The ultimate guide to freight forwarding operations

The World Bank projects that the global freight forwarding market will reach USD 2.4 trillion by 2027, reflecting a significant rise in international trade. For efficient freight forwarding operations, however, you need to navigate strict regulations and optimise logistics processes and communication. 

Types of freight operations 

Understanding the different types of freight operations is essential for businesses choosing the most suitable transportation mode for their needs.

The six stages of a freight forwarding process 

Freight forwarding services involve these six critical stages:

1. Pre-carriage

This stage involves initial communication between the shipper and the freight forwarder. The shipper details the shipment's nature, weight, dimensions, and destination. The freight forwarder acts as a consultant, using their expertise to recommend the optimal mode of transport (air, sea, or land) based on speed, cargo type, and destination accessibility. 

They also provide cost estimates and guide the shipper on necessary customs documentation. Freight forwarders may also leverage internal shipping and logistics software to document details and generate initial freight quotes.

2. Export customs clearance

In this stage, the freight forwarder compiles all essential export documents and ensures they meet the specific requirements of the origin and destination countries. These documents typically include commercial invoices, packing lists, certificates of origin, and export licenses (if applicable).

Many countries have transitioned to electronic customs clearance systems to expedite the process. Freight forwarders use these platforms to submit documentation and interact with customs authorities efficiently. McKinsey estimates that an electronic bill of lading could save $6.5 billion in direct costs and enable $40 billion in global trade. In some instances, however, customs may require physical inspections of the cargo to verify the accuracy of the documentation and ensure regulatory compliance.

3. Haulage 

The preferred mode of transport from the pre-carriage stage determines the type of export haulage used. For example, freight forwarding companies use road haulage for land-based shipments, and they might use inland waterways like rivers and canals in specific cases. Freight forwarders employ GPS tracking technology in this stage to monitor the cargo's movement in real-time.

4. Main carriage

This is the core stage of the freight forwarding process, and it involves transporting the goods to the destination. In the case of maritime transportation, the freight forwarder monitors the shipment and coordinates with destination port agents for arrival and customs clearance. For urgent shipments, air freight might be chosen despite higher costs. In cases where the destination is landlocked, a combination of sea, rail, or truck transport ensures efficient delivery, adapting to logistical challenges.

5. Import customs clearance

Upon arrival at the final destination, the freight forwarder facilitates import customs clearance, ensuring the shipment complies with all import regulations and obtains the necessary clearance from customs authorities. These documents typically mirror those required for export, with additional country-specific variations. 

6. Delivery

Once they secure customs clearance, the carriers deliver the cargo to the consignees at the designated location. This process may involve additional warehousing, unpacking, or distribution services. Depending on the agreement, the freight forwarder may handle the final delivery to the consignee's warehouse or arrange pickup at the port or terminal. 

How to overcome top challenges in the freight forwarding industry 

Let's review five challenges freight forwarders face and the strategies to mitigate their impact:

1. Regulatory compliance

Freight forwarders must continuously stay updated on the latest rules across different countries to avoid delays, fines, or reputational damage due to non-compliance. Companies achieve this by investing in subscription-based services or software that provides real-time updates on regulatory changes specific to their trade routes. 

Leveraging the expertise of logistics service providers well-versed in customs procedures and regulatory requirements across different countries also helps. For instance, freight forwarders must adhere to the Export Administration Regulations (EAR). These providers assist with accurate documentation and ensure import/export laws compliance. Regular training and continuous staff education on customs procedures, documentation requirements, trade compliance, and regulatory updates are essential.

2. Capacity and cost fluctuations

Shipping capacity and transportation costs fluctuate due to fuel prices, geopolitical events, and other factors. This constant price shift makes it difficult for freight forwarders to offer predictable pricing to their customers.
To manage fluctuations in shipping capacity and transportation costs, freight companies should:

• Develop a diverse network of carriers, including multiple shipping lines and airlines, to secure better rates and avoid over-reliance on a few providers. 
• Consider dynamic pricing models that adjust based on market conditions. 
• Explore long-term contracts with carriers for fixed rates on specific volumes. 
• Leverage freight management software to optimise routes and reduce fuel costs.

3. Technological integration

Integrating new technologies into the freight forwarding industry poses a challenge, especially for companies with outdated infrastructure. Legacy systems may not be compatible with newer software, upgrading systems is expensive, and employees' learning curve may temporarily disrupt operations.

We recommend starting with initiatives that can give you a quick win — for example, by deploying a purpose-built email management platform that integrates with your software stack. Starting your digital transformation in your inbox will help you build momentum, gain stakeholder support, and mitigate risks. 
Discover key strategies for supply chain change management.

4. Managing multiple stakeholders

Secure communication and collaboration are crucial to managing expectations, ensuring smooth operations, and building trust. 

Research from NTT Data indicates that 78% of logistics professionals believe improved communication is essential for building solid relationships with clients and carriers. And email remains the favoured method due to its accessibility, record-keeping capabilities, and ability to facilitate asynchronous communication across geographies. However, language barriers, time zone differences, and email overload present hurdles.

With AI-powered email management, you are able to:

• Prioritise messages that require your immediate attention
• Find the information that you need for streamlined decision-making 
• Track shipments in one place rather than in multiple systems 
• Accelerate customer responses

5. Risk management

Forwarders should assess each shipment's risk exposure and secure necessary arrangements well in advance​​. Unforeseen events like bad weather, labour disputes, or port congestion disrupt schedules, causing delays and potential financial losses. There's also the risk of cargo damage, theft, or loss due to unforeseen circumstances. 

Addressing the market volatility requires freight forwarders to share concerns over risks with clients, avoiding penalties or business interruptions. Working closely with third-party logistics (3PL) companies to address sudden demand surges helps manage unexpected volume increases without straining existing resources​​. 

Leverage Sedna for your freight forwarding and logistics needs

Sedna is a leading provider of AI-powered email management solutions specifically designed for the freight forwarding and logistics industry. Our platform, Stream, simplifies communication workflows, automates repetitive tasks (data entry, booking confirmations, quote generation, and tagging relevant stakeholders), and empowers freight forwarders to focus on their core competencies.

Benefits include:

• Improved accuracy: By automating data entry and communication tasks, freight forwarders reduce errors and ensure consistent information sharing with all involved parties. For instance, eliminating the need to input shipment details like dimensions and weights into emails minimises the risk of typos or incorrect data entry.
• Reduced email processing time: Sedna automates email organisation and prioritisation, freeing up valuable time for freight forwarders to focus on critical tasks such as resolving complex shipment issues and proactively managing logistics challenges.
• Data analytics: Automated data capture and analysis provide real-time visibility into key metrics such as shipment status, arrival times, potential delays, and communication logs with various stakeholders, enabling data-driven decisions to improve communication processes continuously.

Ready to optimise your freight forwarding operations? Book a Sedna demo today.