eCommerce is a booming industry where more and more people are starting their own online stores. Many new sellers are just starting to learn about logistics and don’t know the difference between freight forwarders and brokers. Some even think that they are the same thing. These are two different roles but both hold important processes in logistics with strict rules and laws to adhere to.
The lack of understanding of the two can lead to delays in product sourcing and a seller overspending! To avoid this issue, sellers should learn how each service works so they can choose the right one to work with for the long-term.
In this broker vs freight forwarder blog post, we will talk about what customs brokers vs freight forwarders does along with their differences.
Freight Broker vs Freight Forwarder
One thing is for sure, both freight brokers and freight forwarders are involved in managing shipments and arranging the transportation between a shipper and a carrier. They both are well-versed in all modes of transportation such as road, rail, sea, and air. Both are required to be registered with the Federal Motor Carrier Safety Administration (FMCSA).
A freight forwarder arranges the transportation of freight from source to destination. They handle the negotiations with customs and port authorities as well as transfer the freight to the companies that physically transport the goods to their destination.
For example, if you are an eCommerce seller who sources products from China, the freight forwarder will ensure that your products from the factory get properly approved through customs and port authorities, then they will transfer the freight over to the shipping company that transports your freight cross-country.
It is best to work with one freight forwarder for the long term. Think of them as the middleman between you, your product source, customs, port authorities, and the transport company.
Some of them also offer warehousing services if you want them to keep your product at their facility until it’s sold or ready for distribution. They even handle the dreaded paperwork that you wouldn’t want to do yourself.
A freight broker, on the other hand, is a third party that matches shippers with carriers. Brokers are not physically responsible for the execution of logistics, but they do work closely with their clients to ensure smooth transactions. They are able to help negotiate in situations that weren’t predicted, such as the need to ship more products than originally expected.
An example is when you suddenly decide you want your product shipped from China to Los Angeles in three weeks and couldn’t arrange this earlier with a freight forwarder, a broker can find carriers who have excess capacity during this time. This broker then finds the best deal for you, negotiates rates with carriers, and makes sure that all agreements are in order.
Oftentimes, brokers even work from home and they earn by a commission for a successful match. Brokers typically charge a 15-20% fee on top of what you pay your carrier for shipping services. One downside to using a broker is that they are not physically present with your freight to fully understand the situation when something goes wrong. They will be passing along to you the information that was passed on to them, which is less reliable and creates communication delays.
Brokers are most often hired in rush situations. For example, if you need to ship extra product because of seasonal demand, they can arrange this for you. For planning way ahead, using a freight forwarder is best because they negotiate deals with carriers in bulk.
What Can Go Wrong And How To Avoid It
Now that we know what brokers and freight forwarders are, it’s important to understand the differences so you can choose who to work with.
Accidents can happen during the logistics and transportation process, and although both freight brokers and freight forwarders have a legal liability, it is most often the freight forwarders who take more responsibility for it. This is because a transaction with a freight forwarder includes liability insurance most of the time, but it is up to you to research the ones that do for sure. Brokers never take physical possession of your freight, hence the reduced responsibility.
Headaches can be avoided by doing heavy research beforehand on several freight forwarders and asking them all the necessary questions before hiring a service. Do not rely solely on who offers the cheapest services, because this can create consequences for your business if things go wrong.
As for freight brokers, even though they are most often hired for rush transactions, do research beforehand and have a reliable company in mind that you will be ready to run to in case you need it.
One last thing to keep in mind: be sure to read through contracts carefully! Legal jargon can get intimidating but consulting with an attorney if needed may save time later on down the road.
Why Choosing The Right Broker And Freight Forwarder Is Crucial For Your Business
Negotiating with customs is heavy work and can even get intimidating. It’s best to leave it up to the experts. They are able to establish personal relationships with everyone involved in the transactions and establish trust. They are able to save their clients a significant amount of time, money, and stress from handling it all on their own.
Find a broker and freight forwarder that you can build a long-term relationship with so they will be proactive in solving any problems that may arise during the transactions. The more your business grows, the more complicated logistics will become. You don’t want to switch around companies constantly just because something went slightly wrong one time or another company offered lower prices than before. It’s best to find a broker and freight forwarder that will offer you competitive prices, but still be reliable.
This way, they are able to take care of all the work for you so you as a business owner can allot your time to more important things without worrying about logistics.
In this blog post, we’ve covered the differences between broker and freight forwarder. Both have their own benefits as well as drawbacks to weigh when deciding who best suits your needs for a successful transaction. They both play important roles in the logistics process. However, they serve different purposes and one is not better than the other – they simply are used in different situations.
It is important that you do thorough research before hiring either one of them so you know exactly what they offer and how it will affect your business in terms of liability or reliability issues down the line.
When logistics are handled correctly by reliable companies, businesses have more time available for other things which makes life easier and emphasizes why owning your own business is much more fun than a 9-5!For more knowledge, watch our logistics video on the Sourcing Monster channel!