Freight forwarders play vital roles in keeping the supply chain moving by serving as intermediaries between the shippers and the carriers who will bring the goods to their final destination. While freight forwarders do not transport the shipments, they offer multiple transportation modes, including ocean freight, road transport, air freight, and rail freight.
Because of the reliance on freight forwarders, carriers and distributors need protection against potential misconduct or law violations committed by the freight forwarders. For this reason, the Federal Motor Carrier Safety Administration (FMCSA) requires freight forwarders to obtain licenses and either purchase BMC-84 freight broker bonds or open BMC-85 trusts. To prevent a potential freight broker bond claim, forwarders need to take care when building out their carrier networks to ensure they contract with reliable partners in every transportation mode to secure the best possible price while ensuring the goods will reach their destinations on time.
Freight forwarders might rely on established routes that have frequent and regular departures, arrange charters, choose the routes that offer the greatest reliability, the lowest cost, and the fastest speeds, and value various offers while considering the myriad variables required for a well-informed analysis. With all of the factors that impact the ability of forwarders to build their carrier ecosystems, it is important to recognize the common challenges and how to overcome them.
EVER-INCREASING FREIGHT FORWARDING COMPETITION
Freight forwarders who are just starting out and those who are trying to expand their service opportunities run into challenges with the increasing competitiveness of the freight forwarding industry. There are low barriers to entry into the transportation market, which adds to the competition. This is a major challenge facing freight forwarders, with new companies constantly entering the industry. The pressures of competition can make it hard for freight forwarders to remain profitable while maintaining an advantage. When competing against large, established freight forwarders, it can be difficult for smaller forwarding companies to break into the market since many carriers prefer to work with larger partners with major established networks.
A major challenge to freight forwarders that are trying to grow a carrier network is the shortage of drivers and other workers. When there aren't enough truck drivers, dock workers or warehouse workers, multiple problems can result. There can be a bottleneck of shipments waiting to be picked up and transported, combined with delays in loading and unloading. When there is a labor shortage, it can quickly result in tight deadlines combined with capacity problems. To overcome these problems, utilizing process automation systems can be critical for supply chain logistics.
COMMUNICATION CHALLENGES WITH SUPPLIERS AND PARTNERS
Collaboration and communication with suppliers and partners can be difficult for freight forwards when they are handling ocean freight shipments. Many suppliers and partners use different systems that might not be interoperable. While freight forwarders can build carrier ecosystems with standardized data sharing, it can still be a major hurdle in today's environment.
The market is volatile, and sudden rate increases and expenses sometimes happen. Keeping track of pricing trends, rates and fees can make it significantly easier to budget and plan even when the economy is uncertain.
Freight forwarders need to be able to track shipments in real-time. Poor monitoring and tracking can cause major problems. Problems such as delays, damaged goods, lost cargo, missed deliveries, and other disruptions can occur when tracking and monitoring are inadequate. Because of these issues, it is important for freight forwarders to use systems that allow for real-time tracking and continuing status updates to stay on top of the shipments they handle.
REMAINING CURRENT WITH LAWS AND REGULATIONS
Laws and regulations around the world that affect global trade constantly change. Freight forwarders must stay on top of the many regulations and laws and be aware of changes as they occur. When forwarders are unaware of changes in duties, taxes, customs, and inspections, it can increase the stress on the supply chain, including local supply chains. Since you need to uphold the laws, you must know what requirements currently exist wherever you operate.
RISING TRANSPORTATION COSTS
When transportation costs rise, it can place added pressure on freight forwarders when they look for the lowest costs for transporting shipments. The market is volatile, and sudden rate increases and expenses sometimes happen. Keeping track of pricing trends, rates and fees can make it significantly easier to budget and plan even when the economy is uncertain.
CUSTOMER SERVICE DEMANDS
The services freight forwarders provide must be driven by customers. The availability of e-commerce, personalized options for shipping and delivery, and real-time tracking and updates have increased customer service demands. Freight forwarders need to find carriers and shippers who work to maintain high levels of satisfaction while they meet or exceed their customers' expectations.
THREAT OF CYBERATTACKS
As freight forwarders increasingly rely on digital shipping systems, there is an increased risk of cyberattacks. Malevolent actors can ruin supply chains and logistics while quickly draining money from key budgets. While you build your ecosystem, protecting your digital data is just as important as all of your other security measures.
AUTOMATION AS A WAY TO ADDRESS CHALLENGES
Using automated processes through secure technological systems can help to solve many of the challenges faced by freight forwarders as they work to build their carrier ecosystems. Technology can help to automate emails and other forms of communication while also handling unstructured data tools, allowing you to focus on important activities necessary for growing your business. Leveraging technology can help you keep better track of shipments and help to minimize the issues caused by labor shortages.
Automation can also help forwarders quickly identify reliable carriers to handle shipments to help avoid delays and other disruptions. When manual processes are automated, efficiency can be improved.
Freight forwarders must contend with numerous challenges when they are trying to build out their carrier networks and become more competitive in the market. By recognizing and understanding the challenges you might face, you can take steps to proactively determine how to manage them more effectively. Understanding how to address these and other challenges can help to ensure you always comply with the law and your bond conditions to prevent other problems that could threaten your ability to continue operating.