From raw materials to finished products, the entire supply chain of businesses around the world relies on transporting items from point A to point B, which is where freight forwarders come in. Freight forwarders are companies that organize transportation of goods by air, sea, road or rail. This industry allows for a great business opportunity as the freight industry continues to expand throughout the coming years.
As per American Trucking Association (ATA), the trucking sector earned total freight earnings of $987 billion dollars in the year 2023 and had indeed employed 8.5 million individuals in trucking jobs, which include 3.55 million professional drivers. Moreover, the global logistics market (including freight forwarding) was valued at around $8.96 trillion in 2023, and it is estimated to be worth $15.79 trillion in 2028, growing at a CAGR of 6.3% during the aforementioned forecast period.
Before you get started in your own freight forwarding business, there are some things that you will need to bear in mind to be a success. While there is generally no specific degree you need to work as a freight forwarder, securing the types of licensing and legal approval necessary is essential. This will require filing paperwork and providing information as needed. To help point you in the right direction, we’ve put together an extensive guide of the necessary steps to obtain your freight forwarders license.
What is freight forwarding?
Freight forwarders organize the shipment of goods from one country to another. The goods may consist of packages, crates and containers, or a mixture of all three. They work for companies and individuals that import and export goods.
The client decides how much involvement the forwarder has in the goods’ journey. For example, it might be taking a container load from a factory in one country to another (for onward assembly), or it might contain finished goods that go from the producer directly to a shop’s warehousing facility. The freight forwarding company can use a mixture of shipping modes (not just ships!) but sea, aeroplanes, trucks and rail.
What’s the difference between a freight forwarder and a broker?
A freight broker is a person who helps shippers connect with carriers when they have freight they need to move. Freight brokers act as a middle man and don’t hold the freight itself. A freight broker’s salary will also differ from a freight forwarder.
A freight forwarder coordinates shipping for customers and may also store freight, assemble and distribute it, and supervises final delivery. They’re liable for any damages and losses in this process.
Freight forwarder licensing is a simple process that has a lot of specific steps to complete. Choosing between a trust fund and a surety bond is one important decision you’ll need to make to complete your licensing. If you’re still on the fence on what to choose, you can learn more about freight broker bonds to get a better understanding of how it works.
Essential Steps to Start a Freight Forwarding Business
Determine Your Business Structure
Before starting your freight forwarding business, you need to decide on your business structure. Will you operate as a sole proprietor, managing everything independently, or establish a partnership or corporation? Your choice will impact how you register your business and the name you use on your application.
Conduct a Market Research
Research freight forwarding industry thoroughly to understanding the market dynamics, key competitors, and potential challenges. The global freight forwarding market experienced a 1.3% real decline in 2023, with a market value at €192.73 billion
However, in 2024, it is projected to grow 1.7%, signifying a tempered hopefulness with an upward trajectory. Learning these trends and what the customers want will inform your business plan.
Gain Industry Experience
It can be difficult to start a freight forwarding business without industry experience. working for an established freight forwarder is the best way to know the ins and outs of the business. A basic knowledge is helpful, try to work on a few departments such as:
- Documentation Department: Get to know what a bill of lading is and other mandatory customs documents.
- Booking and Dispatching: Learn how to arrange shipments, book trucking, and arrange ocean freight.
- Sales: Learn the art of acquiring clients, negotiation, and managing relationships.
Develop a Business Plan
An extensive business plan guides your freight forwarding company. It should include:
- Mission: The fundamental purpose and objective of your company
- What Are You Offering: List the different services you are providing — air freight, sea freight, customs brokerage, etc.
- Target Market: Who you will service within what industries and regions.
- Pricing: The determination of pricing strategy for the various price models.
- Financial Projections: Expected revenues, expenses, and profitability over time
A comprehensive business plan will be invaluable to securing financing and guiding the growth of your company.
Develop a Strong Sales Background
Sales is the crux of any thriving freight forwarding company. Once you have operational experience under your belt, making the move into a sales position will give you the background you need to land clients and grow a profitable business. You have a clear edge in understanding the market, pricing and customer needs when you eventually start your own company.
Choose Your Mode of Transportation and Obtain a License
Freight forwarder licensing also depends on how you will operate. You’ll need a different license if you plan to work on the sea, in the air or on the road.
- Trucking and road freight forwarders must get their license with the Federal Motor Carrier Safety Administration (FMCSA).
