They may sound the same but a freight forwarder and a freight broker serve different purposes. The logistics industry is made up of many key players to ensure that freight gets to its endpoint on time and in flawless condition. While the process of moving freight involves many steps, it is important to know the difference between the roles of a freight forwarder and freight broker.
Key Roles of Freight Forwarders and Freight Brokers:
The Responsibilities of a Freight Forwarder:
A freight forwarder has a very hands-on role in the shipping process. Freight forwarders are companies that specialize in arranging storage and international shipping of freight on behalf of their customers, the shipper. Although the freight forwarder does not actually move the freight itself, they arrange the transportation of the goods from one location to the next whether by land, water or air. In other words, the freight forwarder acts as an intermediary between the shipper and transportation services as they oversee the delivery of the freight to its final destination.
The freight forwarder negotiates rates with the shipping company and also prepares all the necessary documentation needed to transport and clear shipments. They typically ship freight under their own bill of landing and provide insurance services for their client to ensure if items do arrive damaged, they will be reimbursed.
The Responsibilities of a Freight Broker:
The freight broker, on the other hand, has a less hands-on job but still very important. Like any other broker, they act as a middleman by connecting shippers and carriers to one another. In exchange for their services, they receive a small commission of the total cost of the transaction. They are accountable for keeping a line of communication open to update the status of a shipment. Although the role of the freight broker is to bring both parties together, they are more than just the middle man.
Shippers usually work with freight brokers because they help them find reliable transportation for their freight while carriers work with freight brokers because they help them find additional loads besides the ones. Like freight forwarders, freight brokers also have more bargaining power to negotiate lower rates. Simply put, freight brokers help save carriers time finding quality carriers and helps carriers earn more money with quality loads.
One key difference between a freight forwarder and a freight broker is that the broker never has physical possession of the items being shipped so they are never directly responsible for it. A freight broker is able to run their business remotely unlike freight forwarders who need warehouses and people to oversee transportations up until its final destination.
Also, generally brokers do not own their bills of landing as some freight forwarders may. In the U.S., freight forwarder companies that work with domestic freight must register with the U.S. Department of Transportation’s Federal Motor Carrier Safety Administration.
Knowing the difference between a freight forwarder and freight broker is important if you are a carrier. It will help you make the decision on if their services will contribute to the betterment of your business.
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