Freight Forwarding: Choosing the best partner

With President Obama continuing to emphasize exports, specialized shipping intermediaries are more important than ever to global logistics operations. But how do shippers identify and choose the right freight forwarder?
image
By Patrick Burnson, Executive Editor
May 01, 2011 - LM Editorial

Lost in all the recent discussion of what differentiates a 3PL from a 4PL, comes the question: Whither the common freight forwarder? Once charged with simply arranging the movement of goods through Customs clearance, the role remains in what some experts call “deeper shades of grey.”

“Third- and fourth-party logistics providers are always freight forwarders,” says Shay Scott, director of the Global Supply Chain Institute (GSCI) at The University of Tennessee. “But it’s never the other way around.”

Nor should it be, he adds. Given that not every shipper faces the complexity of penetrating a new global market or extending its existing supply chain across vast “borderless” regions. “A lot of logisticians are taking issue with economists who say the world is flat,” he says. “We know that globalization has been vastly exaggerated, and that relying on a ‘mega-forwarder’ is not always the distribution answer.”

Shay points to the work of Pankaj Ghemawat, of IESE Business School in Spain, who recently authored the book, World 3.0. In it, he notes that the number of American companies with any foreign operations is vastly overstated, and that exports remain a relatively small part of GDP.

“So while some Fortune 500 companies really do need a Fedex Trade Network, or UPS Logistics, or a Penske, many other U.S. exporters only require a basic forwarder,” says Shay.

But that doesn’t keep forwarders from over-promising on their services, he adds.

“Thirty years ago, a small trucker would call itself a freight forwarder,” Shay says. “Then they’d build a warehouse and call themselves a 3PL. And if that worked, they’d offer consulting and call themselves a 4PL. It’s all become rather confusing…and often unnecessary.”

What is necessary, however, is finding the right forwarder for “niche” shipping, says Shay. He notes that U.S. companies doing business in Mexico, for example, might be better off with a small forwarder located near the border. The same holds true for shippers of specialized commodities like pharmaceuticals or hazardous materials.

“The shipper’s focus should not be on the country he’s trying to enter, but the port of entry,” says Shay. “And many of the smaller forwarders have better relationships with Customs at these stations than the bigger players.”



About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Largely feeling the effects of the recently resolved West Coast ports labor disruption, railroad and intermodal volumes in February were down annually, according to data released by the Association of American Railroads (AAR) this week.

The year 2015 marks a major milestone for the industry, MHI is celebrating its 70th anniversary at ProMat 2015, held March 23-26, 2015.

While the Federal Motor Carrier Safety Administration has made strides in regards to better oversight of motor carriers through its Compliance, Safety, Accountability (CSA) and chameleon vetting safety programs, there is room for improvement for it to improve its oversight to better target high-risk carriers. That was the thesis of a report released this week by the United States General Accountability Office

With an eye on capitalizing on future trade and commerce growth in South Asia, express delivery and logistics services provider DHL today rolled out its plans to build an $85 million EUR ($93 million USD) DHL Express South Asia Hub, which will be a 24-hour express hub facility within the Changi Airfreight Center at the Singapore Changi Airport.

While the Federal Railroad Administration (FRA) has long stated its goal of having Positive Train Control (PTC) technology installed on 40 percent of its network by December 31, 2015, railroad industry stakeholders have repeatedly stated that reaching that deadline would be a stretch. It now appears that the railroad sector has some members of Congress sharing the same line of thought with legislation rolled out this week that pledges to extend the PTC deadline to 2020.

Comments

Post a comment
Commenting is not available in this channel entry.