Category: Logistics Insights

You know shipping your goods can be complicated. Between rates, paperwork, and regulations, it is a lot to navigate alone. That is where freight forwarders come in handy. They act as your personal logistics department, handling everything from booking cargo space to preparing customs documents.

With their expertise and relationships with carriers, freight forwarders can get you better rates and service. In this article, we will break down the key benefits of using a freight forwarder over going directly to a shipping line. From simplicity and savings to reliability and communication, we will show why you are better off having a pro in your corner when shipping your goods.

What is a freight forwarder and how do they work?

Freight forwarders act as intermediaries between carriers and businesses needing goods moved. In simple terms, they manage the logistics of transporting your cargo from point A to B. Freight forwarders can handle either a portion of your supply chain or even the entire supply chain operations who are commonly called as third-party logistics or 3PL.

They handle all the details

Freight forwarders coordinate everything involved in the shipping process so you don’t have to. They will arrange things like:

• Finding the best carrier and route for your needs
• Booking space on ships, planes or trucks
• Preparing and processing shipping documents like bill of lading
• Ensuring your cargo meets all regulations and is properly packaged
• Handling customs clearance and paying any duties or taxes on your behalf
• Tracking your shipment and providing updates on its progress
• They have strong relationships and negotiating power

Freight forwarders have close ties to various transportation companies which allows them to get you the best rates. Their high volume of shipments also gives them more leverage to negotiate lower prices. These savings can then be passed onto you.

They simplify international shipping

If your shipping goods internationally, a freight forwarder is essential. They are experts in global logistics and understand all the complex rules around customs, security, and international trade regulations. They can properly classify your goods and determine which documents are needed to legally and efficiently ship your cargo across borders.

Using a freight forwarder over dealing directly with carriers simplifies the shipping process and gives you more control over your supply chain. Their expertise and connections allow them to provide faster, more streamlined and cost-effective solutions for moving your goods internationally. For most businesses, the convenience and economies of scale they offer make them an invaluable partner for shipping and logistics.

Top 5 benefits of using a freight forwarder over shipping lines

Going directly to a carrier may seem like an easy option, but freight forwarders offer major advantages. Here are five key benefits of using a freight forwarder over shipping lines.

Better rates through volume

Freight forwarders have higher booking volumes which gives them leverage to negotiate lower shipping rates. They pass on a portion of the savings to you. Shipping lines typically do not offer discounted rates especially to smaller shippers.

Payment term to free up upfront cost

One of the best benefits of choosing a freight forwarder over carrier is payment term. Shipping lines usually do not have payment term available to shippers unless your volume is significant. A freight forwarder typically offers a minimum of 15 days payment term to customers at all sizes.

Door-to-door service

Freight forwarders offer door-to-door shipping, handling the entire journey from pick up at origin to final delivery at destination. They oversee all legs of transport and any intermodal transfers required. Shipping lines only get your cargo from port to port, leaving you to arrange any inland transportation. Although some shipping lines have door to door service, however the cost to avail this end-to-end delivery is expensive than a freight forwarder can offer.

Consolidation services

Freight forwarders can consolidate multiple small shipment into a single larger shipment to reduce costs. They then deconsolidate shipments at the destination and deliver each shipment to its final address. Shipping lines typically do not have consolidation and deconsolidation service.

Flexible shipping options

Freight forwarders provide access to a range of carriers and shipping methods (air, ocean, rail, or truck) so they can find the option that best suits your needs based on cost, speed and cargo type. Shipping lines only provide the shipping methods they directly operate.

Using a freight forwarder over a shipping line for your cargo needs is a smart choice. Let the experts handle the details so you can focus on your business. Entrusting the logistics to a qualified freight forwarder frees you up to focus on your core business while enjoying exceptional service and value.

This article first appear in Explore Supply Chain website.

If you’re new to the world of logistics, you may have heard the term “FOB” thrown around. FOB, or Free on Board, is a commonly used shipping term that can save both buyers and sellers money when used correctly.

In this article, we’ll explain what FOB means, the benefits it offers, the different types of FOB terms available, the factors that affect FOB prices, and how to negotiate rates. We’ll also share some tips to help you lower your freight costs with FOB term, common mistakes to avoid, and how to choose the right FOB term for your business

Understanding FOB term

FOB, or Free on Board, is a shipping term that indicates when a buyer takes ownership of goods being shipped. Under this term, the seller is responsible for loading the goods onto the shipping vessel, but the buyer is responsible for all costs and risks associated with transporting the goods from the port of origin to the final destination. FOB term is applicable for shipments via ocean and inland waterway and does not apply to freight by air, road, or rail.

For example, if you buy a container of goods from a supplier in China, and the FOB term is FOB Shanghai, the seller is responsible for loading the goods onto the shipping vessel in Shanghai. Once the goods are on board, the buyer assumes all responsibility for the shipment, including the cost of transportation, insurance, and any customs fees.