- Ocean freight forwarders must get their license from the Federal Maritime Commission (FMC)
- Air freight forwarders aren’t subject to a federal license, but will need training and a membership number from the International Air Transport Association (IATA). Air freight forwarders must also follow rules by the Transportation Security Administration (TSA).
- Intermodal freight forwarders use two or more modes of transportation to carry goods. You’ll need multiple licenses depending on where you operate. For example, you’ll need a license from the FMCSA and the FMC if you operate on land and on the water.
Obtaining a Freight Forwarding License in Canada
There are several steps to take when starting a freight forwarding business in Canada in order to be compliant and successful. Here is a summary based on information from the Canadian International Freight Forwarders Association (CIFFA):
Business Registration: There are no specific licensing requirements for starting a freight forwarding company or Non-Vessel-Operating Common Carrier (NVOCC) in Canada. But you do need to register your business to operate commercial activities, usually as a corporation under the Canada Corporations Act. So, in order to do that, it’s better to consult with a law firm.
Carrier Relationships: Once you establish your business, you’ll have to build credibility with different carriers—land, sea, and air. some carriers have tight criteria before starting business with new freight forwarders.
CIFFA Membership: In order to qualify as a freight forwarder member of CIFFA, your business must have a strong background in the profession. Requirements such as the number of years in business, having employees properly trained in handling dangerous goods, and proof of Liability and Errors & Omissions (E&O) Insurances. Information on specific membership requirements can be found on the CIFFA website.
Professional Development: CIFFA provides several courses to help members grow in their industry knowledge such as:
Professional Freight Forwarding Courses/Designation: Best for launching or enhancing your career in International Transportation, Trade, Logistics & Supply Chain.
Dangerous Goods Training: Qualification to transport dangerous goods by all mode of transport.
Air Cargo Security Training: Covers Transport Canada’s Air Cargo Security program requirement.
These courses are vital to meeting regulatory and operational training standards.
You have to comply with the laws established by the Canada Border Services Agency (CBSA) This involves an acquisition of carrier code, eManifest relation, and reporting deadlines.
Challenges and How to Overcome Them
Economic Challenges
Global economic uncertainty presents an ongoing challenge for freight forwarders, as these conditions can affect demand and profitability. They should manage down the slope by negotiating better rates, optimizing routes and extracting other efficiencies. Strategies include consolidation of shipments, just-in-time inventory systems, and availing technology for cost savings. Overcoming economic uncertainty also means strengthening customer relationships and providing added-value services.
Political challenges
Freight forwarders can be affected by political issues such as trade wars and tariffs, policy changes, etc. Keeping abreast via trade publications, associations, and experts is critical.
Establishing relationships with decision-makers and having contingency plans will minimize disruptions. A diversified operation across several markets will mitigate the overreliance on a certain area, promoting more stability.
Actively participating in the process will assist the businesses in planning and adjusting according to political changes.
Technological challenges
In a fast-paced technological world, freight forwarders need to adapt to remain competitive. New tools need to be adopted with investment in software, building workforce skills, and lifelong learning.
Staying in touch with industry news, conferences and vendor updates helps to track emerging trends. This way, ongoing training keeps the employees updated on how to use new systems successfully.
Mastering agile and adaptive practices like proactive innovation adoptions, easier process implementations, and team feedback interactions will allow you to be more efficient and competitive within the evolving landscape of logistics.
Environmental Challenges
Freight forwarders are under increasing pressure to tackle their greenhouse gas emissions and improve their environmental footprint. It can be achieved through fuel-efficient transport, environmentally friendly packaging, and energy-efficient warehousing.
With customers becoming more focused on sustainability, it is also about adapting to new regulations on emissions and waste management. You can also contribute by partnering with green carriers, investing in technology, and collaborating with industry organizations to drive positive change.
Freight forwarders can remain competitive and at the same time, curb environmental woes by implementing sustainable solutions.
Competition challenges
Freight forwarding has also become a very competitive arena, as new generations of digital platforms and e-commerce players upend previous dock-and-bulk approaches. These companies use technology and data to streamline logistics and find competitive prices.
Telecom companies have lowered costs and improved customer experience while competing with smaller freight forwarders by quickly investing in digital capabilities, data analytics, or other automation and AI–based operations. This is why collaboration with partners as well as optimizing operations can also enable the costs to drop.
Two things you need to do in order to be successful, firstly, focus on defining your services, find out where you can find niche markets, and a more sophisticated innovation. To remain relevant in the ever-changing competitive environment, agility to pivot in the right direction will be crucial.
