Courier and Freight Shipping Explained

The distinction between courier vs freight revolves around the size, speed, and handling of shipments. A courier service specializes in the fast delivery of small to medium-sized parcels. 

These services are known for their door-to-door service, offering affordable solutions for delivering packages swiftly and securely. Couriers often utilize their own vehicles and staff to deliver packages, making them an ideal choice to transport time-sensitive goods.

On the other hand, freight shipping is tailored towards larger shipments that exceed the size and weight limitations of courier shipping. A freight forwarder and freight companies are adept at handling multiple shipments, utilizing a network of shipping couriers, freight services, and other transportation companies to move large quantities of goods from one location to another. 

This method is particularly beneficial for domestic and international transport of commercial goods.

For businesses and individuals with small to medium-sized packages that need quick delivery, courier services provide a reliable and efficient option. Whether it’s documents, small electronics, or other cargo that requires speedy mail. 

Conversely, freight shipping becomes the go-to option when dealing with huge amounts of goods or when shipping oversized items that regular courier services cannot handle.

Courier Shipping

This shipping method is facilitated by courier companies, which often provide a comprehensive range of services, including door to door delivery, express shipping, and tracking services. 

Courier services are designed to be fast and efficient, utilizing a combination of own vehicles and staff to manage the entire delivery process. This ensures that parcels are handled carefully and delivered directly to the recipient’s doorstep.

Benefits

The primary benefits of courier shipping include:

• Reliable Delivery Times: Courier services are known for their commitment to timely deliveries. With options for same day delivery, next-day delivery, and standard, customers can choose what best meets their timing requirements.
• Front Door Delivery: One of the most significant advantages of courier shipping is the convenience of door-to-door service. This ensures that packages are delivered directly to the recipient, enhancing the ease of receiving parcels.
• Increased Package Safety: Given the personal nature of courier deliveries, packages are often safer, reducing the risk of loss or damage during transit. Couriers typically handle fewer packages at once, giving each parcel more attentive care.

Drawbacks

However, there are some limitations to courier shipping, such as:

• Weight Restrictions: Courier services usually have strict limits on the size and weight of parcels they can handle. This makes it less suitable for large shipments or bulkier shipments that exceed these restrictions.
• Cost Variability: While courier shipping can be cost-effective for small parcels, the cost may significantly increase for heavier or overnight shipments, making it less economical for certain shipping needs.

Freight Shipping

A freight company transports large shipments, bulkier shipments, or commercial goods over land, sea, or air. 

This method is suitable for transporting large quantities of goods that are too big or heavy for courier shipping. Freight shippers can be broken down into LTL (Less Than Truckload) for smaller freight loads or FTL (Full Truckload) for larger quantities that require a whole truck. 

Freight forwarders and freight forwarding companies play a crucial role in this process, coordinating the logistics of shipping large volumes of goods and navigating through the complexities of domestic and international transportation.

 Benefits

The benefits of freight shipping include:

• Handling of Large Shipments: Freight shipping is designed to accommodate large quantities of goods, making it ideal for bulkier shipments and commercial goods.
• Cost Efficiency for Large Loads: On a per-unit basis, freight shipping can be more cost-effective for large shipments, especially when utilizing LTL shipping for loads that do not require a full truck.
• Comprehensive Services: Many freight forwarding companies offer additional services such as warehousing, cargo insurance, and customs brokerage, facilitating a smoother shipping process for large shipments.

Drawbacks

Despite its advantages, freight shipping also has potential downsides, such as:

• Complexity: The process of shipping large volumes of goods, especially internationally, can be complex and requires navigating various regulations and documentation.
• Longer Delivery Times: Depending on the mode of transportation and distance, freight shipping may have longer transit times than courier services.
• Minimum Shipment Requirements: There might be minimum shipment requirements, especially for LTL shipping, making it less flexible for smaller volumes that don’t meet these criteria.

 Situations Best Suited for Freight Shipping

1. Large Volume Shipments: Ideal for shipping large quantities of goods or bulky items that exceed courier size and weight limits.
2. Commercial Goods Transportation: Perfect for businesses moving inventory in bulk, especially for international trade.
3. Cost-Effectiveness for Heavy Shipments: More economical for large or heavy shipments where cost per unit is a concern.

Situations Best Suited for Courier Shipping

1. Small to Medium-Sized Parcels: Best for personal or business shipments that are too small to meet the freight minimum requirements.
2. Door-to-Door Service: Ideal for those requiring convenient delivery directly to the recipient’s address without the need for additional handling.
3. Tracking and Security: Perfect for valuable items that require detailed tracking and a higher level of security throughout the delivery process.

Conclusion

The choice between freight and courier shipping ultimately depends on the specifics of your shipment, including size, weight, urgency, and cost considerations. 

Freight shipping is typically best for larger, heavy equipment that does not require rapid delivery, offering cost savings for heavy or large-volume shipments. 

In contrast, couriers focus on smaller, time-sensitive parcels that benefit from fast transit times, detailed tracking, and direct delivery. 

