Many merchants turn to freight forwarding services to overcome the challenges of sourcing products overseas. Freight forwarding services take the process out of your hands and make moving your goods more efficient and cost effective. With ever-changing trade rules and complex import procedures (not to mention natural disasters and military conflicts), freight forwarding can help you source merchandise overseas to resell, get raw materials to make your products, and more.
Below you’ll learn how freight forwarding services work and how you can get the most out of partnering with one.
What is a freight forwarding service?
A freight forwarding service is a company that organizes your shipments by working with carriers. A freight forwarding service does not move the goods but acts as an agent in the logistics network.
“Ecommerce companies that source [supplies or products] from overseas work with freight forwarding services in deeply integrated ways to coordinate production and shipment of their products from a factory abroad to the markets in which they sell,” says Cory Sanderson, general manager at Flexport, a freight forwarding service that also specializes in customs brokerage.
It’s the responsibility of the freight forwarding service to work closely with their partners—including carriers that offer ocean, rail, road, and air freight—to negotiate the best possible prices for merchants.
Freight forwarders also help to determine the best routes, even designing charter routes to optimize speed, cost, and reliability. The goods they ship may be raw materials to factories, finished goods to warehouses around the world, and even post-consumer shipments for recycling and disposal.
In addition to working with carriers, freight forwarders act as a liaison between suppliers and manufacturers to help manage the customs process.
What’s the difference between freight and logistics?
While freight and logistics have similarities, they’re not synonymous.
Prior to the ecommerce boom, logistics meant moving orders from factories or warehouses to brick-and-mortar stores. This process has become more complicated over time, with logistics companies now shipping individual orders directly to customers using their own fleets of trucks, ships, or planes.
There are also third-party logistics (3PL) companies overseeing warehouse spaces on behalf of merchants, in addition to shipping goods and managing returns. Logistics companies operate both domestically and internationally, and many can help ecommerce merchants navigate cross-border customs processes.
A freight forwarding service, on the other hand, is less likely to have its own assets such as trucks or boats and doesn’t carry out shipments. Instead, it works directly with a range of logistics companies to negotiate and find the best shipping routes and costs for their customers. Some freight forwarders may require companies hit a particular threshold of ocean or air shipments, while others will work with companies of any size.
Freight forwarding services also handle paperwork related to international shipping, helping you navigate the confusing world of customs and export declarations.
Benefits of using a freight forwarding service
Freight forwarding agencies can help you in ways that impact your bottom line. Here are some of the benefits of working with freight forwarding services:
Freight forwarders can negotiate lower shipping rates
Unless you’re tendering hundreds of shipments a year, you’re unlikely to be in a position to bargain directly with carriers. Freight forwarders have the volume to negotiate, saving money they can pass along to you, the shipper. Since they’re working with multiple ecommerce merchants, they can also help consolidate freight so all the companies involved receive a better rate.
Freight forwarders can help resolve supply chain snags
Working with multiple carriers gives freight forwarders the ability to look into different transportation models and routes. When capacity is tight, preference is typically given to high-volume customers, which includes freight forwarders and their clients.
You’ll only need to manage one relationship
It takes time and resources to manage multiple and sometimes disjointed relationships with shipping companies, airlines, trucking companies, customs brokers, and insurance agents. Freight forwarders take care of everything.
You will likely save time and money
Freight forwarders specialize in the complex market of international shipping. By delegating the task to the experts, you’ll save time, money, and, most likely, headaches.
How does the freight forwarding process work?
When a company sources its products or materials from somewhere else, they can use freight forwarding to manage the process. Cory gives the example of a US-based Flexport customer making reusable stainless steel products. The company’s products are sourced from a factory in China and then shipped to its main shipping warehouse in the US and to distributors in Europe.
While the process may sound relatively straightforward, Cory says many ecommerce companies underestimate how many parties touch a shipment over the course of an international move—which is why the expertise of freight forwarders is invaluable.
Here’s how it works:
1. Planning
The company builds out its sales and operations planning forecast. It converts this information into purchase orders (PO) for individual product stock keeping units (SKUs), including the type and quantity of each product, the target cargo ready date and other parameters that will help the factory plan production and shipping. As the products are completed and prepared for shipment, the factory books shipments against the PO in Flexport’s system.
2. Communication
The company provides documents to Flexport, including commercial invoices for customs clearance for Chinese export and US import, and anything else required by the exporting or importing countries and the ocean or air carrier that will be handling the shipment.
Using a local team or partner (typically referred to as an “agent”) Flexport works with the company’s factory in China to coordinate pickup, work through export questions, and manage hand-off to sea or air terminals. Flexport also handles the full process of tendering a shipment to an air or ocean carrier.