Common Freight Forwarding Mistakes to Avoid
Not Having a Clear Business Plan
The adage about failing to plan is the equivalent of planning to fail holds in the business world even today.
It is truer for freight forwarding, considering that freight forwarding is primarily about planning every step of the transportation and cargo management process.
While most are not even aware of ongoing legislative changes in the industry. The absence of a business plan in such cases can be detrimental for the business’s future, which brings the long-term viability of the business to question. You need a business plan that outlines the clear vision of the business, specifying the target market, segmenting the customers, prioritizing them, where to sell, highlighting the selling points, what are the goals and when are realistic. A well-defined business plan determines the goal for your business and creates the structure which the business will live within.
Failing to Prioritize Customer Service
In the people-centric business of freight forwarding, customer service matters. The most fundamental mistake made by many new freight forwarders is not giving importance to customer service right from the outset. Since logistics is all about providing the customer’s businesses the necessary support and seamless services, freight forwarders need to give utmost importance to ensuring best-in-class service levels and satisfying customer needs.
Neglecting to Properly Track and Manage Inventory
One very important aspect of the freight forwarding business that is often overlooked is inventory management. Inventory management and tracking is the most critical process for a freight forwarder to be able to ensure that a customer receives their shipment complete, on time, and without any errors Furthermore, a freight forwarder has to stay on top of things like the slowdowns at the ports, to be able to predict accurate transit times to the customer.
Not Staying Up to Date with Industry Trends
While focusing on the day-to-day aspects of the business, it is very easy to miss the larger picture and ignore macro-level commercial (e.g. European Summer Break)and geo-political developments that affect the industry. The freight forwarding industry is dynamic in nature and hence constantly evolving.
Freight forwarders should keep themselves updated on the latest trends and best practices to serve customers better and respond with alacrity to market developments.
This includes being aware of congestion and associated delays at destinations, informing customers of equipment shortages, suggesting innovative multi-modal products and routings, as well as incorporating technology to improve internal efficiency.
In recent years, freight forwarders have started relying on advanced technological solutions these technological solutions offer a raft of functionalities such as immediate quoting functionality and real-time visibility of shipment status.
Not Properly Managing Your Finances
Most freight forwarders possess operational expertise but lack the financial acumen to manage their finances and cash flows, resulting in the business facing a shortage of funds to finance daily activities, impacting the financial viability of the business.
Other potential challenges include actual expenses exceeding budgeted levels and debtors not paying within the agreed credit period.
A freight forwarder should manage the financial aspect effectively to ensure that all amounts due are received well in time, expenses are booked accurately and are within the initial budgeted estimates, cash flows are at healthy levels, and accounts are kept accurate.
Not Properly Training Your Employees
The real assets of a freight forwarding business are its employees. A freight forwarding business’s success or failure depends primarily on the knowledge and ability of its employees.
Inadvertent mistakes made by an untrained employee can have serious repercussions, ranging from revenue losses to lost goodwill to statutory penalties, besides the risk of claims from dissatisfied customers.
To avoid such costly errors, employees should be trained in all commercial and operational aspects of the business, as well as in soft skills such as negotiation and interpersonal relations.
Failing to Properly Handle and Resolve Issues
With the numerous stakeholders, human interactions, handover points, documentary requirements, and procedural compliances in the freight forwarding process, the probability of mishaps and issues occurring is high.
While issues are inevitable (e.g. Russia – Ukraine War), how a freight forwarder handles the issue is crucial to the success of the business.
The ideal manner to handle issues would be to respond immediately and take appropriate remedial measures and minimize the impact on the client and the freight forwarders’ reputation.
Not Leveraging Technology to Your Advantage
In the last few years, the freight forwarding domain has seen a technology-driven shift with the advent of software solutions that are purpose-built to address the specific needs of logistics and transport management operations. There freight forwarding systems are equipped with intuitive algorithms and innovative solutions to simplify every element of the freight fulfillment framework.
Wrap–up
The goods transportation industry is growing, And, A freight forwarding company is a great option to start. The only way to be successful is through licensing, building strong relationships with carriers, and industry experience. Adapting to challenges such as economic fluctuations and regulatory changes require flexibility, financial stewardship, and customer-centricity. By leveraging technology, optimizing operations, and investing in employee training, we improve our efficiency and competitiveness. The simplest rule – avoiding mistakes, like a weak financial planning or poor customer service, which will certainly help you to grow. Freight forwarders can position themselves to thrive, break into the global logistics market, and build a successful business by staying current, accepting innovation, and valuing dependability.
