The global shipping industry is a crucial enabler of international trade. In particular, the sector is critical in the transportation of raw materials from the source to the manufacturing industries. Equally, shipping is essential for the transport of finished products from the manufacturer to consumers. Due to its global nature, international shipping involves enormous logistical challenges hence requiring the services of people that are well versed in the industry dynamics and who can formulate the right solutions to such problems. Freight forwarders or freight forwarding agents are some of the most common professionals in the sector, and their role has been instrumental in the industry’s growth. Freight forwarders are people or companies who arrange the transportation of goods on behalf of a client (Shang and Lu 2012). Their primary role includes preparing documentation and arranging customs clearance and dealing with all the other formalities necessary for transporting products from one point to another (Shang and Lu 2012). Employing the services of freight forwarders comes with its fair share of advantages and disadvantages, as discussed below.
Employing freight forwarding services presents business people with an opportunity to save on the cost of shipping and other essential services necessary for fast and safe transportation of products. Typically, freight forwarders transport products in bulk, enabling them to benefit from the economies of scale (Glass 2013). As such, the overall cost per unit charged by such firms is significantly lower. Also, as experts in the industry, freight forwarders are adequately informed of the various options available to a client and therefore, will advise on the most cost-effective method to use (Glass 2013). Besides, freight forwarding agents can negotiate for better prices with shipping companies and other players involved in the transportation of goods, therefore providing relief for individuals and small companies that cannot afford the high freight charges levied by some organizations. On the whole, engaging freight forwarders ensures cost-effectiveness.
Freight forwarding companies have a reputation for enhancing the timely delivery of goods. However, in order to ensure timely delivery, a client needs to conduct a background check and establish the reliability of the chosen organization. Typically, competence and reliability vary among the sector players. For example, some freight forwarding firms are better equipped and more experienced than others, making it easy for them to handle the complex shipping process in time (Glass 2013). Although enrolling such firms’ services can be a bit expensive, one is guaranteed of fast and timely delivery of goods. One of the advantages of engaging an experienced freight forwarding agent is that they minimize the chances of costly mishaps that can delay shipment (Glass 2013). However, in the event of such incidences, the experience and level of expertise among such agents aid in the formulation of timely solutions hence preventing costly delays. On the whole, freight forwarders’ knowledge and expertise enable them to facilitate the timely delivery of products.
Experience in The Processing of Crucial Documents
International shipping involves a lot of legal documentation necessary for the movement of goods from one jurisdiction to another. The processing of such records requires a high level of expertise as slight mistakes that occasion massive delays. As critical players in the industry, freight forwarding agents have extensive knowledge and experience in processing various legal documents necessary for cross-border shipping (Glass 2013). The majority of freight forwarding firms enrol legal experts’ services to prepare such crucial documents, hence eliminating the probability of mistakes and omissions that can occasion costly delays. For example, reports that are filled improperly can cause custom officials to seize goods, causing lengthy delays, resulting in decreased profitability and other inconveniences of the client’s part (Glass 2013). On the whole, engaging freight forwarders enables one to benefit from their experience in the processing of crucial documentation and other requirements necessary for uninterrupted shipping.
Flexibility and Versatility
The dynamic nature of transportation, especially in international shipping, necessitates the need for flexibility, especially in accommodating new information and methods. Engaging freight forwarders provide one with the flexibility required to handle new developments and unforeseen circumstances that can occasion delays (Glass 2013). For example, in case of delays at sea and other challenges such as rerouting, a freight forwarder can arrange for alternative means of transport to ensure products reach their destination at the required time. In addition, detailed knowledge and understanding of the legal and business dynamics in different jurisdictions enable freight forwarders to establish the most suitable method to ensure goods reach the client at affordable rates and within the required timelines (Glass 2013). In case of challenges along the way, such firms can adjust their operations and transportation method, hence preventing costly delays. On the whole, the flexibility and versatility of freight forwarding firms are crucial in avoiding delays.
Creates Room to Concentrate on Other Business Aspects
Transport logistics can be a nightmare for many, especially where products have to go through different procedures in different jurisdictions. Indeed, complying with all the legal and logistical requirements takes a lot of time and energy, therefore necessitating the need for extensive experience and expertise in the handling of such matters (Glass 2013). While a business owner can handle these logistical requirements, the time spent on such an endeavour would likely undermine other routine business operations hence causing underperformance and low profits. Accordingly, engaging freight forwarder presents one with an opportunity to concentrate on core business operations while leaving the former to handle shipping and other logistics necessary for the safe and timely delivery of goods. On the whole, enrolling freight forwarders’ services enables business owners to concentrate on the core business operations, which is necessary for smooth functioning and profitability.
