People often use the terms “carrier” and “freight forwarder” in the shipping industry. Here, a carrier refers to a company that uses transportation modes for freight shipping. Generally, a carrier uses trucks, ships, aircraft, etc. A freight forwarder refers to a company that acts as a broker between carriers and customers. It ships customers’ cargo on their behalf and offers various transportation services depending on customer requests. Both a carrier and a freight forwarder play a significant role in shipping freight, but their purpose is different. Let’s take a look at the similarities and differences between a carrier and a freight forwarder.
A carrier is a company that physically transports cargo from one place to another. A carrier owns and operates vehicles, ships, aircraft, etc. that are necessary for shipping. It has the responsibility of freight shipping. Depending on the shipping sector, a carrier can refer to a bus driver or a pilot and must ensure that cargo arrives safely on time.
Carriers can be categorized according to the following transportation methods:
(1) Truck carrier: A company that uses trucks for inland transportation. It is often used for short- to long-distance transportation.
(2) Ocean carrier: An ocean carrier owns and operates ships to transport freight across seas and oceans. It is essential for global trade and freight shipping between continents. Compared to other transportation modes, an ocean carrier can move a large quantity of goods.
(3) Air carrier: An air carrier is a specialized business that transports cargo with aircraft and offers transportation services for time-sensitive freight. It can ship cargo in a short amount of time compared to an ocean carrier.
(4) Rail carrier: A rail carrier uses trains for transporting cargo, and a rail carrier is often used for long-distance mass transportation.
(5) Multimodal carrier: A multimodal transportation company that uses various transportation modes, such as trucks, trains, and ships. It efficiently plans cargo when shipping.
(1) Advantages
- Transportation process control: Since a carrier physically transports cargo, it can directly manage and control the transportation process and can efficiently process so that cargo can move safely.
- Responsibility: A carrier should take responsibility and address problems when they occur during the process of transportation, such as delays.
(2) Disadvantages
- Limited service: Since a carrier offers limited services other than transportation, the shipper may have to find other companies that offer extra services, including customs clearance and warehousing.
- Service requiring quality management: Most of the shippers excluding a few big-size shippers may not receive close management from a carrier when problems occur.
- High cost: Since a carrier simply offers a transportation service without additional services, a shipper may think that a carrier is less expensive. However, considering the characteristics of the logistics industry that negotiates a better price based on bulk orders, a small-size shipper may have to pay a high cost for a carrier’s services.
A freight forwarder plays a similar role to a coordinator who designs and runs big events. It does not own trucks, ships, or aircraft. Instead, it is a broker between carriers and companies or individuals who wish to ship freight. A freight forwarder is in charge of various connecting activities, such as documentation processing, setting optimal routes, and pricing negotiation. It can even take charge of customs and other international regulation-related issues for companies who wish to send their products overseas. A freight forwarder is important and quintessential in seamlessly managing logistics for freight shipping.
(1) Logistics plan establishment: A freight forwarder plans the most efficient and effective shipping routes and methods considering shipping costs of cargo, shipping time, cargo characteristics, etc., from all angles.
(2) Documentation: Multiple international documentation is necessary since freight crosses borders during international shipping, and a freight forwarder takes this role. Some related documents are customs clearance documents, bills of lading, import and export licenses, etc.
(3) Booking: A freight forwarder negotiates costs with carriers on behalf of a shipper, books shipment space, and helps freight to be loaded on the most suitable carrier.
(4) Shipment tracking: A freight forwarder tracks and checks cargo status in real time so that customers can monitor the route of their cargo.
(5) Cargo insurance: A freight forwarder may offer or apply cargo insurance to prevent pilferage or damages during the process of shipping.
(1) Advantages
- Provision of various services: A freight forwarder not only provides transportation services but also various services, including customs clearance, insurance, and warehousing. This makes customers’ complex transportation process simpler and more convenient.
- Cost reduction: Since a freight forwarder ships large quantities of cargo together with many shippers, it can negotiate better rates and conditions compared to an individual shipper with small quantities of cargo.
- Expertise: A freight forwarder has many experiences and expertise regarding the transportation process and various transportation options. It offers efficient and useful advice and guides, so it can provide attentive and specialized care when diverse issues arise.
(2) Disadvantages
- Reliance on carriers: Since a freight forwarder has to rely on carriers for the actual transportation of cargo, it may not be able to have personalized selections. In other words, a freight forwarder may have to load freight following the schedule and route of carriers.
(1) Goal-oriented: Both carriers and freight forwarders are freight companies, and they have to ensure that the freight safely arrives on time.
(2) Compliance with regulations: Both carriers and freight forwarders have to comply with not only domestic but international transportation regulations.
(3) Customer service: Good carriers and freight forwarders accurately grasp customers’ needs and must prioritize effective conversation and reliability.
(1) Owning of asset: The biggest difference between a carrier and a freight forwarder is whether one has an asset or not. A carrier owns and operates a physical transportation mode. On the other hand, a freight forwarder does not own any transportation mode and adjusts the process of transportation.
(2) Responsibility: A carrier is responsible for the actual transportation of cargo and ensures that it arrives at the destination safely and on time. A freight forwarder takes charge of most of the necessary business during the process of logistics. Mostly, it takes responsibility for the overall logistics from planning of transportation, preparation of documents, international transportation, customs clearance, and warehouse.
(3) Customer relationship: A shipper generally makes a direct relationship with a carrier, and a freight forwarder acts as a broker between a shipper and a carrier. A shipper mostly hires a freight forwarder to streamline the logistics process and use its expertise.
(4) Expertise: A freight forwarder professionally deals with complex processes, including international trade, customs regulations, and documentation. A carrier is superior at transporting cargo, selects the optimal route, and ensures cargo safety.
Due to the recent technological development of transportation and the integration of industries, it is becoming more and more common. For instance, a carrier can easily expand its services covering cargo tracking, customs clearance, document processing, storage, and product shipping due to the development of a digital logistics platform. Since many carriers even play the role of a freight forwarder in order to provide integrated solutions to their customers, a carrier can extend its services and become a freight forwarder. In addition, a freight forwarder can also play the role of a carrier if it partially has an asset.
If you have small quantities of goods, have to transport them in short distances, do not have complex requirements like dangerous goods, and do not need many carriers, you can transport goods directly using a carrier. It is good for your business if you establish a continuous relationship with a carrier since you can get better rates and improved reliability. However, you have to take care of customs clearance by yourself if you use a carrier.
You can use a freight forwarder both for small and large quantities of goods. It is good to use a freight forwarder if you have trouble managing all the transportation complexities on your own, such as finding the most efficient network and optimal costs. A freight forwarder provides services based on its expertise and multiple networks to ensure fast and inexpensive freight shipping. Moreover, it reduces the concerns and stress of shippers by taking charge of all the logistics work. You can use a freight forwarder even when you need many transportation modes, such as air, ocean, truck, and railroad. Last but not least, a freight forwarder is especially helpful for small-size enterprises or companies that do not have a dedicated logistics division.
- Experience: You need to find a freight forwarder who has experience dealing with product types and transportation routes.
- Network and resources: A freight forwarder that has a strong network of carriers, agents, and partners can offer more options and flexibility regarding transportation routes, methods, costs, etc.
- Customer service: A good freight forwarder provides clear communication during the entire transportation, swiftly responds to inquiries and problems, and offers tailored solutions that meet specific requirements.
