Freight Forwarding Companies: Spot the Differences
In the United States alone, there are more than 21,000 established freight forwarding companies. For businesses looking to grow their shipment reach, that’s an awful lot of choice.
One way to avoid decision paralysis and narrow down your search is to first decide whether an asset-based transportation logistics service or a non-asset-based partner would best fit your business’ needs.
Confused already? Don’t be! Read on for help with your assessment, as well as some of the essential vocabulary and concepts involved.
What is a freight forwarder?
Freight forwarders are professional, third-party logistics (3PL) experts that arrange and facilitate the logistics and transportation of cargo shipments, including necessary compliance paperwork and documentation.
Freight forwarders work with their clients to increase efficiency, cut costs, boost customer satisfaction and loyalty, and mitigate risk, with the goal of growing the clients’ bottom line.
And some, not all, also operate as customs house brokerages, assisting their clients with the document collection, tax form management, Incoterms requirements and more surrounding goods import and export.
What is an asset-based freight forwarder?
Asset-based freight forwarding companies own some or all the assets required to run their customers’ supply chains, from trucks to warehouses to distribution centers, and beyond.
What is a non-asset-based freight forwarder?
Non-asset-based freight forwarding companies do not own the assets necessary to manage and implement their clients’ supply chains.
Instead, a non-asset-based company forwarding freight negotiates contracts with a network of carriers, maintaining relationship management programs with warehouses and distribution centers in order to manage its clients’ supply chains at the lowest possible price.
Which option should I choose when forwarding freight?
The truth is, it all depends on your organization’s priorities and approach to risk management. A few considerations you should keep in mind:
Flexibility can reduce cost…
Non-asset-based partners can be nimbler—and potentially most cost effective—with the solutions they develop for you, as they’re only constrained by quality and reach of their network of relationships with carriers and other providers.
On the other hand, asset-based partners are bound to use their own trucks, ships, warehouses, etc., even if they’re not necessarily the best option for your requirements.
But don’t forget to weigh the risks
No venture is entirely risk-free. Non-asset-based logistics providers are generally considered more financially stable, and less prone to bias or conflicts of interest regarding claims and damages than their asset-based counterparts. However, they may find themselves at an access disadvantage during times of peak demand, if they don’t have a broad enough global network.
And because non-asset-based logistics providers outsource responsibilities to other companies, there are many more cooks in the supply chain kitchen. In order to give yourself peace of mind and ensure the risk of errors isn’t too high for your liking, vet any potentially partners in regards to their quality assurance and risk management approaches and capabilities.
Forwarding freight? Choose an industry leader
No matter what type of logistics provider you choose, asset based or not, be sure to first take the time to thoroughly vet any potential partners. Look for not only experience, but also the right footprint and capabilities for your specific needs (and needs you might have in the future). Find out if they have a track record for outstanding customer service. And make sure they have the right technology to support a transparent view of your supply chain.
In the end, when you find the right partner, you’ll find that outsourcing your transportation logistics will free you up to not only save on cost, but also on time and energy that you can then better apply to your core business.