Although enrolling the services of freight forwarding agents comes with various advantages, several factors relating to their mode of operation undermine their suitability, especially where goods of immense value are involved. For example, factors such as trust issues, the probability of products getting lost while on transit, overpricing, and the lack of proper regulations are some of the disadvantages associated with freight forwarding.
One of the most common challenges faced by business people concerning the use of freight forwarding services is developing trust with the contracted party. Undoubtedly, regardless of the success, competence, and expertise of freight forwarders, business people can find it challenging to entrust them with their goods and services (Glass 2013). Such trust issues are more pronounced if the two parties have never engaged in business before. Unfortunately, regardless of a forwarder’s reputation, trusting them fully can be a challenge for business people. Accordingly, even after contracting a party to oversee shipping and other related logistics, business people are likely to remain worried and doubtful of whether their products will reach their destination in time and good condition. On the whole, developing trust between a forwarding agent and customers is a challenging task.
Data inefficiency and related challenges are some of the common disadvantages of using freight forwarding services. Often, miscommunication might occur between a forwarding agent and the customer (Chou 2016). Such miscommunication can be in the form of gaps in the information provided. For example, the failure to disclose the specific destination of the products under shipment can affect the delivery due to delays. In other circumstances, the language barrier between a customer and a forwarding agent can lead to translation difficulties and distortion of information (Chou 2016). Such hitches can take a long time to address, especially if the forwarding agent sends goods to the wrong location. On the whole, data inefficiencies caused by the breakdown of communication between customers and forwarding agents is one of the disadvantages of using freight forwarding services.
Unfair pricing is one of the disadvantages associated with freight forwarding services. While one can have complete control over the shipping of one’s products, it can be risky due to the lack of expertise and knowledge of industry dynamics, therefore necessitating the need for a freight forwarding agent. Unfortunately, some agents usually impose unfair charges for the services offered (Glass 2013). For example, it is common for some unscrupulous agents to impose exorbitant fees on services that would cost far less had they opted to handle the process by themselves. While it is okay for agents to include a mark-up in the prices charged for services, it is imprudent to impose exorbitant prices, especially if it involved taking advantage of the customers’ lack of understanding of industry dynamics. On the whole, freight forwarding agents’ unfair pricing is one of the disadvantages of using such services.
Product Damage and Loss
The loss of products is one of the disadvantages of procuring freight forwarding services. Indeed, despite the adoption of technology, such as real-time monitoring of cargo, the probability of goods getting lost is real. Whereas companies do their best to ensure safety and security, the challenges associated with the unpredictability of nature, especially sea accidents, raise the likelihood of goods getting lost while on transit (Glass 2013). One will inevitably attribute the blame on the freight forwarding agent if one’s goods get lost. Besides, entrusting freight forwarding agents with the responsibility to package goods destined for shipment denies the actual owner control over how such products are packaged (Glass 2013). This means that the security of such assets is at the mercy of the forwarding agent. Thus, the probability of such goods getting damaged is high if the contracted agent is ineffective. On the whole, the likelihood of products getting lost or damaged is one of the disadvantages associated with freight forwarding agents.
The shipping industry is one of the heavily regulated economic sectors. Indeed, shipping is prone to abuse and misuse by unscrupulous individuals and organizations that focus on crime and the transportation of contraband goods. The need to prevent such companies from operating necessitates the need for stringent regulations (Glass 2013). However, unfortunately, inadequate regulation in some parts of the world makes it challenging to ensure safe practices, especially on forwarding agents. Mostly, the lack of adequate rules raises the probability of agents engaging in shady deals aimed at ensuring goods cross borders without going through the right procedures (Glass 2013). The move by forwarding agents to engage in such illegal transactions raises the probability of goods getting lost or damaged and legal action. On the while, lack of proper regulation increases the likelihood of forwarding agents engaging in underhand deals that might lead to loss of goods and legal repercussions.