3. Tracking
Once the shipment is in transit, Flexport keeps track of it with the carrier and provides the company with updates or “exceptions” if something (such as a storm) causes a delay. Freight forwarders aren’t responsible for delays but will try to resolve them.
4. Arrival and pick up
When the shipment arrives at its destination, it’s unloaded then inspected and validated against the booking documents. The customs paperwork for the cargo is also checked by the authorities.
Flexport handles the arrangements with the sea or air terminal to get the shipment picked up. This may include providing trucking services to get it to the delivery location requested by the merchant, which could be warehouses or distribution centers.
Flexport’s “destination” team can resolve issues that arise, receive updates on delivery arrival, and even make changes in transit. Flexport can also handle tasks like labeling or other prep if it's going into a distribution center that has complex inbound requirements.
How does pricing work?
Calculating freight forwarding costs depends on a number of factors, including your shipment’s size, contents, origin country, destination, and whether you’re shipping the goods by land, sea, or air.
Carrier costs
Although this may be lumped into one line item as a flat fee, it accounts for airline security charges, fuel surcharges, and cargo screening fees. It is also known as the air freight or ocean freight forwarder price.
Container costs
If you’re shipping by sea, you’ll either be charged for a full container load (FCL) or a less than container load (LCL). If you’re shipping LCL, you’ll be sharing space with other shipments and there may be a cost associated with separating those shipments at the destination. If shipping by air, expect to be charged for a pallet or container.
Freight forwarder handling fee
This covers the costs associated with paperwork and documentation, such as preparing the bill of lading, which contains the type, quantity, and destination of the shipped goods.
Insurance
Carriers are legally obligated to have insurance, but you may want to purchase additional insurance to protect your shipment.
AES fee
This is specific to imports to the United States. It covers the cost of freight forwarders filing electronic export information (EEI) to the automated export system (AES).
TSA security charge
Specific to US importers, freight forwarders charge this fee to offset the costs of adhering to strict TSA regulations.
Fees for specialist goods or specific destinations
These may include export license fees for goods deemed controlled exports (such as those that can be used or modified for military use), certificates of origin fees, hazardous materials fees, or legalization fees (a process forwarders go through, primarily in the Middle East to send documents to a consulate or embassy).
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Best freight forwarding services
We researched and cross-checked freight forwarding service reviews to create the following list:
Flexport (Shopify preferred)
An American multinational corporation, Flexport focuses on supply chain management and logistics, including order management, delivery, insurance, freight forwarding, and customs brokerage.
UPS Supply Chain Solutions (SCS)
UPS SCS specializes in international air and ocean freight services, and offers freight forwarding, port-to-port and door-to-door options, for both palletized and loose freight shipments across the world.
GEODIS
As a freight forwarder, GEODIS offers a wide variety of land, air and ocean freight solutions, including supply chain optimization, contract logistics, distribution, and road transport.
DHL Global Forwarding
DHL Global Forwarding provides air and ocean freight forwarding services. It also plans and undertakes major logistics projects under DHL Industrial Projects.
C.H. Robinson
C.H. Robinson is an American transportation company that offers transportation management, freight forwarding, brokerage, and warehousing services.
Nippon Express
Nippon Express provides services such as air freight forwarding, air and marine transportation, heavy haulage, warehousing and distribution processing, logistics design, and chartered truck services.
Toll Group
Toll offers a diverse range of freight forwarding and logistics services, covering air, sea, rail, and land transportation, warehousing services, supply chain management, and customs brokerage.
TIP: Work with a freight forwarding company that has an online booking system, which will allow you to take advantage of the freight forwarder’s PO management tool, eliminating lengthy email threads and paper trails.
Moving forward with a freight forwarding service
If you already ship internationally or are thinking about scaling to enter international markets, then it’s time to consider a freight forwarding service. These supply-chain navigators take complex logistics and customs processes out of your hands.
Freight forwarding FAQ
What is the difference between logistics and freight forwarding?
Logistics companies ship orders using their own fleet of trucks, ships, or planes. Freight forwarders work with carriers to negotiate the best shipping rates and routes for their clients. They also handle customs and paperwork needed to import and export goods.
Why is a freight forwarder important?
Many carriers do not work directly with shippers and instead work exclusively with freight forwarders. For merchants, freight forwarders make the process of importing and exporting less expensive, complex, and time consuming. They can also negotiate better shipping routes and rates for their clients.
What is the difference between a freight forwarder and a 3PL?
A freight forwarder helps to move supplies or products across international borders. A 3PL is a third-party logistics company that helps with warehousing and shipping goods directly to consumers.
