Many people mistake the freight forwarding process with import and export consultations, distribution management, and straightforward shipping. It’s not completely clarified: what does a freight forwarding company do? The process involves aspects of import and export, distribution, and shipping, but it’s none of those things.
A freight forwarding agency, also known as a NVOCC (non-vessel operating common carrier), handles the regulations, paperwork, and logistics of international trade Anne K. Metcalf, a technological essay writer emphasizes. The agency specializes in shipping merchandise and arranging storage on behalf of its clients (the shippers).
We’ll list some of the services provided, so you’ll better understand: what is freight forwarder services? This is what the agency does:
- It books cargo space and warehousing
- It prepares shipping and export documents, in accordance with international regulations
- It tracks inland transportation of goods
- It deals with cargo insurance policies
- It files insurance claims when needed
- It negotiates freight charges
In short, the freight forwarding business is an extended hand to the shipper on an international level. It’s a lucrative business idea. Interested?
5 Tips: How to Start a Freight Forwarding Business
1. Analyze the Industry
The first step towards developing a successful brand is understanding: what does a freight forwarding company do? You need to analyze the industry and understand how it works. You’ll research your competitors on an international level, so you’ll understand how they became successful and how you can take away a piece of the pie.
In the logistics business, it’s best to gain some experience by working for a freight forwarding company first. If you can learn from an experienced team, you can build on that knowledge. You’ll notice the flaws and you’ll fix them when you start your own brand. You’ll do your best to mimic the strengths and advance them even further within your team.
2. Estimate the Costs of Starting and Maintaining a Freight Forwarding Business
The good thing about starting this type of business is that you don’t need warehouses and huge offices. The startup costs are low. All you need is a computer with an Internet connection and a phone that you’ll use for direct communication.
However, you’ll also need software, which will help you manage the receival, storage, and delivery of cargo in real-time. That’s your major expense. You don’t need to invest in unique software developed from scratch. There are pre-made tools on the market, so you can choose one based on your needs and features.
You’ll need to compare those costs with the profit you predict to start making. For that, you’ll need to answer these questions:
- What is freight forwarder services? What types of services will my business provide?
- How much do competitors charge for them?
- How much will I charge for them?
Typically, a freight forwarder takes a fee of 15-25%, and they charge it once the goods are safely and timely delivered.
3. Work on a Strategic Plan
These are the seven steps in the strategic planning process:
- Develop a mission statement - Make it specific; not abstract! At this point, you can work with a professional to help you develop a business plan.
- Make a SWOT analysis to understand the strengths, weaknesses, opportunities, and strengths. This process demands a lot of research and planning, so don’t rush through it.
- Establish the long-term goals of your business. Based on your current finances and knowledge, you know where you start. But where will your brand be five years from now? You need a vision that will keep you moving forward.
- Determine the KPIs (Key Performance Indicators), which will show how successful your business is. You will measure these metrics all the time, so you’ll have evidence of the progress you’re making.
- Determine your assets: skills, starting finances, and connections. In the freight forwarding process, connections are especially important. You should always be in contact with other agents on an international level. That means that it’s smart to join an alliance. We’ll get to that step soon.
- Create a strategy, which will define short-term and long-term goals. It will be a foundation for the action steps you’ll take.
- Implement the plan! You’ll go with the flow in some situations since the freight forwarding market is lively and exciting. However, you’ll have to take your daily decision in accordance with the strategic plan.
4. Become a Part of an Alliance
Digital Freight Alliance brings together logistics providers from all around the world. As soon as you join, you’ll become part of the massive freight forwarders network in over 150 countries. You will get your own SaaS solution, which enables you to sell services through your website’s rates.
This online platform is important because it connects you with other agents and facilitates the freight forwarding process regardless of the destination and the transition countries. When you become an active member of the network, you’ll boost your business opportunities.
Let’s say a shipping company explores a new country. They will not Google to find and compare the freight forwarders from that country. They will turn to the Alliance with a global network of partners. There, they will find an adequate opportunity and close the deal in a matter of minutes. This is why your business should be part of such the Alliance.
5. Understand the Pros and Cons of the Freight Forwarding Process
A freight forwarding agency is an easy target for investors. When they learn the basic things about the industry, they have the impression that it would be easy to maintain such a business. However, there will be obstacles on your way to growth. Learning is the biggest investment you’ll have to make. You’ll spend a lot of time going through legal requirements, given the fact that this is an international business process.
Handling the disruptions in the supply chain is one of the greatest challenges you’ll face. Transport is never smooth. Delays and all kinds of shipment issues occur. The forwarder is not the one responsible for those issues, but they should find ways to manage the situation and ensure safe delivery. Missing or overly late deliveries will damage their brand’s reputation.
That being said, there are good things about starting a freight forwarding agency as well. As long as you know how to do it, it will be a viable business. You will act as a broker or a salesperson, who guarantees they can handle any shipment in any situation.
Always start with the basics! Before you start implementing these tips on how to start a freight forwarding business, learn everything you can about the industry. In the ideal situation, you’ll be part of it as an employee before you start your own brand. If you want to skip that step, your HR department must recruit the best professionals in the field, so you’ll develop the brand together with your team.
