As supply chain bottlenecks persist, freight forwarders have emerged as key players across the freight and logistics industries. If you’ve ever asked yourself, “what is freight forwarding?” or if you simply want to learn more about the increasingly important role freight forwarding companies play, you’ve come to the right place.
In this comprehensive guide to freight forwarding, we’ll not only cover major topics surrounding freight forwarding, but we’ll also equip you with a toolkit to help you break into the business and thrive long-term.
What is a freight forwarder?
Freight forwarders serve as intermediaries between carriers and shippers, frequently handling cargo shipments – unlike freight brokers, who never assume physical custody or direct possession of cargo. Some freight forwarders register under their own operating authority to store, pack, and ship out loads themselves.
A freight forwarder’s primary job is to coordinate the transportation logistics for freight shipments. Freight forwarders will therefore usually assume an active and hands-on role throughout the end-to-end freight journey. They might also handle customs and help store loads in warehouses, but they will never haul cargo themselves.
Freight forwarders occupy a more specialized niche than freight brokers and face stricter compliance requirements. After all, they handle freight directly and often ship freight under their own bills of lading. So, while brokers need only register with the Federal Motor Carrier Safety Administration (FMCSA) for their brokerage authority, freight forwarders must be licensed through the FMCSA for interstate and foreign commerce.
In addition, since freight forwarders can use their bills of lading and operate independently in a more hands-on role than freight brokers, freight forwarders face additional business responsibilities as well as more stringent insurance requirements.
What is the difference between a freight forwarder and broker?
Both brokers and freight forwarders serve essential roles in the larger freight world. Brokers and freight forwarders alike often manage freight journeys on behalf of third parties. In addition, brokers and freight forwarders will both usually negotiate rates, track cargo, and serve as an intermediary between carriers and shippers.
With so many overlapping duties, it’s easy to overlook the key differences between freight brokers and forwarders. Before you decide to become a broker or freight /forwarder, it’s critical to understand what distinguishes the two professions from each other.
Unlike brokers, freight forwarders take a more hands-on role throughout the freight journey, handling cargo and assuming physical custody of new shipments. Some freight forwarders offer to consolidate packages, break up bulk cargo, and deliver other packaging services. Brokers, however, will never modify the cargo’s physical state because brokers never come into direct contact with goods. The physical nature of the profession means freight forwarders can not work remotely. Since brokers mainly handle negotiations and logistics, many brokers have the option to work from home.
As far as payment, while freight forwarders might sometimes work on a commission basis, most forwarders earn flat rate salaries. Brokers, meanwhile, usually receive a total compensation package that includes both a base salary plus commissions. Although broker commissions vary from freight forwarding company to company, they typically will boil down to two components: the shipping payment and the freight rate. Brokers are also less likely than freight forwarders to handle international cargo or work with customs officials as a clearing and forwarding agent.
Another key difference? Since brokers never assume physical custody of the cargo, brokers will also never assume legal liability for it. The opposite is true for freight forwarders, who remain legally responsible for the freight as long as they maintain physical possession of the cargo.
For most loads, brokers are typically supplied with a bill of lading from the cargo owner. However, independent freight forwarders can operate with their own bill of lading and register under their own operating authority to haul cargo shipments legally.
There’s also a difference between the two when it comes to paperwork and back-office tasks – a difference that becomes particularly noticeable in the absence of effective back-office support. Generally speaking, brokers face fewer administrative responsibilities compared to freight forwarders because they never handle the freight themselves. However, without the right tools, these responsibilities can quickly become overwhelming in either position. Luckily there are a wide variety of tools to make managing all the tasks that come with being a broker or a freight forwarder much simpler.
Tools for success as a freight forwarder
As the premier one-stop shop for all your freight needs, DAT offers a range of tools that can help your freight forwarding or broker business thrive over the long haul. DAT One’s cutting-edge freight tools, including:
DAT Authority:
Perhaps you’re a broker looking to break into the freight forwarding business for the first time. Or, maybe, after years of working for a larger freight forwarding company, you want to set up your own operation. Whatever the reason you’re now looking to get your authority, the best way to ensure your new business hits the ground running is by turning to the experts at DAT Authority. With more than 30 years of experience under their belt, the team at DAT Authority knows what it takes to successfully launch – and sustain – your own freight forwarding company.
After all, there can be a lot of moving parts to keep track of when you’re first starting out as an independent freight forwarder or broker. Without the right support in place, the administrative duties can soon pile up, placing a real cap on your growth prospects. The more you find yourself occupied with busy back-office work, the less time you’re left with to focus on more valuable areas of your business.
