Engaging in international trade and logistics services presents a crucial question for many businesses, especially when you are deciding on air freight or sea freight transportation: Should you source your shipping needs directly from carriers, or is partnering with a freight forwarder the better choice?
This decision is pivotal to maintaining cost efficiency in Logistics and can significantly impact the success of your international trade endeavors, where timing and efficient handling are everything to guarantee fulfilling business commitments.
The easiest way to think of this is linking it to buying wholesale vs retail: while wholesale might be cheaper, it won't necessarily fit your wider scope of needs and the selection might be limited. Buying retail allows you to mix and match, as well as negotiate with further added value depending on the store you are buying at.
Every business has a unique shipping profile defined by the volume, frequency, and specific nature of its cargo. Thoroughly assessing these needs is the first step towards deciding which kind of provider you want to choose.
For sporadic, high-volume shipments, direct carrier sourcing might seem appealing, promising potentially lower rates and a straightforward relationship. However, we need to assess what resources we have on hand and what are the compromises we are willing to take in order to save time and costs in moving our cargo from point A to point B.
The first crucial question to ask is: what is the scope of the service(s) you need? Carriers tend to have a limited portfolio of options and services to render, as we will see below.
Some questions that will help you get into the right mindset to start analyzing options are these:
| Question | Reasoning | Direct Carrier Impact | Freight Forwarder Impact |
|---|---|---|---|
| What Incoterm am I planning to use? | Determines responsibility and risk distribution. If you are buying CIF for example, you don't need to worry about hiring freight | Must understand each term's implications on responsibilities. Often you only deal with a carrier if you are buying the freight directly | Offers guidance on best terms for cost-efficiency and risk management |
| Am I looking for a transactional business or a long-term partnership? |
Defines the relationship's depth and commitment Check our article on transactional business vs logistics solutions here |
Transaction-focused, less personalized service. Negotiation of contracts depends on long term commitments, MQC and relationship | Potential for long-term partnerships, with tailored services and better understanding over time |
| Am I going to be engaging more import or export services? | Influences the need for localized expertise and global network access | May require multiple carriers for different regions | Streamlined service through a single provider with global capabilities |
| Based on my local market, the volume I am planning to handle is considered low, mid, or high tier? |
Impacts pricing, attention level, and service customization |
Preferable pricing for high-volume shippers, less flexibility for low-volume, depending on the volumes expected from the market you are in | Often more flexible, offering customized solutions for all volumes. They can leverage relationships and volumes of their customers not limited to yours only |
| What is the frequency in which I plan to ship my goods? | Affects contract terms, pricing, and service availability | High frequency can secure better rates but may require coordination across carriers | Ease of scheduling with consistent rates and single-point coordination, as well as more options to choose |
| Does my internal logistics team have enough resources to handle the rest of the supply chain, besides the freight transportation? | Assesses the capacity to manage logistics complexities, as well as the manpower required to organize and coordinate internally | Requires strong in-house capabilities for managing logistics end-to-end. Their services and assistance are limited to only the services required |
Can compensate for limited in-house logistics with comprehensive service offerings, as well as solutions catered to your needs |
| Is the value of my cargo relevant to influence logistics supplier choice? |
High-value cargo might need special handling or insurance requirements |
Potentially higher insurance premiums and limited special handling options | Often provides comprehensive handling and insurance options for high-value cargo |
| Are there any additional services that I won't be able to negotiate on my own? | Identifies the need for supplementary services like warehousing or customs brokerage | Limited to standard carrier services, negotiation often not flexible | Access to a wider range of services and better negotiation leverage |
| Do I have a preference to deal with a single point of contact or multiple suppliers along my supply chain? | Simplifies communication and accountability | Multiple contacts may be necessary, complicating communication | Single point of contact simplifies interactions and improves response times |
| What are the alternatives and time frames I can expect for exception management with the options in services rendered? | Determines flexibility and response to unplanned events | May face delays; carrier-dependent solutions | Typically offers quicker, more flexible solutions to exceptions due to broader resource networks |
| How important is customer service for me? | Influences satisfaction and ease of resolving issues | Might not prioritize individual customer service, focusing on operational efficiency | Often prioritizes customer service, with dedicated support and personalized attention |
| What would be the key factor to make my decision? Cost, Transit Times, Customer Services (Service Quality), others? | Guides the final choice based on prioritized needs | Competitive in specific areas like cost or speed but may lack elsewhere | Balances multiple factors, often excelling in service quality and reliability |
| Do I need support with customs and compliance issues? | Evaluates the necessity for expert guidance through customs processes | Often limited support and requires self-management. Most carriers will not offer customs brokerage services | Provides extensive customs brokerage and compliance services. |
| What level of risk am I comfortable with regarding shipment security and delivery guarantees? |
Assesses tolerance for potential shipment issues |
Might offer less comprehensive security measures and guarantees | Generally offers more robust security options and reliability in delivery guarantees |
| Am I equipped to handle logistics documentation and shipment tracking independently? | Considers the capability to manage intricate logistical details | Requires significant internal resources for effective management. There are no to very little solutions for integrations | Provides full-service solutions including documentation handling and tracking |
| Will I require multimodal transportation solutions? | Determines if integrated logistics solutions are necessary | May need to coordinate with multiple providers, complicating logistics, as the carriers will offer you only limited services | Simplifies logistics with seamless multimodal transportation offerings, all handled with a single point of contact |
| How do fluctuations in shipping rates impact my business? |
Identifies financial flexibility in response to rate changes |
Vulnerable to market rate fluctuations; less predictable expenses |
More stable and predictable pricing due to volume and negotiated rates |
If you're unsure what your shipping needs are yet, you can download our easy-to-use questionnaire, which might give you something to think about or let us do the work for you and book a meeting today.
