Manuscript Id: iJARS/692 1 Research Article
Exporters Choice of Freight Forwarder in Moving Their
International Cargo
Authors:
K. Parimala
*
Address For correspondence:
1
Assistant Professor, PSGR Krishnammal College for Women, Coimbatore
INTRODUCTION
The goods are moved from the manufacturers/exporters to the customers/consumers by the freight forwarders with their effective utilization of the road/sea/air transportations. The key concept in freight forwarding service is the delivery of the cargo till the destination point or at the forwarders place to perform the operations to bring the goods to their end users. The international freight forwarders act as bridge between the manufacturers/exporters to the destination of the consumers. Their role through the development of multimodal transport operations is important to increase efficiency in international movement of goods, which is a critical component in the quest of improving our total export competitiveness.
LITERATURE REVIEW
The study “Freighter operators' choice of airport: a three-stage process 1” focuses on the increasing levels of congestion at the major cargo hubs and further restrictions on noise and night-time flying, freighter operators' airport choice is a complex and important issue. The aim is to identify the factors that affect the airport choice of freighter operators through a review of the published literature.
This paper“A study of the freight forwarding industry in Hong Kong 2”, reports the results of survey administered to over 1,100 companies in the industry, examining their demographic profiles, capability in providing different types of logistics services, service performance and the perceived prospects of the industry. While many freight forwarders in Hong Kong are highly capable of providing freight forwarding and many traditional logistics services, they seem to lack the ability to provide other value-added services.
Manuscript Id: iJARS/692 2
This research “Profiling international freight forwarders: an update” provides results from a recent empirical study of US-based international freight forwarders (IFFs). Compares IFF demographics with those from previous empirical research and finds that the IFF industry is still dominated by small companies and that IFFs continue to diversify their revenue bases. Presents information concerning contemporary issues affecting the forwarding industry and finds that IFFs generally view the Internet as a complement to, rather than a substitute for, EDI. The Study focuses on “The Differentiation In Service And Performance By The Freight
Forwarders In Logistic Operations.
NEED FOR THE STUDY
Depending on the type of forwarder or their specialty, they will set you up with insurance, they may assist in inventory management, transshipment and some will handle customs clearance. Many times freight forwarders are specialists in a particular market. If they handle the same cargo for various different companies who are shipping similar goods it can be very beneficial financially. Price, security, and compliance rank high on the list of criteria for selecting an international freight forwarder on the part of shipper. Auctions have gained popularity, with freight contracts going to the lowest bidder. But choosing on price alone can leave a company shortchanged.
So the researcher has keen interest towards learning the perception of exporters in Coimbatore towards their choice of freight forwarders in moving their international freight.
SCOPE OF THE STUDY
A recent study found that some IFF companies begin by offering value added services and move towards becoming a logistics service provider. The evolution of the concept of "total logistics support" led IFF companies to offer value added services such as customs clearance, logistics management, information technology and more. In order to measure to what extent clients purchase the additional services that IFFs offer, we defined scope-of-use of IFF services.
We employ use as a segmentation tool and define three categories which classify scope-of-use in this study: (1) international forwarding only; (2) a complete "solution" for all of an organization's logistics requirements; (3) international forwarding requirements and part of the organization's logistics requirements.
OBJECTIVES OF THE STUDY
To study the role of freight forwarders in international logistics.
Manuscript Id: iJARS/692 3
FREIGHT FORWARDERS
–
“Logistic Architect”
Freight forwarders are generally viewed as a necessity only by businesses dealing with international business. However, they can be a godsend to any individual faced with an international freight problem. Freight forwarders provide logical and professional shipping solutions to any client requiring their expertise. Although international freight shipping might seem like a straight forward affair, unless the shipper is well versed in the many treaties governing international trade and import/export restrictions, then he might run into unforeseen problems even if all he moves is his personal belongings.
Why does a Shipper need a F reight F orwarder?
Hiring the right freight forwarders to help you with your international freight requirements is a logical first step to getting your belongings to your ultimate destination. Regardless of what you have to ship over, unless you are relocating with nothing more than a backpack, then you will have to find shippers to help you book passage on a ship or aircraft, deal with customs obligations and fill out all of the necessary documentation. International freight is especially tricky because you must fill out the correct papers and file them with the proper authorities in a timely fashion or risk having your belongings held up at customs for an indefinite length of time.
Freight Forwarder (or) Shipping Company?
Shipping goods overseas also involves having to rent a container to hold all of your belongings. Unless you know exactly what kind of a container to rent and from where you can obtain such a vessel on your own, you will have to use the services of either a shipping company or a freight forwarder. While a shipping company might be able to cover some bases, they will undoubtedly have to call on third parties to fill other aspects of your move. Most international freight companies will partner up with customs brokers and will book space on ships and aircraft in order to ensure space for their customers' shipments. However, freight forwarders generally tend to either have all of these services offered under one, practical umbrella or they have a very extensive network of partners, meaning that they have are able to offer you a turn-key service for your international freight shipping needs.
ROLE OF FREIGHT FORWARDERS
Manuscript Id: iJARS/692 4 On behalf of the shipper , they can provide a quotation on:
Freight costs Port charges Consular fees
Cost of special documentation Insurance costs and
Freight Forwarder’s fees.
This information is used to prepare an accurate price quotation to foreign customers. At the shipper’s
request, the freight forwarders can make the actual arrangements and provide the necessary services for expediting the shipment to its overseas destination. This can include:
Booking space with the carrier Completing export documentation Arranging for cargo insurance
Advising on foreign import regulations
Providing guidance on packaging, marking and labeling
Arranging for products to be packed and containerized at the exporter’s request
Export clearance.
