Broker vs. Freight Forwarder

freight-forwarding-services

Source: https://ready-fleet.com

In June 2017 we discussed the blurry line between and 4PL and LLP. Similar confusion can occur when discussing differences between a broker and freight forwarder.

The APICS Dictionary, 15th edition, defines the following key terms:

Broker

‘An organization that helps match carriers to freight, adding value by helping the shipper and carrier obtain better rates and more fully utilize their capacity and equipment.’

Freight Forwarder

‘The “middle man” between the carrier and the organization shipping the product. Often combines smaller shipments to take advantage of lower bulk costs.’

Reading further in the CLTD learning system I prefer associating the term “middle man” to a broker than to a freight forwarder. A broker is primarily serving as matchmaker between a shipper and a carrier. Trying to find available carrier space to satisfy a specific shipment then connect the two. A freight forwarder provides additional value by potentially consolidating multiple shipments (from multiple companies) into larger loads to gain better truckload rates (assuming the original shipment was an LTL volume). This includes taking possession of the shipment and providing short-term storage prior to final shipment. Additionally, a freight forwarder can bring shipping expertise to find the best shipping routes, determining shipping costs, and coordinating the necessary documentation for customs requirements. Generally, a freight forwarder WILL also provide a BOL for the shipment while a broker WILL NOT.

In essence, a freight forwarder is a 3PL providing shipping expertise. Working with a freight forwarder may be more cost effective than employing a team with this skill. An insource vs. outsource decision.

When brokers work to match shipments to carriers they are serving as a freight broker.

The APICS Dictionary, 15th edition, defines a Freight Broker as…

‘An individual or organization who finds appropriate carriers for shippers needing transportation. The broker helps negotiate terms and administers most of the documentation.’

When brokers provide import customs advise and services, they are serving as a customs broker.

The APICS Dictionary, 15th edition, defines a Customs Broker as…

‘A person who manages the paperwork required for international shipping and tracks and moves the shipments through the proper channels.’

While freight forwarders can provide input and services on customs documentation, their focus is on getting product moved from point A to point B and processing freight through customs, rather than only coordinating the necessary documentation. In general a freight forwarder will work on behalf of the shipper (exporting product) while the customs broker works on behalf of the buyer (importing product).

For more information on freight forwarders and customs brokers check out the Operations : Supply Chain Management blogs at https://www.thebalancesmb.com

Here is a good blog to start with…

https://www.thebalancesmb.com/freight-forwarding-2221040

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