Why shippers use a freight forwarder?
The tendency of companies to hire freight forwarders to take charge of their freight transport needs is growing. In North America alone, the segment receives annual revenues of more than 40 billion and expects 10% growth in the next year.
What is the need to hire a freight forwarder? Why are freight forwarders companies with sustained growth? Why does not the shipper hire the transport service directly with the carrier? In this post we will answer these questions and we will provide information about the functions of the freight forwarders.
What is a freight forwarder?
A freight forwarder is a company in charge of organizing and managing the storage and transport of the cargo of a third party (shipper), through the selection and contracting of the services of the carrier that will offer the real transport service of the load. In other words, the freight forwarder is the meeting point between the shipper and the solution to its transportation and storage needs.
A freight forwarder:
- Negotiates transportation rates with the carriers
- Provides cargo insurance to protect the goods transported.
- It recommends the type of truck in which your cargo should be transported and books the truck to transport your cargo on the day and time you need it.
- Organizes and manages the cross-border crossing of your cargo
- Guides you through the transportation of your cargo, requesting the documents you require for the transportation and border crossing. The freight forwarder advises you on the rules and procedures for importing and / or exporting goods to a specific country.
- Assumes responsibility for the load from the origin to the final destination and normally takes responsibility and possession of the cargo at some point during transportation.
Freight forwarders should normally show evidence of having limited liability insurance according to the type and weight of the cargo they handle, which ranges between $ 300,000 and $ 5,000,000 and which must have a cargo insurance for $ 10,000 in the FHWA records (Department of Transportation Agency)
Why do companies use freight forwarders?
One of the reasons why companies choose to contract the services of a freight forwarder is the need to reduce transportation costs. A freight forwarder can offer more competitive costs than the ones that a company or shipper could obtain alone, for three reasons:
1) Preferential rates by volume. The freight forwarders have preferential rates because they transport large volumes of goods and make a large number of loads. For example, Mexicom Logistics, a freight forwarder specialized in the North America region, transports goods of more than 650 customers, so it is able to guarantee constant loads to his carriers, at the same time that the carriers guarantee Mexicom Logistics to maintain preferential rates for the loads.
2) Cargo consolidation. Brokers or freight forwarders specializing in a specific region have frequent requests for transport for the same route, so it is possible to consolidate merchandise of two or more customers in a single truck. This is advantageous for the customers because they will pay less for a consolidated load than for the transport of the same merchandise in a full truck.
3) Price comparison based on expertise. The freight forwarder has a large network of suppliers and transports goods all the time throughout the year on frequent routes, so it knows the flows, as well as the supply and demand by route, direction (southbound or northbound), and type of equipment. Its expertise allows the freight forwarder to have a point of reference when determining if a cost is high or low and to identify the most competitive rates for its client.
High-quality service guaranteed
Today, more than ever, the quality of the delivery service is of greater importance for the success of a company. Companies know that the best marketing strategy is the recommendation by their own customers and that the best way for them to obtain a customer’s recommendation is to offer an excellent service.
Freight forwarders have a large network of contacts, this allows them to connect shippers only with the carriers that offer a service of the highest quality and that are best suited to their transportation needs in terms of the type of truck needed, times of delivery and price. Freight forwarders have the solid experience that allows them to know the strengths and weaknesses of each of the transport providers with which they have already worked so that they can decide who to give the cargo, based on the performance that the carrier has had before.
That is why companies prefer to hire a freight forwarder because they have the ability to hire a reliable provider, they are capable of solving problems as soon as they arise and they have the ease of finding another carrier or offering new alternatives to solve a specific shipper need. In this way, companies do not risk the quality of their service by betting on a single carrier.
Knowledge of the industry, lower risk
Specialization is a production method in which each entity performs specific tasks and manages to develop a high level of efficiency in this task. Companies hire freight forwarders because they know they are hiring a transportation expert. For freight forwarders, the transport of merchandise is the heart of their activity, transportation is what they do the best.
Mexicom Logistics transports more than 35 thousand loads per year, with 13 years of experience, achieving an optimal level of efficiency and an expertise that allows Mexicom to anticipate potential problems, reduce risks, predict real delivery times, recommend the most suitable equipment, determine the necessary and unnecessary accessories to transport loads safely, identify the most suitable routes, etc.
Knowledge in border crossing
In addition to the previous point, we can mention the knowledge of shippers to transport goods in specific regions or through border points with precise and complex procedures, as another reason to prefer to hire the services of a freight forwarder.
The border crossing for the transportation of merchandise between the United States and Mexico is one of the busiest in the world. Its geopolitical position, the type of goods that are transported and the high cross-border control, make the transportation of merchandise across the border of Mexico and the USA a complex process that the shippers prefer to leave under the responsibility of a freight forwarder expert in the border crossing.
The freight forwarders with experience in this cross-border point know the process, the documents, times and other requirements, in general, to cross the border without hassle.
Photo by VanveenJF on Unsplash