SHIPPERS CHOICE IN SELECTING A FREIGHT FORWARDER
Shippers/Exporters each have their own needs to consider when selecting a freight forwarder, and the following are some factors to be taken into account when selecting a freight forwarder.
It's important to look for a freight forwarder that is accredited. They must have a license from the Federal Maritime Commission in order to handle ocean freight. Freight forwarders that handle air freight must be registered with the International Air Transport Association (IATA).
You should determine whether the freight forwarder is financially stable. You can request credit references and confirm them. You could also consult freight companies to see whether the freight forwarder has a good payment record. If the freight forwarder is a large company, you could see whether it is listed on the New York Stock Exchange or the NASDAQ and request a copy of their annual report.
You could ask the freight forwarder for references from its customers, and then call those customers to ask about their satisfaction with the service provided. You could ask the freight forwarder directly, or its customers, if the forwarder has knowledge and experience with your company's
Manuscript Id: iJARS/692 5 You should find out whether the forwarder is large enough to meet your company's exporting needs.
Do they have an office in your destination market? Do they have a network of agents abroad?
Do their offices and agents have the ability to communicate on line? Do they have warehouse facilities, in case you need that service?
Do they have sufficient staff to manage the volume and needs of your exporting company? Do they have insurance against errors and omissions?
Are they willing to take the necessary time to explain the terms and procedures in a way that you can clearly understand?
You should inquire about the cost of using the freight forwarder's services. o How do they charge for their services?
o Do they charge the exporter a fixed fee plus reimbursable expenses? o Do they charge the freight company a percentage of the cost of freight? o How much do they charge for packing and documentation?
10 Tips for choosing the right Freight F orwarder
1. Determine your overall requirements. Look at imports, exports, distribution and brokerage. Be clear about your objectives, and be able to compare freight forwarder responses equally. Think in terms of total cost, not just transportation cost by lane. Decide if you want a large or small partner. Look at the coverage necessary to support your business, as well as your customer service, information technology, and reporting needs.
2. Get internal management buy- in. This is the toughest part. Be sure that management is committed to making the change and your internal organization supports the decision.
3. Come to the negotiating table prepared. Have your demands ready. Specify your objectives and why you are seeking a new partner. Identify a target start date. Have the information on commodities and density, as well as terms of sale. Know your criteria; know your volumes by lane; and know the product and service levels you need.
4. Do your homework. Research the forwarders you are interested in. Know their financial strength, coverage, and local office. Talk to colleagues in your market about which forwarders they use and why.
Manuscript Id: iJARS/692 6 6. Build your Request for Quote (RFQ). Look over your current RFQ to ensure that it's complete and up to date. Provide sample agreements and the terms and conditions you desire.
7. Be selective. Issue RFQs to "qualified" companies you have pre-screened. Don't blast RFQs out to the world—you will not have enough time to do an efficient review.
8. Set a time frame. Determine a reasonable time frame for forwarders to reply to your RFQ. Set up a question-and-answer period with a minimum of three weeks for forwarders to provide comprehensive responses.
9. Narrow your choices. Go through the RFQs and invite forwarders who meet your criteria to a follow-up meeting—but have a conversation with them in advance so your concerns can be better addressed. Listen to their presentations, but ask questions based on their initial responses.
10. Negotiate the nuances and make your choice. Starting up with a new freight forwarder is just as critical as the selection, so set a reasonable time frame and appoint a team to get it done.
IFF Evaluation Factors
Factors Factor Explanation
Expertise Degree of expertise in providing relevant services Personal attention Ability to work with one contact point personnel Customization Ability to meet unique customer requirements Flexibility Ability to provide both air and sea freight services Additional logistic services Ability to provide a wide range of services
Reliability Reliability of the IFF's service
Meeting Deadlines How well the IFF meets pickup, delivery and distribution deadlines
International Deployment No. of branches/offices worldwide; no. of countries in which the IFF is represented
Quality certification How well the IFF meets ISO 9002 and IATA and FIATA standards
Experience Years of forwarding activity
Company size No. of IFF company employees
Information availability The ability to access/interface with the IFF's information technology
Reliable information The reliability of IFF's information systems
Online pricing The ability to receive price quotes over the Internet
Reports tools The customer's ability to produce status reports independently Competitive prices Ability to offer attractively priced services
Taxation Ability to minimize the customer's tax payments
Manuscript Id: iJARS/692 7
SUMMARY
The factor perceived as most important to international traders is Reliability. We also found that the
Reliability group of factors is the most important. The second most important perceived factor is Deadlines. The ability of forwarders to meet deadlines directly affects their clients' ability to meet
their own obligations towards their customers and to provide them with reliable supply schedules.
The third most important factor is Competitive Prices. Selecting an IFF company is basically an economic decision, based, to a large extent, on cost considerations. We could find significant differences in regard to the number of destinations a client may have. We found that the importance of the Reliability group and Service and Prices group is significantly higher for respondents who work in a company with a smaller number of destinations. Consequently the study suggests that the aggregate data regarding the group criteria is sound and not influenced by the shippers characteristics and the business environment.
The present study investigated the perception of IFF customers as to the most important factors in selecting an IFF service provider. Future research might examine the importance of key factors from the viewpoint of the freight service providers and then to compare the different perceptions of providers and clients. Another area for further research would be to repeat the present study using a different sampling frame, which would examine whether the results would be similar or different among IFF users from other countries.
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