Benefits of FOB term for buyers and sellers

FOB term offers several benefits for both buyers and sellers. For buyers, it provides greater control over the shipment and can result in lower overall costs. By taking ownership of the goods at the port of origin, buyers can choose their own carrier and transportation method, negotiate better rates, and avoid unnecessary charges or delays.

For sellers, FOB terms can reduce their liability and financial risk. Once the goods are loaded onto the vessel, the seller is no longer responsible for any damages or losses that occur during transportation. This can be especially important for sellers who are shipping high-value or fragile goods.

Different types of FOB terms

There are several different types of FOB terms available, each with its own level of responsibility and risk for the buyer and seller. The most common types include:

• FOB Origin: The buyer takes ownership of the goods as soon as they are loaded onto the shipping vessel at the port of origin. The buyer is responsible for all transportation costs and risks from that point forward.
• FOB Destination: The seller retains ownership of the goods until they reach the final destination. The seller is responsible for all transportation costs and risks until the goods are delivered to the buyer.
• FOB Shipping Point: The buyer takes ownership of the goods as soon as they are loaded onto the vessel at the port of origin. However, the seller is responsible for all transportation costs and risks up to that point.

Factors affecting FOB prices

Several factors can affect FOB prices, including the type of FOB term, the mode of transportation, the distance traveled, and the volume of goods being shipped. Additionally, market conditions, such as supply and demand, can also impact the rates.

For example, if you’re shipping a large volume of goods by sea from China to the United States, the FOB price may be affected by the availability of shipping vessels, the cost of fuel, and any tariffs or duties imposed by the countries involved.

Negotiating FOB rates

When negotiating under FOB term, it’s important to consider all of the factors that can impact the final cost of the shipment. This includes the type of FOB term, the mode of transportation, and any additional services or fees that may be required.

To negotiate effectively, it’s important to have a clear understanding of the market conditions and the costs involved in the shipment. This may require research into current freight rates, carrier availability, and any regulatory requirements or restrictions that may affect the shipment.

Tips to lower your freight costs with FOB term

There are several tips you can use to lower your freight costs when using FOB term. These include:

• Consolidating shipments: By combining multiple shipments into one, you can reduce the overall transportation costs and negotiate better rates with carriers.
• Optimizing packaging: Properly packaging your goods can help reduce the risk of damage during transit, which can lead to lower insurance costs and fewer claims.
• Choosing the right logistics provider: Selecting a provider that specializes in your industry or has experience with similar shipments can result in lower rates and fewer delays.
• Negotiating rates: Negotiating rates with carriers and freight forwarders can help you secure better pricing and reduce overall transportation costs.
• Utilizing technology: Using logistics software or other technology can help you optimize shipping routes, track shipments in real-time, and identify cost-saving opportunities.

Common mistakes to avoid while using FOB term

While FOB terms can be beneficial for both buyers and sellers, there are several common mistakes that can lead to increased costs and risks. These include:

• Misunderstanding the terms: Having a clear understanding of the FOB term being used and the responsibilities of each party involved is important to avoid freight issues.
• Failing to insure the shipment: Failing to insure the shipment can leave you vulnerable to financial losses in the event of damage or loss of goods.
• Poor packaging: Improperly packaged goods can be damaged during transit, leading to additional costs and delays.
• Not verifying the carrier: Verifying the carrier’s credentials and experience can help you avoid scams, fraud, or inexperienced carriers that can lead to additional costs and risks.
• Not negotiating rates: Failing to negotiate rates can result in higher overall transportation costs and reduce your bottom line.

Choosing the right FOB term for your business

Choosing the right FOB term for your business depends on your specific needs and goals for the shipment. For example, if you want more control over the shipment and are willing to assume more risk, FOB Origin terms may be the best option. If you want to reduce your liability and financial risk, FOB Destination terms may be a better choice.

It’s also important to consider the type of transportation, the distance traveled, and any regulatory requirements or restrictions that may impact the shipment. Working with a trusted freight forwarder or logistics provider can help you navigate these complexities and choose the best FOB term for your business.

FOB term vs other freight terms

While FOB terms can be beneficial for both buyers and sellers, there are other freight terms that may be more appropriate for certain types of shipments. For example, CIF (Cost, Insurance, Freight) terms include insurance costs in the final price and may be more appropriate for high-value or fragile goods.

Similarly, EXW (Ex Works) terms require the buyer to assume all responsibility for the shipment from the seller’s location, making it a good option for local or domestic shipments. Ultimately, the best freight term for your business will depend on your specific needs and goals for the shipment.

Final thoughts

FOB terms can be a powerful tool for reducing freight expenses and increasing control over your shipments. By understanding the different types of FOB terms, the factors that affect FOB prices, and how to negotiate rates effectively, you can take control of your freight costs and improve your bottom line.

If you’re looking for a trusted logistics partner to help you manage your FOB shipments, Moverpacific Logistics offers a full range of freight solutions to help you take control of your cost and transit time. Contact us today to learn more about our services and how we can help you streamline your logistics operations.