This direct carrier sourcing strategy, often highlighted for its potential cheaper cost, is especially viable for companies that handle contract negotiations and ongoing relationship management with carriers.
However, adopting this approach requires a substantial investment in both time and resources. It involves intricate coordination and a deep understanding of logistics to manage the complex network of routes and regulatory requirements. Moreover, companies must be prepared to handle logistical challenges independently without the buffer of intermediary support that freight forwarders provide. This can pose significant operational challenges, particularly for businesses without a dedicated logistics department.
Furthermore, relationships with Carriers are crucial to be able to really negotiate rates and long term contracts, and they will always be limited by the level of volume that you can contribute within the market of their interest. Dealing with a freight forwarder means you can leverage the volumes that they handle with the Carrier under their contracts, giving you more options to choose and also piggybacking on their existing relationships.
Freight forwarders are more than just shipping facilitators; they are architects of comprehensive Logistics Management Solutions. They offer a robust suite of services including warehousing, cargo tracking, and consolidation—vital for businesses that need a broad Service Range. This makes them an all-in-one solution for companies that require ease of service along with expertise in International Shipping Strategies. Their extensive expertise and network strength in dealing with complex regulations and documentation can be indispensable, especially when handling diverse and intricate cargo movements.
If exploring the logistics landscape feels daunting, freight forwarders can simplify your decision-making process by providing tailored advice based on your specific business model. Their ability to customize services and leverage their vast networks allows them to offer potentially more competitive pricing through consolidated shipments and economies of scale, which are particularly beneficial for smaller shippers.
With a global presence across 60 countries and territories, moving over 1.1 million TEU of ocean freight annually, and operating over 67 million ft2 of logistics facilities that include container depots, port terminals, logistics and express centres, Kerry Logistics Network exemplifies such a forwarder. We have a track record in helping companies in Oceania that deal with International Trade to make their operations simpler, and their supply chains more reliable.
The table below evaluates several key factors, such as pricing, service range, expertise, network strength, and service customisation. Each factor needs careful thought to help you determine which logistics option best aligns with your business's needs, whether it’s optimising for cost, expanding service capabilities, or leveraging extensive global networks.
| Factor | Direct from Carriers | Freight Forwarders |
|---|---|---|
| Pricing | May offer lower rates for larger volumes | Potentially more competitive for smaller shipments |
| Service Range | Limited to core services | Broad, including warehousing and consolidation |
| Expertise | Specific to their operations | Wide expertise in regulations and documentation |
| Network Strength | Restricted to their assets | Access to extensive global networks |
| Customization of Services | Less flexible | Highly adaptable to client needs |
This section presents three hypothetical client profiles to illustrate the practical applications and benefits of choosing between direct carriers and freight forwarders. Each example provides insights into how businesses in various sectors navigate their specific logistics needs, helping you understand the best logistical strategy for your operation.
| Client Profile | Business Needs | Option Chosen | Reason for Suitability |
|---|---|---|---|
| High-Volume Retailer | Consistent, large-volume shipments, multiple origins and multiple destinations | Carrier | Preferential rates due to volume, frequent schedules, available to commit to MQC imposed by Carriers |
| Small Fashion Boutique | Diverse, low-volume international needs. Small number of origins, single destination | Freight Forwarder | Custom solutions, consolidation, expertise in apparel. Require and end-to-end solution to outsource their supply chain to a 3PL. |
| Automotive Parts Supplier | Regular, time-sensitive deliveries. Operates in JIT from multiple suppliers in multiple origins and more than one destination. | Freight Forwarder | Integrated services, efficient customs clearance, end-to-end management. Offers visibility through systems integration and advanced tracking, useful for JIT planning |
Deciding between direct carriers and freight forwarders involves weighing various factors, from cost and service range to expertise and network capabilities. While direct carriers may offer appealing rates for large-volume shippers, freight forwarders like Kerry Logistics provide comprehensive solutions that extend far beyond simple transportation. With a robust network across 60 countries and vast expertise in managing complex logistics challenges, Kerry Logistics exemplifies the heightened service level and customisation that freight forwarders can provide.