The world of logistics is a complex and multifaceted industry, and it's often surprising to discover that many transport companies don't own their own fleets. Instead, they operate as intermediaries—freight forwarders—connecting shippers with actual carriers. These forwarders play a crucial role in ensuring that goods move seamlessly across borders and regions by managing the logistics, consolidating smaller shipments, handling customs documentation, and arranging multimodal transport.
However, with the increasing availability of digital tools that empower businesses to manage their logistics in-house, the role of the traditional freight forwarder is under scrutiny. Despite the potential to bypass middlemen, forwarders continue to offer valuable expertise, especially in complex international shipping scenarios.
Read our overview of everything you need to know about the freight and transport industry.
The Role of Freight Forwarders and Their Markups
One area where forwarders face scrutiny is the markups they apply to shipping quotes. Freight forwarders typically source quotes from carriers, and then add a margin to cover their services. These margins usually range from 15% to 30%, depending on the complexity of the shipment, market conditions, and the forwarder’s pricing model.
For many businesses, the markup can raise concerns, especially when the logistics are relatively straightforward. However, it’s crucial to remember that freight forwarders do far more than simply pass on quotes. They negotiate rates, handle customs documentation, secure insurance, and coordinate complex multimodal transport, all of which require specialised expertise. For businesses unfamiliar with these logistics processes, the value provided by freight forwarders often outweighs the cost.
That said, businesses with in-house logistics capabilities or access to digital freight platforms may find it more cost-effective to bypass forwarders. In such cases, the ability to manage shipments directly can reduce overall costs, especially when handling simple, single-mode transport routes.
Read our comprehensive guide on 'How To Get A Good Freight Quote'
How to Identify Freight Forwarders vs. Carriers
It can be challenging to distinguish between a freight forwarder and a direct carrier, especially since forwarders often provide end-to-end logistics services. However, there are a few key indicators that can help identify whether you're working with a forwarder or a carrier:
Asset Ownership: Freight companies typically own their transport assets including trucks, ships, or planes. If the company doesn’t mention owning these physical assets or showing these assets on their websites, they are likely forwarders.
Multimodal Transport: Forwarders frequently coordinate shipments across multiple modes—air, sea, and land—while direct carriers usually specialise in one mode of transport.
Customs and Administrative Services: If the provider offers a broad range of services such as customs handling, insurance, and warehousing, they are almost certainly a forwarder. Direct carriers usually focus solely on transportation and do not manage customs or provide insurance.
Bills of Lading: Forwarders typically issue their bills of lading and work with several carriers to manage different legs of a shipment. This level of coordination is not typical for direct carriers.
Navigating FOB Origin and FOB Destination with Freight Forwarders
One of the key reasons freight forwarders remain relevant, even in 2024, is their ability to navigate complex shipping terms such as FOB Origin and FOB Destination. These terms define the point at which responsibility and ownership of goods transfer between the buyer and seller, and they can significantly impact shipping logistics, costs, and risk management.
FOB Origin: Under this arrangement, the buyer takes responsibility for the goods as soon as they leave the seller’s premises. From that point on, the buyer is responsible for all transportation costs, customs duties, and risks. This can be more cost-effective but places a greater burden on the buyer to manage any complications that may arise during transit.
FOB Destination: Here, the seller maintains responsibility for the goods until they reach the buyer’s location. This means the seller covers all shipping fees and risks during transit, making it a more secure option for the buyer but a potentially expensive one for the seller.
As for whether buyers and sellers have a choice between FOB Origin and FOB Destination, it often depends on the nature of the transaction, the parties' negotiating power, and industry norms. In some sectors, standard agreements may apply, but in most cases, these terms are negotiable. Buyers and sellers can discuss which arrangement best suits their logistical capabilities and risk tolerance. Freight forwarders become indispensable in managing both FOB terms. They handle the complexities of each scenario by coordinating shipments, managing customs documentation, and ensuring compliance with international regulations. Whether a buyer chooses FOB Origin or a seller opts for FOB Destination, forwarders simplify the entire process, ensuring smooth transitions across borders. By allowing freight forwarders to manage these details, businesses can focus on their core operations without worrying about the intricacies of international logistics.
Conclusion
At INH Transport, we believe in simplifying logistics by offering direct carrier services that eliminate the need for intermediaries like freight forwarders. By working directly with us, you avoid the extra costs and complexities associated with middlemen, gaining more control and transparency in your supply chain.
If you found this article useful, please visit our blog on 'Everything You Need To Know About Working With Freight Companies'
For more information on how we can assist with your logistics needs, contact us at info@inhtransport.com.au or call 0438990388. Learn everything you need about freight companies by visiting our website.
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