Estimated reading time: 4 minutes
Supply chain challenges are a common issue for many companies, especially in today’s climate. These challenges include but are not limited to high costs, lack of visibility and transparency, and compliance issues.
Many companies are utilizing freight forwarders to solve these supply chain challenges and more due to their unique ability to find creative solutions.
In this article, our logistics experts answer the question of what is a freight forwarder, the difference between asset-based and non-asset-based, and how to evaluate if a freight forwarder is right for you.
Table of contents
What is a Freight Forwarder?
A freight forwarder is a company that helps other companies transport products from point A to point B through various modes of transportation as quickly and economically as possible.
In most cases, freight forwarders are non-asset-based, which means they can utilize various companies with transportation assets instead of relying on their own. A freight forwarder does not own assets. Instead, it uses a network of partners from different companies to transport products from one destination to another.
According to most definitions, a Logistics Service Provider (LSP) is a company that provides logistics services as an asset-based carrier. Asset-based carriers own trucks, trains, vessels, airplanes, and other equipment. Ultimately, their goal is to fill their assets instead of another carrier. However, an LSP can be considered a freight forwarder whether it’s asset-based or not because both companies provide logistics services to their customers.
Want questions to ask when vetting a freight forwarder?
Click here to download your list!
Asset-Based Versus Non-Asset-Based
As we described above, an asset-based LSP is a company that uses equipment it owns to transport products from one place to another. An example of an asset-based LSP is FedEx. Everything that is transported through FedEx travels through its network of planes, trucks, and personnel.
On the contrary, a non-asset-based freight forwarding company uses a network of partners to transport shipments for its customers. Using a non-asset-based freight forwarder can seem uncomfortable for some companies because they may not know how they operate.
The thought of cargo going through various partners to move from China to Texas can seem daunting. However, they have the flexibility of using different carriers based on transit time, location, product, and mode. A non-asset-based freight forwarder can then find custom solutions for its customers.
The Benefits of a Non-asset-based Freight Forwarder
In today’s market, companies need the flexibility to get their shipments to their destinations on time and undamaged. Using the cheapest freight forwarder to move cargo from one place to another is no longer an acceptable option for companies navigating the current supply chain challenges that we face today.
Thankfully, a freight forwarder specializes in finding alternative ways to get shipments to their destinations through various modes, which allows them to excel in times like these.
If a freight forwarder has a quality partner network, they have the flexibility to cater to customers’ specific needs. For example, when the steamships were stuck at the ports in California, we found alternative options for customers to avoid getting stuck in the port with the other steamships. That’s where freight forwarders will help their customers with expertise and understand the best solutions based on the market conditions driving them.
Another example when the west coast ports were standing still was that we started running ocean freight from China into Mexico and then had it shipped through the Texas border to the customer. That’s not a typical route, but it’s a prime example of finding creative solutions when the supply chain is complex.
How to Evaluate a Freight Forwarder
The biggest differentiators in freight forwarders come down to what they specialize in. One of the ways you can evaluate a freight forwarder is by asking them for references based on the services you need. Our priority is to be open and transparent by allowing companies to speak to our clients.
Our clients will tell the story of how their clients benefit from our services, so the ability to provide references is of paramount importance. If freight forwarding companies are unwilling to share their references, it’s a sign that they are not confident in their requested services.
Knowing what criteria are used to enforce compliance with your internal processes and customers is also critical. Partners should be held accountable if a critical incident could cause failure. Conversely, rewarding partners who help achieve successful outcomes is also essential. These tips will help you evaluate a freight forwarding company and ensure the best possible relationship.
About Pegasus Logistics Group
We redefine the standards for time-definite transportation. We provide custom logistics solutions and outstanding experiences by investing resources into team members, technology, and a superior transportation network. This approach frees us from an asset-heavy environment beholden to the push-pull mentality of multi-location facilities with significant footprints in every market.