The start of 2023 is met with a frenzy of new shipping contracts after six months of plummeting ocean container rates. The Drewry World Container Index released a report last December indicating the average occupancy for a 40ft container has sunk as low as $2,135. This is a steep drop from the peak that was $10,377 in September 2021, a time when container carriers were scrambling to find additional vessels.

The reason why it’s even lower than the 10-yr average ($2,694) is because the world’s shipping industry has reached its supply surplus stage. However, unlike previous cycles, the pandemic has pushed us beyond tipping point – sector and business leaders had to respond fast and make long-term decisions under ‘new normal’ circumstances. The result is supply of cargo has surpassed the anticipated demand for (formerly) essential goods, even when some economies are already back at pre-pandemic levels.

Shippers were fast to move by locking in short-term contracts weeks before the holiday season. Whether they’re after stockpiling individual pallets or huge volumes of grain or liquid, they have the advantage of being one of the earliest to use up cargo space from newly deployed container vessels. At this very moment, they are likely achieving the best margins they’ve ever had since the first quarter of 2020. They couldn’t have done without supply chain intelligence from a professional freight forwarder.

Optimizing your supply chain strategy in this opportune time requires a bit of teamwork between you and your transport partner. You might know your own logistics more than well enough that you keep a tender with your service provider so that options will always be diverse and rates are competitive. This arrangement doesn’t always guarantee stability because spot shipment orders (i.e. transactions based on live changes in currencies) have significantly increased, ultimately changing how businesses approach inventory. The research team at the privately-funded Freightos Baltic Index has revealed that over 65% of shipments during the 2021 peak season arrived late because tenders at the time weren’t flexible enough.

The Philippines is blessed to have a local freight forwarding industry that is compact, sufficiently manned and young enough to adapt to new business processes. The necessity of e-commerce fulfillment has made logistics providers to come up with new service arrangements in line with LCL and LTL. While the country is also experiencing its very own supply chain crisis, there is a consistently massive demand for imports, attracting more voyages in the Indo-Pacific region. If you have worries about domestic shipping cost, a freight forwarder can help you navigate the optimal routes and delivery dates so that you don’t have to keep relying on spot rates.

Before you decide to propose a contract rate, we suggest you consider the following parameters to get the best deal:

Are you ready to overhaul your inventory management?

Many businesses have come to realize they are now finding it more difficult to turnover goods despite having ordered new merchandise and getting rid of old ones. People are now more inclined to buy products and brands that are advertised in online marketplaces. These new avenues give more opportunity for upstarts to compete with your business. While your marketing team is busy coming up with a new campaign, your purchasing team is at a crossroads. Is it time to cut off underperforming product lines and downsize your assortments, to make way for new stock?

If you’re not sure, you have the option of renting warehouse space to accommodate inventory. This is useful when you still want to put them up for sale in your online store. When an order is activated, the freight forwarder will be the one to take care of the dispatch, shipping and distribution. At first, you may think you don’t have sufficient inventory to invest in a premium service, but successful shippers have capitalized this as part of their cost optimization strategy. We will see how low freight rates have made things more favorable.

Returns and refunds are becoming the new norm fulfillment. How is this relevant to freight?

While established companies like Amazon and Costco have long prioritized customer service, shopping thru digital platforms in the Philippines has often yielded a mixed experience. It was only starting a year ago that e-commerce giants operating in the country took quality control more seriously by offering refunds at the expense of the vendor’s sales credit, and freebies to those who were left shorthanded.

Shippers will want to employ their own returns and refunds policy as part of their customer loyalty strategy, and there’s no better advantage but making use of the current shipping prices. A delayed order being relegated under this policy is still a bad thing. The entire process of having a staff reconcile an irate customer and billing a new invoice is going to cost you more than having no freight charges. Your commitment, however, will be remembered. Every good deed grants you a second chance.

To keep post-sales fulfillment expenses low, you may need to find a separate logistics partner who is good at last-minute deliveries. Look for those who are able to offload goods under a small window time, ideally less than three hours after picking up the crate or parcel from your distribution center. The cargo operator will likely reward the freight forwarder a lower rate for being on time, not needing to place the item on queue.

Vendor managed inventory: remember, the best business models is whenever the product is at hand.

Starting a venture can be intimidating after seeing how expensive the initial investments can pile up. This is why people who have a market yet don’t have a plan in managing inventory have resorted to dropshipping. The downside of this business model is that you have no control over the product until it is in your possession. The most common modification dropshippers are after is branding – they take out the item from the original packaging and resell it under a different presentation. That’s the most they can do.

You don’t have to do this when your supplier can be the one to handle everything, while you focus on what you do best. With the VMI system, you grant a third party full responsibility over your inventory before they are ready to be sold. In most cases, they already have their own storage premises, which means you, are only charged once the item reaches the retail shelf space. This is another cost-effective way to shelter you from additional shipping fees, especially for categories that see quick demand spikes and need to be delivered right away like frozen foods.

If you need to know more about where global shipping rates are heading and how you can take advantage of the opportunities, just send us a quote and one of our consultants will make sure you answer your questions.