Key Performance Indicators of a Freight Forwarder’s Competence
The contemporary business landscape necessitates one to make the right choices regarding the choice of suppliers, marketing agents, and logistical support. In particular, the choice of transport and logistics determines how fast one’s goods can reach the target market. Failure to identify the most appropriate shipment method and forwarding agents can result in costly delays that can undermine profitability. To establish a freight forwarder’s competence and expertise, one should review specific key performance indicators (KPIs). They include labour productivity, on-time pick-up and delivery, loading and unloading time, maintenance costs, and border delays.
The productivity of an agent’s employees is critical in determining the latter’s competence and expertise level. Indeed, the measure of productivity among the employees plays a pivotal role in determining an organization’s efficiency, especially in planning shipments (Basuki and Arimurti 2014). For example, weak labour productivity essentially means the loaders and unloaders at various destinations will face difficulties in sorting products, leading to additional costs incurred in hiring external labour, ultimately raising the charges imposed on customers. Accordingly, a customer should procure an agent whose labour productivity is high to benefit from low fees.
On-Time Pick-Up and Delivery
Adhering to the set timelines is one of the primary determinants of a freight forwarder’s performance. Typically, freight forwarders obligate customers to pay for shipping in time to promptly ensure their shipping orders are processed (Basuki and Arimurti 2014). Thus, an agent must provide to stick with the set timelines regarding pick-up and delivery, especially if the customer has made the payment as required. The failure to adhere to the set schedule waters down an organization’s reputation. Accordingly, customers should measure an agent’s performance by establishing their adherence to the pick-up and delivery schedule.
Loading and Unloading Time
Loading and unloading time is a crucial determinant of an organization’s efficiency and performance. Typically, long loading and unloading times raises the need for rerouting of existing shipments to reduce congestion (Basuki and Arimurti 2014). Unfortunately, rerouting causes further delays, especially if the point of docking is far from the customer’s location. Rerouting also results in additional costs for a forwarding agent hence raising the probability of imposing extra charges on the customer. On the whole, a customer should be aware of an agent’s loading and unloading times before contracting them.
The presence of border delays or lack thereof is a primary indicator of a freight forwarder’s performance. Typically, border delays indicate that a company has challenges getting the necessary approvals, resulting in failure to satisfy random inspections. Unfortunately, such delays undermine an organization’s per mile length, hence lengthening the time goods spend on transit (Abeywickrama and Wickramaarachchi, 2015). Besides, border delays increase the probability of late deliveries. On the whole, before contracting a freight forwarding agent’s services, one should establish the time they take to obtain approvals, especially at border inspection points.
The maintenance cost is one of the primary determinants of a freight forwarder’s performance. Typically, companies involved in shipping incur maintenance costs, mostly those revolving around fleet cleaning (Basuki and Arimurti 2014). Other maintenance costs include the cost of maintaining offices and storage facilities. Minimal maintenance costs enable such organizations to channel resources into meaningful courses that can ensure customer satisfaction. Also, low maintenance costs prevent such firms from imposing unreasonable prices on clients. On the whole, a freight forwarder’s maintenance costs determine the charges levied on customers.
Comparison Between Freight Transportation in The U.S. And South Africa
The U.S. is one of the countries with the highest demand for freight services. Indeed, with over 128.6 million households and business establishments exceeding 7.8 million, Americans desperately need freight services in order to ensure the constant flow of supplies (“The nation served by freight” n.d.). In addition to households and business establishments, America has over 90,000 government units domiciled in different parts of the country, thus requiring a vibrant freight industry that can ensure such facilities are adequately supplied with the materials and equipment necessary for smooth operations (“The nation served by freight” n.d.). In the U.S., freight travels over various methods such as railroads, trucks, waterways, pipelines, and airways.
Truck Freight Transport
Truck transport is the most common and indeed, the first method of choice for many freight transporters. According to the U.S. Department of Transport, trucks are responsible for the movement of the largest percentage of cargo transported within the U.S. For example, in 2018, vehicles moved approximately 11.3 billion tons of products, accounting for around 60.8% of the total freight shipments (“Freight transportation system extent and use” n.d.). Due to the increasing demand for cargo transport, the department of transport estimates that the annual tonnage of goods transported by trucks will rise to approximately 14.8 billion (“Freight transportation system extent and use” n.d.). The demand for truck transport has raised the need for more parking spaces, thus attracting private sector players (Dobbins, McGowan and Lipinski 2007). As of 2018, the U.S. had a total of 308,920 parking spaces, 88.3% owned by private sector players (“Freight transportation system extent and use” n.d.). On the whole, truck transport is the most common method used to ferry freight in the U.S.
