already have most of what was mentioned above, then there’s really not much need for a forwarder anymore. Your company is likely well-versed in logistics operations and will find little value in outsourcing logistics services from others. On the other hand, if you don’t have the required logistics manpower and capacities yet, a freight forwarder who has it all at the ready will be a great investment.
Have you been experiencing logistics issues on your own?
Sometimes businesses try to take care of their logistics on their own, even without an in-house team. Some find that they can manage it, while others realize that they can’t. If you’re in a similar boat and have been facing a lot of problems trying to run your own logistics, this is the sign you need to take it to an expert.
Cost-cutting is one of the reasons why businesses try to manage their logistics operations by themselves. Not having to hire a freight forwarder does save businesses money, but oftentimes this is true only in the beginning. Expecting untrained people to take care of a business’ logistics results in reduced productivity, errors and inaccuracies, and inefficiency. They might not be mentioned outright in your financial statements, but these are still losses that cost you potential revenue.
How much risk can you tolerate?
Risks in shipments include cargo damage and losses, extensive delays, accidents, and other mishaps due to human error. These incidents require immediate attention and careful handling, and a lot of prior experience in handling logistics emergencies. One major downside of not having access to actual logistics professionals is that shipment risks are higher. When emergencies do happen, the problem then changes to who will respond, and how?
These unexpected circumstances cause much stress to companies, affecting not just the smoothness of operations but also employee productivity. Just in case an emergency does pop up, wouldn’t it be better to feel secure knowing that you have a trustworthy partner taking care of the situation for you?
The decision to work with a freight forwarder is a big one. Logistics services like freight forwarding, customs brokerage, and trucking are not small expenses. Similarly, insisting not to work with a forwarder – even though you might really need one – can be just as costly.
Whether you decide to hire a partner or not should therefore be based on sound reasons. Know how much cargo you’re dealing with, whether you’re shipping to/from multiple countries, how much logistics manpower and capacity your business possesses, how smoothly (or roughly) your logistics operations are currently going, and how much risk you can tolerate. Once you’ve considered these factors, you’ll hopefully have a good rationale to decide whether a freight forwarder is exactly what your business needs.