In the world of the logistics and freight forwarding industries, many businesses find themselves asking the question of whether it’s better to employ their own in-house supply chain management or outsource the work to a freight forwarder. There are important differences between them, ranging from expertise and capacity to coordination and networking abilities.
So if you’re a business owner looking to understand the differences between freight forwarders and in-house supply chain management (including which option is right for your company), you’re in the right place. We’ll outline why all businesses should work with a freight forwarder and highlight what benefits you can take advantage of by outsourcing the transport & logistics arm of your business.
Freight forwarders and in-house supply chain management
It is important to understand the difference between freight forwards and in-house supply chain management when making such a critical decision that will affect your company’s supply chain.
What is a freight forwarder?
A freight forwarder is an expert in the transport of goods from a point of origin to a point of destination. They act as the agent of an importer or exporter of goods to ensure that cargo safely arrives at its destination, whether that be by rail, road, sea, or air.
A freight forwarder won’t directly move goods themselves. Rather, they will organise the logistics required for a shipment. This involves working closely together with transport companies (known as carriers), who physically move the goods. They also liaise with local agents, ports, suppliers and different government departments to make the journey as seamless and cost-effective as possible.
Importers and exporters can also receive tailored advice from freight forwarders on the raft of issues that come with logistics. This may include the costs of shipping their goods, what particular mode of logistics and transport is most cost-efficient, what documents are required and how shippers can keep their cargo safe from hazards such as the stink bug or other maritime accidents.
Freight forwarders will typically act on a global scale and have relationships in every country around the world. They are not to be confused with customs brokers.
What is supply chain management?
Supply chain management (SCM) operating in-house refers to an individual or a team of people employed by a business internally to manage the company’s supply chain function.
An internal SCM team may be responsible for everything within the supply chain from placing orders with a supplier to fulfilling sales orders. Their tasks can also include designing and developing the company’s products (i.e. product development), manufacturing them, packaging them and eventually transporting them. They may also be in charge of running their own business’ warehousing facilities.
Each in-house SCM team will differ in the tasks they perform, as every company is inevitably going to structure its team in their own way.
Benefits of working with a freight forwarder
While in-house supply chain management can work for some businesses, there are far greater advantages to obtaining expert third-party freight forwarding services.
We’ll outline some of these perks below.
Save time and resources
One of the most practical and obvious benefits of engaging an external freight forwarder is allowing your company to focus on its core business. Rather than employing separate staff to specifically deal with transport and shipping, use that time and energy to focus on growing your company by doing what you do best.
An internal supply chain management team will be working on hundreds of different things at once. They may be focused on product development one day and warehousing the next. Details may slip through the cracks, which may result in a shipment becoming unnecessarily delayed, or extra costs being incurred.
By enlisting independent and third-party logistics professionals who have the capacity to take the work on, you can instead focus on developing your products and services. Allowing you to come up with inspiring ideas for your industry and sell your solutions and products to the market.
Let freight forwarders handle all the shipping work – which is their core business.
Co-ordination with local suppliers
Freight forwarders are accustomed to working all over the world with different parties on a regular basis. They’ve therefore developed close relationships with local suppliers in many countries worldwide.
This makes coordination with local suppliers or customs much more efficient. They are often able to speak the local language and understand the local customs and traditions to get things moving much more quickly and cost-effectively. This is opposed to an internal SCM team, who may not be as accustomed to international business or have the necessary local knowledge to facilitate a shipment efficiently.
This is a vital advantage you can receive with freight forwarding. Barriers to trade can often be caused by language differences, but our team at ICE works with partners across the world that will coordinate your requirements with your shippers directly, in real-time, in their own language.
Understanding the Incoterms
The International Commercial Terms (‘Incoterms’) are the terms of trade that regulate the costs, risks and insurances between the buyer and seller in an international shipment (whether transporting by air or sea).
For example, the Incoterms will decide whether or not the buyer is at risk when goods are being transported from the port to the warehouse. It will also decide whether the seller is responsible for paying for any particular charges levied by a port authority.
These terms are complex and are particularly important in the event that buyers and sellers fall into a dispute. When something is damaged or a deal goes pear-shaped, the question that’s always asked is ‘who pays?’ In some cases, the Incoterms will be the answer to that question.
If you work with a freight forwarder, they can advise you on which Incoterm is best for you. In-house SCM teams may have some idea of their relevance, but freight forwarders are exposed to these terms on a regular basis. They have the expertise to know which Incoterm is most favourable for your circumstances.
Access to various shipping options
Freight forwarders have access to untapped shipping options that many in-house SCM teams may not be able to source. This is because an outsourced team specialising in freight and logistics has built relationships with a great number of partners, such as airlines and shipping lines, to provide options at the most affordable prices.
Our expert team here at ICE has developed close relationships with key operations personnel across the various freight and cargo service providers. We are well versed in the shipping schedules and routes offered by large container liners such as Maersk, Cosco, MSC and OOCL. We’re also across all the different cargo airliners ranging from Emirates and Cathay to Qantas Freight and Etihad.
Based on this extensive knowledge and network, we’re able to make the most appropriate shipping selection for your cargo that fits best with your bottom line.
Visibility of consignments
Another excellent advantage of a freight forwarder is that you are able to monitor your consignment every step of the way throughout the shipping journey.
Here at ICE, we use high-quality tracking software to ensure importers and exporters are able to locate their shipments at any time. You’ll know immediately if your cargo is delayed at a particular location.
Understanding the industry
When it comes down to it, freight forwarders are transport and logistics specialists. They can navigate the various complex issues that arise with relative ease because they’ve made understanding the shipping process their core business.
When you think of the various issues faced in the industry, you will soon realise exactly what your business’ cargo is up again. Rampant port congestion caused by the COVID-19 pandemic, delays caused by customs clearance issues, union strikes disrupting port activities, and unforeseen biosecurity hazards are just some of what logistics experts deal with on a daily basis.
Having a professional on your side that understands these issues and how to navigate them is an invaluable asset for any company that ships and receives goods from overseas.
Bonus: In-house customs brokers to deal with the Australian Border Force
Customs clearance and documentation is a crucial part of shipping that must be accurate. Qualified customs brokers take annual training to maintain their licences and have a thorough understanding of all the nuances including biosecurity, quarantine and customs queries. This involves working closely with the Australian Border Force to ensure your goods clear customs smoothly.
They’re experts in calculating customs tariffs and identifying the correct HS Code that applies to your shipment. This is of vital importance, as failure to pay the right customs duty can lead to your goods being held up by customs authorities.
Normally, a freight forwarder and a customs broker are two separate roles. The former is responsible for organising the transport of goods when the latter deals with the entry of goods at the customs.
However, at ICE, we have our own in-house customs brokerage and consultancy that can help you beyond just your shipment. We can therefore act as your one-stop shop for all your shipping and customs needs.
Can I work with both freight forwarders and in-house supply chain management teams?
Yes, you can work with both freight forwarders and in-house supply change management teams, but whether or not that is the best option will depend on each company’s circumstances.
Supply chain teams can work in conjunction with freight forwarders to get “the best of both worlds”. A supply chain manager can also benefit from the skills and expertise of a freight forwarder for a low cost, removing some of the obligation and pressure when processing documentation and allowing for direct access to skilled professionals. This might work especially for larger companies.
For some organisations, however, a supply chain team will just be too much. It may be a large expense that a business cannot justify, especially when realising the financial and practical benefits to take advantage of external freight forwarding services. In that instance, they should use external freight & logistics specialists to coordinate freight movements in a fast-paced industry.
So get in touch with our expert freight forwarders and customs brokers at ICE today to start discussing your next shipment.