About the basics of domestic freight forwarding in the Philippines and why micro, small, and medium enterprises should avail freight forwarding services.
Freight forwarder as a travel agent
What a freight forwarder does
The Freight forwarding process
Why freight forwarding is for MSMEs too
Freight forwarding may appear as a foreign concept to laypersons in the Philippines. It is the big businesses and globally known brands primarily use their services. And in looking up for resources, freight forwarding is often explained in international, import-export contexts. In this article, I will go over the basics of freight forwarding in domestic terms, and expound why micro, small, and medium enterprises should avail their services too.
In simple terms, freight forwarders, are travel agents for the cargo industry. As in travel agent, who is supposed to have extensive knowledge about tourist product - destinations, modes of travel, climate, accommodation, and other areas of the service sector, a freight forwarder deems to have the same expertise analogous in the cargo transport.
A freight forwarder has an exceptional geographical sense and back-up knowledge on the modes of transportation in the various locations. If your travel agent facilitates the tourist’s accommodation, it is by the same token that freight forwarder takes care of storage and warehousing of cargo.
A travel agent, technically, is an owner or manager of an agency, but other employees are in-charge of advising tourists and selling packages tours/individual components of travel products. The same goes for freight forwarders. While it could mean as a single person, it sometimes refers to a company with employees responsible in every aspect of the freight forwarding business.
As in travel agents, freight forwarders are intermediaries between shippers and various sections in transportation services like shipping lines, trucking services, and airlines. As middlemen, their primary purpose is to negotiate prioritizations, facilitate dialogues, and report status for and on behalf of the shipper/client. They leverage established relationships with different logistics-related companies for the best possible price for moving merchandise utilizing the fastest or the most appropriate route.
What a freight forwarder doesIn Hariesh Manaadiar's blog, he outlined the capabilities expected from a well-established and experienced freight forwarder, and these are:
experience in all modes of transportation – road, rail, air, and sea
ability to provide cost-effective and efficient cargo shipping solutions based on the client’s requirement
ability to arrange storage for the cargo
ability to arrange the distribution or 'forwarding' of the cargo as per the instructions of their client
capacity to negotiate freight rates with the shipping line
ability to book cargo with the shipping line as per the requirement of the client or under their contract
capacity to process all relevant shipping documents such as certificates of origin, customs and port documentation, bills of lading and associated shipping/negotiating documentation
authority to issue their own approved house bill of lading
capacity to arrange transportation of the cargo from/to the clients' premises and port
thorough knowledge of over border cargo movement
ability to arrange customs clearances
For cargo shipping, there are seven steps in the freight forwarding process. It is the freight forwarder's job to do the intricate details for you--primarily on cargo handling and documentation. These steps are repeated for every shipment, and each has associated costs. The freight forwarder usually gives you an all-in freight price for the stages that they are responsible for.
Origin Haulage
It pertains to the movement of the cargo from the shipper’s storage units, to the forwarder’s warehouses, to the port. The commodities are transported by road, usually done by the freight forwarder’s trucking service. In some cases, by a separate, local transportation company.
It is also quite common for freight forwarders to offer local transportation as part of their package.
Port of Origin Clearance
This step pertains to the transaction declaration of commodity and submission of required documentation to the authorities. For international shipping, this is done by licensed customs house brokers only. This step is usually considered as the first hurdle. Should any problem surface in this phase, the whole operation will be at a standstill until all the requirements are fulfilled and completed. The supporting documents differ from country to country. For domestic shipping, the process is less intricate.
Origin Handling
This step entails physical handling of the cargo until loaded onto a ship in a container. In details, goods shall be inspected and analyzed for shipping. The next concern then is on how it would be loaded as shipment. For commodities that can not fill up an entire shipping container, it shall be consolidated with all the other goods and then stuffed into a shipping container, then moved to the port where it is loaded onto a cargo vessel.
Ocean Freight
Ocean freight is usually used to refer to international shipping, while sea freight for domestic. The major aspect of the freight forwarder’s job is in the selection of a shipping line that will manage the ocean freight from the origin to the destination within the designated timeline required by the client. A contract of carriage between the freight forwarder and the shipping line has to be forged. This is usually in the form of a waybill or bill of lading. According to businessdictionary.com, contract of carriage "contains conditions of carriage that spell out the obligations and rights of a carrier and a shipper/passenger. The carrier undertakes to deliver goods/passengers from a named place of departure to a named destination, in consideration for freight/fare." The contract should tackle what is being carried; and more importantly, how the liability and compensation for damage or loss of the goods are assessed, apportioned, and paid.
Port of Destination Clearance
For international shipping, this is specifically referred to as export customs clearance. In some cases, cargo can be cleared even before the arrival of its destination country. In any case, this phase needs to be completed before the cargo leaving a customs bonded area. Without completing the documents and requirements during this phase, the goods will be stuck in the warehouses within the port.
Destination Handling
This phase entails the handling of the goods as it arrives at the port of the destination. It includes the transfer of containers from the ship to shore and from the port to the forwarder’s destination warehouse. Destination handling involves many destination charges, all of which should be taken care of by the freight forwarder, or an agent appointed by them.
Destination Haulage
The final step in the shipment process is the actual delivery of the cargo to its target destination. Similar to origin haulage, it can be performed either by the freight forwarder or a local transport company. The actual unloading of the items can be done by the client-consignee in the destination, however, in some cases, freight forwarders can arrange labor services for the job as well.
Why freight forwarding is for MSMEs too
As an MSME, with less financial strengths than big and acclaimed corporations, you make the most of the benefits in hiring a freight forwarder for your logistics and transportation needs.
Hiring a freight forwarder means lower risk for business losses
To freight forwarders, the moving of good is the heart of their activity. Transportation is what they do the best. Since they specialize in it, a high level of efficiency can be expected from them.
Availing freight forwarding services means less trial-and-error on your part
Considering their vast network of contacts, they can connect with the various sectors in the transport industry to suit clients’ transportation needs in terms of the type of truck needed, time requirement, and budget. Freight forwarders have the solid experience that allows them to know the strengths and weaknesses of each of the transport providers with which they have already worked before.
Freight forwarding services allow you to save money for the shipment
Freight forwarders can negotiate lower terms with carriers since they transport items in bulk. Considering the high competition in freight forwarding, you can always ask for the best rates of your shipment.
Using a freight forwarding business means convenience
Freight forwarding services take care of most of the paperwork and documentation required and other administrative duties in the delivery of goods. The highly-specialized service they provide can assure you that you do not have to handle errors in documentation, or problems with missing information. The convenience they offer allows you more time to handle the other aspects of your business.
TakeawayIf you have reached this part, you probably are considering availing a freight forwarding service.
Snap Movers Co. offers cargo shipping and trucking services to and from different strategic business areas in the Philippines. A domestic freight forwarding company specializing in sea and road freight, known for competitive rates with the assured placement of bookings, full monitoring of shipment status, and cargo insurance.