The U.S. has an extensive network of pipelines primarily used to transport oil and gas. The demand for energy, mainly due to increased industrial activity, has created the need for oil ang gas and related products, hence making pipeline transportation one of the most common freight transport methods (“General pipeline FAQs” n.d.). Indeed, over 90% of all the crude oil used in the U.S. is transported via pipelines (“General pipeline FAQs” n.d.). The large volumes of oil and gas transported through pipelines account for approximately 18% of the total cargo carried in the U.S., making pipelines one of the most common transport methods.
The U.S. has an extensive network of railroad distributed across different regions. Although the demand for rail transport has decreased over the years, the method still accounts for a significant proportion of the cargo transported across the country. Mostly, the railroad is used to transport bulky products such as building materials and crude oil. According to the U.S. Department of Transportation, approximately 140 million barrels of crude oil were transported by railroad in 2017 (“Freight transportation system extent and use” n.d.). Overall, the vast amount of cargo transported by railroad makes it one of the most common freight transport methods in the U.S.
Air transport is crucial for freight transport in the U.S. Unlike railroad and trucks, air freight is mostly used to transport perishable products and select products such as premium express shipments (“Freight transportation system extent and use” n.d.). According to the U.S. Department of Transport, air freight accounted for a paltry 0.01% of the total freight ferried in the U.S. in 2018 (“Freight transportation system extent and use” n.d.). Overall, air freight is one of the most common methods used to transport cargo in the U.S.
Challenges Faced by Freight Transporters in the U.S.
One of the most significant concerns for freight transporters in the U.S. is the cost of fuel. Ordinarily, high fuel prices lead to an increase in the operational costs incurred by shipping companies, leading to high transportation costs (Slowik and Sharpe 2018). Unfortunately, an increase in the cost operations results in decreased profits for transporters. Also, in order to cover their operational costs, freight operators pass on the extra cost to customers, hence leading to higher services charges. On the whole, increased fuel prices are a significant challenge for many freight operators in the U.S.
Freight transporters in the U.S. cite strict regulation as one of the biggest challenges facing the industry. Indeed, the transport sector in the U.S. is heavily regulated, and carriers face a significant challenge complying with different sets of regulations enacted by different government levels (Slowik and Sharpe 2018). For instance, operators are obligated to adhere to the rules set by federal, state, and local authorities. In most cases, complying with such regulations is costly and tasking, especially due to the diversity of the laws implemented by different states (Slowik and Sharpe 2018). In sum, complying with strict regulations is a significant challenge for freight transporters in the U.S.
Freight Transport in South Africa
Road transport is the most common method used to transport freight in South Africa. Indeed, the country has an extensive network of roads distributed across different regions. The availability of road infrastructure has led to steady growth in the transport sector, as evidenced by the growing number of freight carriers. According to South Africa’s Transport Department, road transport accounts for over 77.3% of the country’s total land freight (“Transport” n.d.). Unfortunately, overdependence on roads as the primary method of cargo transportation strains the nation’s road infrastructure, necessitating the need for constant repairs and maintenance (“Transport” n.d.). On the whole, truck cargo transport is the most common method of freight transport in South Africa.
South Africa has an extensive network of railroads. Indeed, with over 20,000 kilometres of railroad, South African is one of the countries with the largest railroad network in Africa. However, despite such a considerable distribution of rail, the majority of the freight operators in the country prefer road transport; this means that railroad is underutilized concerning cargo transport. According to the Department of Transport, approximately 35% of the nation’s rail system is rarely used or underutilized (“Transport” n.d.). Despite the presence of an extensive network of railroads, the majority of freight operators in South Africa prefer to use roads.
South Africa has a well-developed pipeline network mainly used to transport crude oil and gas. Indeed, South Africa relies heavily on imported crude oil to power the majority of its industries, necessitating the need for a reliable pipeline infrastructure that can help transport the commodity safety. The country’s department of transport contends that approximately 90% of the crude oil imported into the country is ferried via pipeline (“Transport” n.d.). On the whole, oil and gas are the two primary products shipped via pipeline in South Africa.
