Choosing the Right Freight Forwarder: A Guide for Growing Businesses

As your business transitions from a seedling to the beginnings of a flourishing tree, you will have to bolster and improve your supply chain. As part of this process, choosing the right freight forwarding and logistics partner is an important decision that requires forethought and careful consideration. Making a good or bad decision here has implications not only for your bottom line, but across your entire business and its growth trajectory.

Your company is operating on top of what can be an almost invisible yet powerful group of threads that connect business units like a vast web. Choosing the wrong supply chain partner can lead to delays and unfulfilled customer orders. This could lead to a disgruntled customer base and an overload of service enquiries. This can result in your limited time being siphoned towards putting out fires rather than nurturing your growing business.

Of course, decisions are sometimes not so dire. However, this example highlights the importance of considering the right partner. The first dichotomy that comes to mind when considering a supply chain partner is whether to look for a multinational conglomerate you may know the name of or consider a mid-tier partner that perhaps is not a “name brand” yet provides a more personalized service.

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Considerations when making your decision

Both have their advantages. However, we’ll break down each of the categories to give you some considerations when making your comparisons:

Service and Expertise

Multinationals: the most important consideration when choosing a forwarder is the service you will receive. Larger forwarding and logistics companies are like the name brand products. As one of our leaders once said, “No one ever gets fired for choosing the brand name”. Dealing with a large forwarder provides a certain level of comfort and stability. You know that you will get an okay level of service in most cases.

The other side of this coin is that large companies often come with bureaucracy and red tape. There are likely many systems that have been in place for decades that you’ll need to manoeuvre. This can hinder the flow of information, leading to a lag in the transparency you get over your data. It could also mean you are asked to change your processes to fit your forwarder’s mould. In summary, you can better anticipate what you get, but at times, you can be left feeling like a face in the crowd.

Mid-tier forwarders: privately-owned providers will not come with this same level of comfort. There is not a library of reviews telling you what to expect from the experience. However, they will have an army of customers loyal to them for decades. This is because of their lack of red tape, mid-tier forwarders can mould to your process the way conglomerates can’t. And they can do it quickly.

?When you speak with a mid-tier forwarder, there are fewer people between you and a decision-maker. This means you’re less likely to be told, “This is how we do things”, and more likely to be asked, “How would you like us to work with you?”. In summary, there’s a degree of uncertainty, but the potential to find gold is much greater.

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Technology

Multinationals: again, in line with the above, larger conglomerates may have the capital to invest in technological developments. It means they’ll have the capacity to spend revenue in developing systems. However, because of the “red tape” factor, these developments can come up against roadblocks. This widens the gap between a research phase and becoming a customer-ready solution. Furthermore, these developments are often developed with their biggest customers in mind, meaning that if you are not a large shipper, you may get a solution made for someone else.

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Mid-tier forwarders: mid-tier providers will often have a smaller budget to invest in technology. Because of this, they may need to prove a business case for a new development before moving.

However, because they do not have the bureaucracy of a larger company, their developments can often be deployed to the customer at a much faster clip. In addition, because there are fewer layers between you and a decision-maker, the technology has a greater probability of considering your needs.

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Network

Multinationals: conglomerates often come with an expansive network and offices in far-reaching corners of the globe. They tend to rely less on third parties in obscure locations; thus, for those moving goods from/to these ports, this can be seen as beneficial. They tend to have a broad service offering across various cargo types and will get the job done well but may not necessarily be experts or act in a consultative manner as a privately owned firm would.

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Mid-tier forwarders: if the supply chain was a body, a multinational would have more veins throughout the body, but a mid-tier forwarder would have richer arteries to vital organs. They tend to specialize regionally or within a particular type of cargo, meaning that their relationships in this region or in this discipline will be more significant. Therefore, they will have a much higher efficacy in that region. They are more likely to provide you with detailed advice and knowledge that will teach you about your supply chain, therefore acting as a partner and educator rather than just a provider.

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Resources and Assets

Multinationals: larger companies often are better resourced, meaning they generally have the capacity to manage higher volumes of freight in-house. They may own facilities with larger warehouse space and perhaps own some of their own vehicles again, providing the ability to handle larger volumes without liaising with partners.

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Mid-tier forwarders: mid-tier forwarders will generally not have as many of their own assets. To combat this, they’ll partner with others who do have the assets to move your freight. Oftentimes, through their strong relationships, their agent's resources become an extension of their company. In this instance, they will have no problem servicing larger requirements thus, making this difference inconsequential.

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Price

Multinationals: because multinationals deal in larger volumes, they often have more capacity to bargain with carriers. Carriers can be assured that their volume requirements will be met in order to give more competitive rates. However, with a larger forwarder, the best rates tend to go to their largest shippers, and if you are not in their top client base, you may not necessarily have access to their best rate.

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Mid-tier forwarders: because mid-tier firms may not have the bargaining power of their multinational counterparts, their rates for larger shippers are often not as competitive. ?That being said, mid-tier forwarders can often leverage their relationships to procure a competitive rate, making the difference not as significant. Additionally, the most competitive rates are not necessarily reserved for their largest customers, so as a smaller or medium-sized shipper, you will not be excluded from the mid-tier firm’s best offering.

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In summary, your choice of forwarder or logistics partner will be dictated by your specific needs. Multinational conglomerates offer a level of comfort and a vast network but often come with the pitfalls of bureaucracy and outdated legacy systems. Their investment in research is higher but could be geared towards their largest clients. By choosing a mid-tier provider, there is a potential for less certainty, but they may tailor their process to suit your needs and work with you as a partner. Their technology team is likely less resourced but more innovative, focused and considerate of your needs. Ultimately, both have pros and cons, and it's important to make this decision carefully as it will greatly impact your business.

At Navia, we are proud to say that our people offer deep-level expertise in numerous disciplines, and we empower our customers with world-class technology that is moulded to their needs, such as NaviaHub and Navia API. To talk with us about your forwarding or third-party logistics requirements, please reach out to [email protected].