5 Advantages and Disadvantages of Freight Forwarding Companies

Advantages of hiring a Freight Forward Companies

Many businesses wonder whether it is beneficial to work with a freight forwarding company. If you have a business that trades overseas, it becomes difficult to keep up with orders and customer demand and ensure safe and efficient transportation of goods if you choose to manage it all by yourself.

In such a case, you can use the help of a freight forwarding company that will organize the shipment and increase your profits on the whole since they are professionals in that area.

Freight forwarders work as a third-party company that helps to coordinate a shipment on behalf of the business so that the long journeys can be easily managed. When working with a third party, you want to be sure you are using technology such as RFID asset tracking to reduce damage by 40-60%.

Freight forwarders are usually hired when the company is growing at a rate that makes it difficult to manage the number of shipments or does not have the time or resources to develop its own shipping system.

What is freight forwarding?

Freight forwarding establishes relationships with transport services to help their clients move cargo. Freight forwarding companies are intermediaries between shippers and transportation services that ensure goods reach their final destination in the most economical way possible.

There is no one definition for what freight forwarding entails, as it can be done by land, marine, rail, or air. One of the many responsibilities of these companies is to coordinate shipments to ensure they reach their final destination efficiently and on time.

The freight forwarding industry is worth $35 billion. The top 10 companies in the U.S., for instance, generate almost $6 billion annually and employ over 8,000 people.

However, you should know that as with everything else, freight forwarding also comes with its own set of pros and cons. Some of these are discussed below so that you can decide whether it is the right option for your business.

Advantages of Freight Forwarding Companies:

1. Cost-Effective

Since freight forwarding companies transport goods in huge quantities, their overall cost per unit is significantly lower. This makes them a great option for a small company that does not have large shipments and cannot afford to pay high freight charges.

Since the company that you are choosing is professional, you can be assured that your shipment is in safe hands and the reduced costs can act as an added incentive. Many people trust these companies to deliver their goods across the globe. This is proof that they are effective while delivering their goods. You can’t just trust anyone to take care of your shipment, considering the risk of loss to the company.

2. Fast

If you are choosing a professional freight forwarder, you can be assured that your goods will be delivered on time. Research is necessary before you go on to select a forwarder. Although you may incur a higher cost for choosing a reliable company, the services provided will be of superior quality and they are likely to ensure the safe and timely delivery of your products.

As freight forwarding companies have years of experience working in this field, they are highly efficient at what they do. They are equipped with all the tools and the knowledge needed to deal with the different issues that arise during the delivery process in the most effective manner.

While mishaps do happen occasionally, they are very rare when working with a professional compared to a novice, as these companies will likely find the quickest route to deliver your product on time.

3. Experience

Experience counts a lot in this service. Freight forwarders will usually be able to deal with all the legal documentation related to all kinds of international deliveries. When it comes to delivering across borders, you cannot afford to have incomplete documents, as it could lead to lengthy delays when your goods are seized by customs and banks put the transfer of funds on hold due to incomplete documentation.

Such a scenario could prove to be disastrous for the business since the delay is likely to upset your customers and result in losses. This is why you should not trust any novice for the shipment of your products, but hire experienced freight forwarders to do the job for you. They will take care of all the documentation in order to ensure you have a smooth transaction.

4. Safeguard your business

No company likes to expose itself to potential lawsuits, customer complaints, or severe losses. Although no freight company gives you a 100% guarantee, you can reduce the chances of any problems occurring during the shipment by letting an expert handle it.

Being a business owner, you probably already have enough things to worry about. Hence, it is best if you focus on the main aspects of the business, rather than staying up late at night worrying about whether your shipment has gotten stuck in the middle of the Atlantic Ocean on its way to the United States.

5. Guaranteed arrival time

This is in continuation of the above point. The freight company will provide a guaranteed time limit for the arrival of your shipment at a particular location. All routes are planned beforehand and alternate measures are discussed in case of an emergency so that there is no discrepancy on their part and your goods are delivered on time.

Disadvantages of Freight Forwarding Companies:

1. Entrustment Issues

No matter how great the reputation is of a freight forwarding company, you can never be fully sure. You are entrusting goods worth thousands of dollars to strangers, hoping that they will deliver them to a destination at the designated time.

Despite the company sending hundreds of shipments before, it is human nature to worry – you may fear chances of accidents occurring while your shipment is at sea and are likely to stay tense until your shipment reaches your customer’s dock.

2. Data deficiency issues

Miscommunication may occur between the owner of the shipment and the forwarder due to multiple reasons. If there are any gaps in data provided by the owner to the freight company, it will affect the shipment.

Data deficiencies are a major cause of delays in ocean shipments. Some of the common examples of data deficiency are the loss of information due to translation between languages or during the journey.

These deficiencies can also delay the journey by weeks at times, which could severely damage your reputation with your customers. Although a reputable forwarding company will deal with these issues effectively so they do not cause any major problems, a mismanaged freight company can put your relationships with your customers at risk.

3. Unfair pricing

Although it is a risky approach, you can have direct control over your cost if you do all the freight forwarding and documentation yourself. While using a freight forwarder, you can never be sure about the markup they are adding to your costs.

Many unethical forwarders cheat by charging you a higher price compared to the deal you could have gotten if you directly contacted the local transporters yourself. For example, a trucking company may charge you $2,000 to deliver a shipment, but an unethical freight forwarder will offer to do it for $3,000, while wrongly stating that the trucking company is charging $4,000 for the same service.

4. Product loss

Whether you want to accept this or not, product loss is a very real problem and a huge risk when using freight services. Despite all the modern technologies we have today, no one can predict the behavior of mother nature accurately, so there is always a risk of damaged goods or an entire shipment going missing over the sea.

If you had entrusted the freight forwarding company with the packaging as well, you have no control over how the goods were packaged in the container. The goods will be secure if the forwarding process is effective; if not, you can incur a significant loss.

5. No Regulations

The last thing that you should be aware of is that the freight industry is still not properly regulated in some parts of the world and all kinds of under-the-table deals take place in order to get your products across borders. This means there is always a high risk of your products getting damaged, stolen, or seized before they can reach your customers.

Final word

Freight forwarding companies are playing a major role in global trade today. They provide the business the assurance that their goods will travel and reach their destination in a proficient and timely manner. However, these benefits are only present if you choose the right company to work with. Do thorough research before you trust anyone with your shipment to avoid any possibility of a loss.

Frequently Asked Questions – FAQs

What are some examples of freight forwarders?

The top freight forwarding companies are Cargill, DHL Express, FedEx Corporation, UPS Inc., etc.

What services do freight forwarders perform?

Freight forwarding companies often coordinate shipments by land, marine, rail, or air. This means they will work with the shipper to ensure that the shipment reaches its final destination in a timely fashion.

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