Each method has its unique benefits, ensuring that you have the information necessary to confidently choose the most suitable option for your shipping needs.

“Freight forwarders orchestrate the movement of goods,” says Richard Patry, vice president, managing director, Canada, with DHL Global Forwarding.

Among other responsibilities, forwarders can act as intermediaries between the many parties involved in international supply chains, coordinate transportation modes, manage documentation, and help to “de-mystify” the complexity inherent in international trade.

For instance, some companies have diversified their international supply chains in what’s sometimes referred to as China Plus One. They continue to source from China, while seeking suppliers in other countries. This reduces the risk of relying so heavily on vendors in one country, but it also adds complexity.

“Many companies don’t have full teams to manage the complexity, so they have a greater need for freight forwarders,” says Lauren Pittelli, principal with Baker Logistics Consulting.

Domestic Freight Forwarding Business Grows

While most freight forwarding activity focuses on international shipments, a growing segment is geared to domestic shipments and over-the-road services. One reason is the increased activity in nearshoring and reshoring. The Reshoring Initiative reports that 364,000 jobs due to reshoring and foreign direct investment were announced in 2022, up 53% from 2021.

With supply chain visibility becoming more critical, so has collaboration among shippers, suppliers, freight forwarders, and logistics partners, as well as the application of digital technologies, says Matt Goker, CEO with ATA. Through technologies like artificial intelligence, the Internet of Things, and blockchain, freight forwarders that offer digital platforms can provide shippers with real-time visibility and market intelligence to inform decision-making.

By implementing application programming interfaces (APIs), freight forwarders can retrieve real-time data—such as information on potential obstacles from port congestion or weather-related events—from third parties. They then can determine how best to adjust to the changes.

Here’s a look at a few successful freight forwarder partnerships that provide shippers with innovative solutions, relevant advances in technology, and productive collaborations.

Dermavant and Hellmann Worldwide Logistics:
48 Hours to Product Distribution

Hellmann Worldwide Logistics helped Dermavant Sciences ship to customers within 48 hours after FDA approval of its VTAMA cream.

About 48 hours after Dermavant Sciences received approval from the U.S. Food and Drug Administration (FDA) to provide VTAMA (tapinarof) cream 1% in the United States, the company was shipping the product from its U.S. distribution centers into pharmacies and patients’ hands.

This feat typically takes companies three months after FDA approval, says Chad Eastman, director of global logistics with Dermavant. VTAMA cream is the first novel chemical entity approved for psoriasis in the United States in the past quarter-century, the company reports.

The rapid distribution was made possible through the Pre-Launch Activities Importation Requests (PLAIR), which enabled Dermavant to import VTAMA cream into U.S. distribution centers for staging, ahead of FDA approval.

Dermavant worked with the FDA to be granted the ability to import under the PLAIR program. Once it was granted, Hellmann Worldwide Logistics assisted in the shipping and importation clearance of VTAMA cream into the United States.

“Shipping to our customers within 48 hours of FDA approval is an incredible feat,” Eastman says, noting that VTAMA cream, like all medical products, must comply with stringent temperature and other controls while it’s in transit.

Behind the launch was more than one year of planning, as well as close integration between Dermavant and Hellmann. While waiting for final FDA approval, both Dermavant and Hellmann prepared a detailed playbook that would guide the launch.

The partnership between the two companies started in late 2021. “We quickly aligned on shared interests,” Eastman says.

Dermavant was looking for a partner that takes a “white glove” approach to logistics and could design a best-in-class shipping structure. Hellmann brought a deep understanding of healthcare logistics, a strong global network of products and services, and the distribution practices and policies to help Dermavant comply with the myriad regulations that govern cross-border shipments of healthcare products.

While all medical products must comply with rigorous safety requirements, “Dermavant’s launch processes and requirements are industry leading,” says Chris DiBernardi, director of business development healthcare with Hellmann.

The playbook documents the rigorous risk mitigation processes and protocols Hellmann and Dermavant jointly follow. This includes, for example, the processes to follow if a truck breaks down or if any products fall outside the temperature controls during transportation.

Through its Smart Visibility solution, Hellmann leverages 5G technology to provide full, real-time visibility from dock-to-dock or port-to-port on every shipment’s temperature, location, and security across all modes of transportation.

“You turn the transmitter on and can see real-time shipment location and conditions inside the container. Smart Visibility also has the capability to track carbon dioxide emissions and provide KPI dashboards and reports,” DiBernardi says.

Should any deviations from established parameters occur, both companies know and can immediately implement the protocols in place to address them. “It provides a level of surety,” he says.

The Smart Visibility system also offers robust reporting tools that enable shippers to analyze and improve performance. As Dermavant continues to compile this data, it’s starting to focus on the next phase of its logistics processes. For instance, it’s considering potential alternative transportation modes that could be more sustainable, while maintaining product quality and integrity.

