After years of experiencing Amazon’s profound effect on everything from its delivery times to shipping prices, it was probably a relief to many parcel and fulfillment professionals to see a different part of the supply chain on the hot seat when the company unveiled plans to become an ocean freight forwarder last fall.
Don’t enjoy the schadenfreude too long – because even though international freight forwarding activity may not be an essential part of your company’s day-to-day DNA yet, many signs point to the possibility that it could be soon.
According to a 2016 Pitney Bowes study, two-thirds of e-commerce shoppers now engage in “cross-border” shopping, and more than half do so at least once a month. And a recent WCA World study suggests that approximately 20% of international freight forwarding traffic will come from e-commerce shipments by 2020.
With that in mind,PARCEL mediarecently sat down with Pro Thapa of APL Logistics, whose company is one of the world’s largest international freight forwarders and non-vessel operating common carriers (NVOCCs), to get an update on what this latest area of Amazon’s focus is all about – and what it might mean for your own company’s supply chain in the not-too-distant future.
What Is an Ocean Freight Forwarder?
An ocean freight forwarder is a company that’s responsible for arranging and overseeing the particulars of overseas transits, including transits that are multimodal, for another company. It’s a go-between specialist that essentially handles all practical and legal issues so that companies don’t have to perform these services or develop international import/export expertise for particular geographies themselves.
An air freight forwarder does the same thing except it serves as an intermediary between companies and international air carriers rather than ocean carriers.
What Kinds of Services Do Ocean or Air Freight Forwarders Provide?
It runs the gamut, depending on the forwarder. But, at the very least, it includes: negotiating with carriers, booking transits, creating or providing a bill of lading/airway bill (depending on whether you’re operating as a freight forwarder or NVOCC), arranging for the safe loading and unloading of cargo, ensuring that shippers have proper cargo insurance, taking care of relevant documentation (such as certificates of origin and export packing lists) and ensuring payment of all the necessary fees, duties, and taxes in the proper international currencies.
That’s a Pretty Robust List of Services!
And it’s just the tip of the iceberg for some. Larger freight forwarders will also offer additional services such as warehousing, cargo consolidation, origin logistics (including value-added services like pick-and-pack, product labeling, and minor assembly), advising shippers on how to properly pack and label their goods for international shipping, customs brokerage, transloading, and various kinds of freight optimization.
What Does the Term NVOCC Mean, and How Does It Relate to Freight Forwarding?
A freight forwarder and a non-vessel operating common carrier perform many similar functions, and a company can serve as both. The primary difference is that, legally speaking, an NVOCC is considered a carrier as well as a freight forwarder (even though it doesn’t actually own or operate any vessels or planes) and, hence, it can offer shippers a few more conveniences and efficiencies, especially in terms of contracts. It has its own standing bill of lading or house airway bill, and when shippers work with it they get to use that bill of lading or house airway bill as if it were their own.
So, if a company works with a freight forwarder for its international shipments, it still needs to have a bill of lading or house airway bill created as part of the process, whereas if it uses an NVOCC for freight forwarding, that step has already been taken care of.
Either way, companies are leveraging high-quality outside expertise to help facilitate their international shipments.
Does a Company Have to Work with an International Freight Forwarder or NVOCC in Order to Efficiently Ship Its Goods Internationally?
It’s not a requirement, but it is a very common practice. In fact, even 10 years ago, companies that worked with ocean freight forwarders/NVOCCs accounted for about 75% of all less-than-container load revenues, while companies that worked with air freight forwarders/NVOCCs accounted for about 90% of all international air shipments.
Why Are These Numbers So High?
The typical international transit involves numerous hand-offs, carriers, modes, rules, regulations, and the like. And that’s a difficult set of challenges and requirements for any company to understand and stay on top of – especially if its supply chain involves multiple origins and/or destinations. A good freight forwarder or NVOCC can make dealing with all of these components considerably easier. In fact, it can remove having to worry about these moving parts from the equation altogether.
