The simplest definition explaining the essence of freight forwarding states that it is the process of organizing the movement of cargo from a supplier to a recipient, using appropriately selected means of transport and methods of carriage. It follows that a freight forwarder is a person performing the activities necessary to carry out the transport process, i.e., primarily organizing the transport of cargo. However, as a result of significant changes occurring in the European freight forwarding services market over the last decade, the role of the freight forwarder and the functions they perform are constantly evolving. Who, then, is a freight forwarder in modern enterprises involved in handling and transporting cargo?
Changes in the freight forwarding services market
In the mid-19th century in Europe, alongside existing transport companies, firms began to emerge whose primary function was freight forwarding. The process of establishing international freight forwarding companies was uneven and proceeded differently in individual countries. The emergence of these firms was a market reaction to the needs resulting from the increasing complexity of processes accompanying international transactions. Over time, freight forwarding companies offered their clients an increasingly wider range of services; alongside organizing cargo movement, they also provided many additional services, such as shipment insurance, warehousing, consolidation of shipments, customs clearance, or marking, sorting, and packaging of goods. The market developed very dynamically, and there was multifaceted specialization of freight forwarding companies, e.g., by the offered branch of transport (sea, rail, etc.) or the served industry or product category. As international trade grew, requirements for freight forwarding companies continued to rise; firms had to adapt to the increasingly complex needs of specific enterprises for which they were no longer organizing simple transport processes, but entire chains of services related to supply or distribution. New services appeared that did not fit into the traditional scope of freight forwarders’ activities. In response to these needs, freight forwarding companies expanded their operations, acquiring additional infrastructure to ensure a high level of quality in their services. In this way, companies known as specialized logistics operators (3PL, Third Party Logistics) emerged on the market.
Classical freight forwarders began to be gradually displaced by them, initially from the market for large contracts. Logistics operators function as enterprises with an extensive structure in which freight forwarding is one of the basic groups of services offered. In addition to forwarding activities, operators also offer their clients warehousing and inventory management, transport and cargo handling, various types of marketing services, and financial services related to contract execution. Companies of this type mostly possess significant transport and storage potential, own sorting facilities, transshipment points, warehouses, and various other infrastructure for broadly understood logistics handling of goods. Both in Poland and throughout Europe, specialized logistics operators dominate the freight forwarding and logistics market, taking over the majority of the turnover occurring within it. At the same time, the role of small transport and freight forwarding companies offering a limited range of services is declining. The latest trend is the emergence of 4PL-type companies –
so-called virtual logistics operators in Europe. These are companies offering clients a range of services extending beyond traditional logistics: they enter production processes, offer value-added creation for products during their journey in the logistics chain, and all this is based on resources owned by other companies: 3PL logistics operators and firms from other industries.
As a result of such market changes, the role and functions performed by freight forwarders are also changing. Organizing increasingly complex services places demands on them for professionalism, operational efficiency, and the ability to utilize available resources.
Traditional freight forwarding companies
Current freight forwarders originate from purely forwarding enterprises, whose main task was to execute orders related to the physical realization of contracts and trade agreements. These companies, acting on behalf of the parties to the contract, handled all activities necessary for the goods to travel from the seller to the buyer under optimal conditions. The freight forwarder assumed the role of a transport intermediary, taking over from the cargo owner the obligation to organize the transport process. The basic unit in such companies was precisely freight forwarding, whose employees dealt primarily with the formal side of organizing transport. The most important tasks of a freight forwarder included finding a carrier with the best means of transport from the cargo’s perspective, negotiating the price and terms of carriage with them, and then creating all the documentation related to the given transport process. Therefore, the basic attribute of a freight forwarder, determining the effectiveness of their work, was an excellent knowledge of the transport market. The freight forwarder ensured timeliness, safety, and optimization of the entire transport process. They performed the traditional role of an intermediary between cargo owners and carriers possessing transport potential. The services offered by freight forwarders did not include the physical transport of goods, but all activities related to its realization. Although in practice, many freight forwarding companies owned their own means of transport and could, upon request, also perform the service of transporting the goods themselves, for most of them, forwarding activity was of primary importance. A special role was played by the freight forwarder’s activity in relation to the execution of transactions in international trade. In these cases, the forwarding service was extended to include the preparation of documentation necessary for the efficient completion of customs formalities, as well as others related to the requirements of official regulations in the countries through which the transport route passed, e.g., certificates, certificates of quantity, quality, and origin of goods, or sanitary certificates. These very services offered by international freight forwarding companies played a very significant role in the development of international trade and created the foundations for the specialized logistics firms operating today.
The article comes from the magazine “Logistyka” 2/2003.