The good news is that DAT Authority gives you all of the resources you need to focus on your business and not the back office from the start. From getting you properly licensed to helping you register under your own operating authority, DAT Authority provides round-the-clock back-office and operational support – from day zero onwards. DAT Authority will assist you with your USDOT and MC number applications, ensuring there are no filing errors on your submitted applications. In addition to covering your federal fees, when you sign up for DAT Authority, you’ll receive a free trial of the industry-leading DAT load board.
Brokers and freight forwarders find newfound peace of mind when they pass off back-office duties to DAT’s experts. With DAT Authority by your side, you can eliminate costly paperwork delays, effectively meet annual registration requirements, and legally facilitate cargo deliveries.
DAT One:
By streamlining the load-finding process and empowering you with better options, DAT One makes finding your next job a breeze. Industry professionals continue to tap into DAT One for good reason – for a flat, monthly rate without any hidden fees, DAT subscribers immediately gain access to the most robust load board and freight network in North America.
DAT’s load board features more than 284 million new loads and trucks annually, meaning you’ll never run out of worthwhile business opportunities. With DAT One, brokers, shippers, and freight forwarders can develop connections with trusted professionals and take advantage of DAT’s unlimited search and post capabilities to make partnerships that keep their business moving forward.
If you’re a freight forwarder focused on growing your business, signing up for DAT One is a no-brainer. After all, DAT One allows you to see accurate spot market rates in real-time and check average market lane rates across every lane you search to drive better business opportunities and better negotiations.
RateView Analytics:
When you join the premier on-demand freight marketplace in the country, you can leverage RateView Analytics from DAT iQ to optimize your bargaining power and boost your bottom line. DAT RateView Analytics analyzes data gathered from more than $126 billion in freight transactions each year, crunching the numbers across more than 68,000 lanes and letting users compare national spot rates with average contract rates.
DAT RateView Analytics features real-time metrics that keep you one step ahead of ever-evolving freight markets. By casting a nationwide net and compiling the most comprehensive data in the industry, DAT’s Ratecast helps you pinpoint the hottest local freight markets where your freight forwarding services are in the greatest demand. With up-to-the-minute market insights at your fingertips, you can always be confident about securing the best rates on DAT.
With DAT’s Trendline Report, you can leverage real-time and historical supply and demand metrics. DAT members can view nationwide average spot market rates – checking shippers’ real-time price quotes and averages over 3-day, weekly, monthly, or yearly periods – and capitalize on exclusive market data across flatbeds, reefers, specialty freight markets. With predictive forecasts and seasonal trends, RateView Analytics helps you stay ahead of competitive freight markets.
In short, DAT’s advanced analytics help freight forwarders navigate uncertain markets with greater confidence, getting the most relevant insights on any lane, based on the deepest, broadest data in the industry.
Broker TMS:
Whether you’re a broker or a freight forwarder, DAT One’s Broker TMS can be a game-changer for your business’ operational efficiency. Designed specifically for freight brokers and freight forwarders, Broker TMS streamlines your back-office by integrating all of your transportation data into one centralized online system.
DAT’s data exchange tools integrate with Broker TMS, allowing you to share details and communicate with customers seamlessly. Broker TMS’ all-in-one accounting system simplifies the settlement process by automatically populating the data you receive from carriers and shippers. From there, brokers can effectively manage, track, and process invoices through Broker TMS’s Account Receivables tool. Additionally, DAT produces financial reports in real-time so you can stay in touch with the financial performance of your business at all times.
Plus, you can add to the capabilities of Broker TMS as your freight forwarding or broker business evolves. Broker TMS lets you add priority booking, load tracking, document management, and more DAT features into your TMS with ease to ensure the system supports your business at every stage.
Bottom line? Broker TMS minimizes your back-office burden, reduces your operating expenditures, and optimizes your uptime. Whether you want to automate your billing, digitize faxes, or take advantage of document imaging to process paperwork efficiently, Broker TMS ensures your business operates with the agility to thrive in fast-moving freight markets.
Ensure the success of your freight forwarding business with DAT.
Whether you’re new to freight forwarding or an experienced player, having reliable tools is crucial for success. DAT offers a wide range of comprehensive tools tailored to your specific needs. These resources empower you to excel and thrive in the competitive industry. Explore the valuable tools DAT has to offer and pave the way for a prosperous future in your freight forwarding business. Get started today.