Working with freight forwarders or NVOCCs can also offer cost savings or increased efficiency because most are highly experienced, high-volume international shippers. As a result, they’re usually able to negotiate better rates and services than companies could get on their own and quite often provide clients with opportunities to consolidate their cargo with other shippers’ cargo to create larger, more economical container loads. A lot of forwarders and NVOCCs also have well-established global footprints with numerous facilities that companies can leverage for additional efficiencies.
Freight forwarders and NVOCCs often have access to some of the best shipping capacity too. Many of them have longstanding agreements or contracts with carriers that guarantee first dibs on prime vessels, planes, sailings, and lanes. That can be a huge advantage during peak season or when a lane is in especially high demand.
What Are Some Other Important International Shipment Factors That Deserve to Be Weighed?
Shippers need to determine how confident they are in their own ability to accurately vet and select the right carriers. Service capabilities, transit times, and reliability can vary significantly from carrier to carrier and lane to lane – and companies need to be sure they have a good understanding of all of that before deciding to forgo a freight forwarder’s or NVOCC’s help.
They also need to weigh the pros and cons of relying on their own land transportation connections and capabilities for the first and final miles of their international transits. Ocean shipping has a lot of reliability gaps, and while it’s not possible to control certain performance factors (like how fast a vessel will actually move), a well-connected, multi-faceted freight forwarder or NVOCC can help companies offset a lot of the related volatility via the other alliances, facilities, products, or transportation solutions it offers. For example, 10 years ago, our company’s freight forwarding division introduced a new genre of ocean service – time-definite ocean shipping with a guaranteed delivery date that enables shippers to cut several days off the average door-to-door ocean transit by ensuring that their goods are loaded onto vessels last, offloaded first, and immediately transferred onto trucks for transportation to their final destination. None of these things changed how quickly companies’ goods traveled while they were on the water. But it still made a substantial difference in terms of their shipments’ overall speed and reliability.
How to Find the Right Freight Forwarder or NVOCC
Finding a good freight forwarder or NVOCC is much like finding the right third-party logistics provider (3PL) or combination of 3PLs. Among other things, you’ll want to look for a good track record in the markets you’re shipping from or to, as well as expertise in handling the kinds of products or raw materials your company specializes in. Other key things to consider include the array of services and technologies provided and how many ports each of your potential freight forwarders routinely service. And, as always, ensure you have a good cultural alignment between your organization and theirs.
Because of the overall depressed fuel rate, excess carrier capacity, and the advent of new technologies, is the role of the freight forwarder changing?
Their role is definitely changing. Even though international shipping is a complex business with numerous moving parts, today’s companies are looking to freight forwarders and NVOCCs to bring more than just basic product movement and import/export skills to the table. They’re looking for more flexible service combinations like air-sea or sea-air. They’re asking for more sophisticated visibility and optimization tools that can work with advanced international shipping algorithms. They’re wanting their forwarders and NVOCCs to provide them with more flexible, customized supply chain solutions, and they’re expecting them to be partners and problem-solvers rather than “just” international transportation agents.
What does this mean for the typical parcel shipper?
Amazon’s decision to become a freight forwarder should serve as a wake-up call that international shipping proficiency is likely to become an increasingly pivotal part of omnichannel shipping success — and that it’s never too early to begin thinking about the best way your company can build or improve upon its international transportation processes.
The bad news is it won’t be smooth sailing all the way because that’s just not the nature of the beast. But, the good news is, no company has to navigate these international waters alone.
Pravakar “Pro” Thapa is Guaranteed Services Product Manager and Network Operations Manager with APL Logistics, a supply chain specialist in the retail, consumer, automotive and industrial sectors. In addition to serving as a freight forwarder and NVOCC, the company operates a full spectrum of end-to-end supply chain services, operates a global network covering all major markets and is backed by a multinational workforce of about 7,700 people. APL Logistics is a member of Kintetsu World Express group, a global logistics services provider.