Challenges faced by freight transporters in South Africa
High Logistics Costs
The high cost of logistics is one of the biggest challenges facing the freight transport industry in South Africa. Simpson, De Bod, Fourie, and Havenga (2011) posit that the high cost of fuel, in particular, increased the operational costs incurred by transporters, ultimately undermining their profit levels. The high price of storage, mainly due to the shortage of warehouses, especially in the less developed areas, is also a big challenge for transporters. On the whole, the high logistical costs present significant obstacles to freight carriers in South Africa.
Poor Road Infrastructure
Poor road infrastructure in some regions is a monumental challenge for freight operators in South Africa. Although the government has made great strides in building and improving infrastructure, many roads are in poor condition. Simpson, De Bod, Fourie, and Havenga (2011) contend that poor roads, especially in the hinterland, cause massive delays hence undermining freight operators’ operational capacity. Besides, the dilapidated state of roads leads to a regular breakdown of trucks, thus necessitating routine repairs. In sum, substandard roads and related challenges are some of the most common problems facing freight operators in South Africa.
Generally, the freight transport industries in the U.S. and South Africa are similar in many respects. In this context, road or truck freight services are well established in both nations. Indeed, just like in the U.S., road transport in South Africa accounts for the most significant percentage of freight transported across the country. Equally, the two countries use pipelines to transport oil and gas mainly for use in industries. However, the volume of crude oil transported via pipeline in the U.S. is far much bigger than South Africa’s, which is attributable to differences in the level of industrialization between the two countries. Despite these similarities, there are stark differences concerning railroad use. For example, freight transporters in the U.S. use railroad regularly, making it the second most common transport method after truck freight. However, in South Africa, the railroad is rarely used, and as a result, nearly 35% of the facility remains underutilized. There are also significant similarities in the challenges faced by freight operators in the two nations. For instance, high fuel and logistics costs and strict regulations are common challenges in the two countries.
Impact of Freight Transport Modes on The Environment
Undoubtedly, the transport sector plays a crucial role in fostering economic growth and development. Unfortunately, despite playing such an important role, some modes of transport cause adverse impacts on the environment, mainly due to greenhouse emissions. Indeed, the U.S. environmental protection agency posits that in 2020 alone, freight trucks will emit approximately 1.7 million tons of nitrogen oxides (NOx) (“Freight transportation energy use & environmental impacts” n.d.). In addition to the NOx, the transport sector releases various other types of greenhouse gases such as carbon dioxide, nitrous oxide, methane, and hydrofluorocarbons, therefore causing significant damages to the environment (“Freight transportation energy use & environmental impacts” n.d.). The department of transport also contends that the U.S. transport sector is responsible for approximately 36.3% of total CO₂ fossil fuel emissions released in the country (“Freight transportation energy use & environmental impacts” n.d.). On the whole, despite making a positive contribution to the economy, the transport sector caused environmental damage due to the release of greenhouse gases.
Carbon Reduction Technologies
Wind energy is one of the viable alternatives to fossil fuels. Indeed, the technology used in generating wind energy, usually wind turbines, eliminates the emission of carbon dioxide hence averting the possibility of environmental damage. Typically, wind farms offset their carbon emission by the end of the six months of operation (Krekel and Zerrahn 2017). As such, the farms run carbon-free hence preventing environmental pollution. Wind energy can be generated on both onshore and offshore firms. Gillingham and Stock (2018) contend that switching from coal to onshore wind energy is one of the most affordable methods of reducing carbon emissions. On the whole, the adoption of wind energy and related technologies help reduce the volume of carbon emissions.
Tapping natural gas is one of the technologies used to reduce carbon emissions. According to the energy information administration (EIA), natural gas is formed from fossil energy found beneath the earth’s surface (“Natural gas explained” n.d.). According to Gillingham and Stock (2018), natural gas does not require sophisticated technology to tap, making it one of the least expensive alternative sources of energy. Besides, compared to other clean sources of energy such as advanced nuclear power, natural gas is cheaper to produce and, therefore one of the most sort after sources of clean energy.
Advanced Nuclear Energy
Advanced nuclear reactors are some of the most common methods of clean energy. The ability to produce zero-carbon electricity is the primary reason why many organizations and governments across the world are turning to the use of nuclear energy. Despite the positive attributes of this type of energy, Gillingham and Stock (2018) argue that it is costly to install and maintain. Compared to other cleaner sources of energy such as wind farms and natural gas, nuclear reactors are costly.
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