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SMEs Eye International Freight Forwarders, Emerging Tech

By Justin Grensing

For purveyors of goods, selling only out of brick-and-mortar locations can be limiting for the company’s volume of sales and resulting revenue.1 The ability to ship goods around the country and even the globe opens up larger potential markets. While this is true for businesses of all sizes, small and midsize enterprises (SMEs) often lack the infrastructure and distribution assets to facilitate global shipments, even if they are able to successfully secure global sales. This is where freight forwarding companies can be useful.

What is Freight Forwarding?

 

Freight forwarders manage large shipments of goods around the world, arranging multiple means of transportation and warehousing and handling customs requirements and other logistics. Depending on the size and time-sensitivity of the shipment—as well as the distance to be covered and the price-sensitivity of the shipper—shipments can be sent by air, land, or sea.

 

Benefits of Engaging a Freight Forwarder

 

Engaging a freight forwarder is one way to alleviate the logistics headaches involved in arranging product delivery, which can be especially important to SMEs.2 These difficulties include the physical logistics of shipping certain categories of goods, regulatory requirements and other “paperwork,” and the process of negotiating and arranging space with the desired shippers.3

 

For example, a freight forwarder can help navigate issues such as shipping hazardous materials that require special safety precautions and/or permits, extremely heavy items necessitating special equipment, or particularly fragile or temperature-sensitive materials and products that require specialized packaging or containment.4

 

For businesses of all sizes, the added complexity of international customs and other regulatory requirements must be considered, as well.5 For example, shipping agricultural products across national borders might require knowledge of—and compliance with—regulations aimed at preventing the spread of certain biological materials. Also, governments might prohibit or otherwise regulate the import or export of certain technologies, while tariffs or other trade regulations can impact the cost and compliance requirements of international shipments.

 

All of these are issues a qualified and experienced international freight forwarder can help address.6

 

Cost of Using an International Freight Forwarder

 

Yet there is generally no requirement for sellers to use a freight forwarding service, and many choose to arrange their own shipments—largely out of concern for cost. As with any outsourced business process, freight forwarding services aren’t free, so opting to engage one can reduce the margins of the supplier.7 Because of the breadth and variety of details involved in shipping, it is impossible to suggest—in dollars or percentages—what a freight forwarder might cost. But here are many of the factors that will impact the fee a business should expect to pay for freight forwarding services:

 

  • Means of transportation, i.e., air, land, or sea
  • Distance from origin to destination
  • Need for specific licenses and other paperwork
  • Volume of the shipment, which correlates to the amount of space a shipper will need to set aside for it
  • Weight of the shipment
  • Use of specific routes (i.e., Panama Canal)
  • Timing—are deliveries required during times of peak shipping demand
  • Cost of storage before and/or after shipment
  • Insurance.8

Technology Important for Modern Freight Forwarders

 

As it has throughout the global economy, technology has had a major impact on freight forwarding. Historically, the advent of shipping containers and mega-ships helped support the shipment of huge amounts of cargo, thereby generating efficiency and cost savings for businesses. Further, air travel has created opportunities for swifter delivery of goods, including overnight shipping, while improvements in navigation (via tools such as satellite GPS) have increased the ability of sea-borne shipments to arrive when and where they are scheduled.9

 

Currently, freight forwarders are seeing that technology is helping enable the delivery of relatively small shipments directly to the end consumer.10 Drones are a perfect example of this, with companies such as Amazon experimenting with such delivery of late.11

 

Online technologies are also starting to have a growing impact on the freight forwarding industry. One example is digital freight forwarders, which provide the services of traditional freight forwarders but do so instantaneously, through advanced technology and web-based applications.12 Another example is the freight forwarding marketplace—specialized online marketplaces and forums that allow shipping customers to better evaluate potential shippers by, for example, reading reviews from previous customers and price-shopping.13

The

Takeaway:

Freight forwarders offer the potential for SMEs and others to take advantage of national and international markets for their goods without having to establish an expensive shipping and warehousing infrastructure. Internationally, freight forwarders can also be effective in helping to manage customs requirements, which are often complex, and with which the supplier may be unfamiliar. Experts believe changes in technology will certainly alter—but are unlikely to eliminate the need for—freight forwarders. In fact, freight forwarders are adopting new technologies themselves to better serve their customers.

Justin Grensing - The Author

The Author

Justin Grensing

Justin Grensing is a freelance writer, MBA and attorney who covers topics ranging from finance, marketing, human resources, legal/compliance, and general business.

Sources

1. “As Online Sales Strengthen, Brick and Mortar Retail Must Rethink How to Survive,” Forbes; https://www.forbes.com/sites/walterloeb/2019/04/05/on-line-retailing-strength-forces-retail-rethinking-how-to-survive/
2. “Advice for exporters: should I use a freight forwarder?” Open to Export; https://opentoexport.com/article/advice-for-exporters-should-i-use-a-freight-forwarder/
3. Ibid.
4. “Freight forwarding and Your Small Business Exports,” Score; https://www.score.org/blog/freight-forwarding-and-your-small-business-exports
5. “Current challenges in trade,” OECD; http://www.oecd.org/trade/understanding-the-global-trading-system/trade-challenges-and-opportunities/
6. “What is a Freight Forwarder? Types and Functions,” Global Negotiator Blog; https://www.globalnegotiator.com/blog_en/freight-forwarder-forwarding-agent-meaning-definiton/
7. “Freight forwarder: everything you need to know,” SmallBusiness.co.uk; https://smallbusiness.co.uk/freight-forwarder-2544115/
8. Ibid.
9. “Is this the beginning of the end for the freight forwarder .. ??” Shipping and Freight Resource; “Advice for exporters: should I use a freight forwarder?” Open to Export; https://opentoexport.com/article/advice-for-exporters-should-i-use-a-freight-forwarder/
10. Ibid.
11. Ibid.
12. “Digital Freight Forwarders vs Digital Shipping Lines,” Shipping and Freight Resource; https://shippingandfreightresource.com/digital-freight-forwarders-vs-digital-shipping-lines/
13. “Freight forwarder’s new era,” Cargofive; https://cargofive.com/freight-forwarder-new-era/

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