Freight forwarding refers to the process of getting your product from where you manufacturer it, to the warehouse that you store and ship it from. Typically, for an ecom business, this means getting your product from your manufacturer in China to your warehouse in Europe or North America.
If you are drop shipping, or if you are manufacturing in the same area that you are warehousing your products, then freight forwarding will be irrelevant to you.
Freight forwarding is a complicated subject, and if you dive into the weeds there is a lot going on behind the scenes. But thankfully there are a lot of professional freight forwarding companies out there that we can hire to look after this stuff for us. Having said that, I feel it’s important for every business owner to know the basics of freight forwarding. So here’s the basics of what it involves:
- Freight forwarding contacts typically start at the dock of your manufacturing warehouse. Finished products are packed together by your factory into ‘master cartons’ (for example, 10 units of your product are put into 1 carton for shipping, called a master carton). These master cartons are picked up by your freight forwarder from the manufacturing factory. When you are dealing with your manufacturing factory it’s important to set a clear scope of work in terms of where the contract with them ends. Many trading companies, or even factories in China, will offer to handle the freight forwarding for you. So that means they would handle the booking of sea freight or air freight for your goods, and your contract with them would include this work. I would generally recommend against this, and instead opt to have the contract with the factory end at their warehouse door, so your freight forwarder would be responsible for picking up the goods from your factory after they are finished. I generally recommend this approach because having your own freight forwarder gives more clarify and transparency to this leg of the supply chain.
- To pick up the goods from your factory your freight forwarder will hire a local shipping company to pick up the goods and bring them to the nearest port. This could be a seaport on the coast if you are shipping by sea, or an airport if you are shipping by air. Shipping by sea takes longer, but is much more cost effective for larger shipments. Shipping by air is faster, but more expensive. Typically sea shipping will take ~30-60 days, and air shipping ~14 days. If your shipment is larger than about 10 cubic meters I would estimate shipping by sea is almost always a better option.
- Once your goods arrive at the seaport or airport, then they will be loaded onto a boat or airplane. Your freight forwarder will arrange the details for this, including booking space on the boat/plane for your goods.
- If you are shipping your goods by boat then it’s good to have a general idea of how products are loaded and stored on boats. Products being shipped via boat are loaded into something called sea containers. These are those large metal containers that you have undoubtedly seen before, but if not, below is an image of one. These come in various sizes, including 20 foot and 40 foot long. A 20’ sea container can hold about 25-28 cubic meters of product. A 40’ container can hold about 54-58 cubic meters of product. If your shipment is more or less than these full capacitys than your freight forwarder can arrange to have your inventory share a container with other businesses inventory. Doing this is known as LCL (less than container load), since your inventory does not fill a full container. If your shipment is the right size to have its very own container, than that is known as FCL (full container load).
- Once your goods arrive at the sea or airport in the country you warehouse products in (the US for example), then your freight forwarder will arrange for the products to be unloaded and picked up by a local courier in that country. From there, the local carrier will deliver your products to your warehouse/3PL.
So, at a high level, this is what your freight forwarder will manage. As you can imagine it would be very complicated and confusing to try and handle these tasks on your own. That’s why outsourcing your freight forwarding to a freight forwarding company is almost always the way to go, unless you happen to come from a background in forwarding and logistics.
On your part, here are some things you will have to supply a freight forwarding company in order to get a quote for shipping goods:
- The total size and weight of the shipment.
- What date the shipment will be available for pickup.
- The HS code for the products in your shipment. HS stands for Harmonized System, and each product category has it’s own unique HS code. Your freight forwarder will use this code to calculate the amount of duties owed for the shipment. Duties are the amount that the governing body in the country you are sending product to will charge to you to import the products into their country. In the US for example, US customs will charge a 16.5% duty fee to import cotton t-shirts. This duty fee is calculated based on the value of the shipment (in other words, how much you paid to get it produced). So if you manufactured $10,000 worth of t-shirts in China and are importing them into the US, expect to pay $1,615 in duty fees to US customs once they arrive at the US port.
- Whether you want to ship the shipment via boat or air. If you are not sure, you can always ask for quotes for both. There can also be different speed options for you to consider as well, such as 30 day boat vs 60 day boat. The faster the service, the more money you can expect to pay.
Here are some things that you can expect the freight forwarder to provide you:
- Bill of Lading (BOL) – this is a legal document that describes what is being shipped and where it’s going.
- Packing list – a detailed list of what is being shipped.
You should provide both the BOL and packing list to your 3PL once you have them, and also have your freight forwarder contact your 3PL with at least 7 days notice to arrange the delivery of goods to them.
So, that’s a quick summary of what a Freight Forwarder is and does for you. Obviously, there is a lot more to freight forwarding than what I described above. And honestly, I’m not qualified to dive into this topic anymore than this. I know the basics of freight forwarding, enough to talk about it and understand quotes from different freight forwarding companies. And I believe that is enough. Because freight forwarding is not one of those things you should consider doing in-house. Similar to warehousing and shipping products, freight forwarding is better to outsource to professional companies who specialize in doing it. Outsourcing freight forwarding will free up your time to focus on what brings competitive advantage to your business: marketing and product development.