The tight communication and integration with Hellmann’s customs brokerage team, as well as its involvement in planning, also contributed to the successful product launch. While many operations and brokerage groups operate in disparate realms, having them work together was more effective. “We don’t encounter challenges because all the documentation was reviewed in advance by their teams,” Eastman says.

“Dermavant offers a white-glove, high-touch customer focus,” he says. “This requires extensive preparing and planning and aligning with partners like Hellmann that share our commitment.”

Kaiser Aluminum and SEKO Logistics:
An Innovative Shipping Approach

A strong partnership with its forwarder enabled Kaiser Aluminum to move its aluminum mill products despite international shipping disruptions.

Prior to the international shipping crisis of several years ago, Kaiser Aluminum Corporation, a leading producer of semi-fabricated aluminum products, enjoyed “very set lanes and an extremely stable shipping environment,” says Karen Sales, planning project facilitator and outbound logistics manager for the Trentwood, Washington location. “That almost all broke overnight.”

Sales reached out to more than 60 contacts, searching for a firm that could offer a cost-effective way to move products across North America and on to other parts of the world. Most providers pointed to the upended state of international shipping and said there was nothing they could do. “SEKO Logistics was the first one to try to figure out what we could do together,” Sales says.

SEKO suggested trucking shipments from Washington state north to Vancouver, Canada, and then using Canada Rail to move them across the country. It was an option SEKO had begun evaluating during the West Coast port strikes. “It was part of our fallback plan,” says Paul Burkhart, managing director for SEKO.

The Seattle area had been cut off from ocean routing to Europe and South America for roughly two years. Burkhart and his team had been looking for a solution for smaller volumes, as some of SEKO Logistics’ customers were losing business due to the lack of shipping options.

SEKO had been using truckers to help move smaller container volumes to Canada. The company then added the ability to move flatbeds to Canada. “We thought, ‘Let’s give it a try,’” Sales says.

“It takes a leap of faith to move freight into another country before we export to a third country,” Burkhart says. The solution requires thorough documentation and knowledge, as well as a strong partner and a top-notch information system to track shipments.

Kaiser Aluminum and other shippers can track their shipments through SEKOHarmony. “We use it daily,” Sales says.

In fact, Kaiser has decided to continue to send shipments from the United States through Canada, due to the stability and efficiency of the route, Sales notes.

Dukal and Mallory Alexander: A Healthy Future

Healthcare professionals continue to confront product delays and shortages, as well as supply chain disruptions. At the same time, a lack of visibility to the disruptions often leaves healthcare organizations without the insight they need to proactively address these challenges, says Amanda Frisbie, marketing communications manager with Dukal LLC, a developer and manufacturer of healthcare products.

In addition to the impact on patients’ treatments, product stockouts, delays, and cancellations stress the financial state of healthcare organizations, many of which are already under strain.

Dukal, through its partnership with Mallory Alexander International Logistics and the development of Dukal InSight, is helping to change this.

The team at Dukal believes better health leads to a better future, and that an effective supply chain has a role to play in achieving this.

“Manufacturing and supply chain excellence allows us to mitigate disruptions and create solutions that better serve the needs of healthcare professionals and patients,” says Siobhan Kelly, vice president of supply chain.

One key to Dukal’s efforts is its partnership for the past several years with Mallory Alexander. Together, the companies developed Dukal InSight, which provides intelligent, real-time visibility from each product’s point of purchase until it’s delivered.

“We’re able to build an intelligent and proactive supply chain,” Kelly says. “We can see and respond to disruptions before they impact patient health or healthcare organizations’ revenues.”

The system also facilitates on-time and accurate product delivery, as well as advanced product assignment.

“Mallory’s order management process brings horsepower to Dukal’s InSight solution,” says Daniel Woodcock, vice president of administrative services with Mallory Alexander. This not only boosts efficiency, but also becomes a selling point, as customers today—and particularly those in healthcare organizations—require detailed and granular visibility.

At the start of production, Dukal InSight assigns each order a product allocation. Because the system provides visibility to inventory on hand, inventory in production, and inventory in transit, as well as each customer’s requested delivery date, it can assign inventory in ways that make the most sense.

For example, if the system shows inventory on hand, as well as a shipment that’s slated to arrive in the next day or two, Dukal might assign the inventory in transit to an order with a deadline that’s one week away, knowing it will arrive in time. The on-hand inventory can remain available for new customer orders that have tighter delivery deadlines.

Having this visibility also enables Dukal to focus on exceptions, such as unforeseen production delays.

It’s not only Dukal that can leverage this information. Mallory’s work to enable electronic data interchanges allows Dukal to communicate this data to its customers.

The shipment data collected by Dukal InSight extends to the item level and is communicated to customers with open orders through weekly automated emails. Customers receive a spreadsheet with order milestones, such as the date and time a sales order is received, the date it departs the port of origin, and when it arrives at a U.S. port.

They can upload the information into their systems and convert it to their preferred format.

“Offering customers full visibility means they can be proactive and maximize efficiency,” Frisbie says.

Thinking Outside the Box

By working with Mallory Alexander, Dukal was able to “think outside the box,” Kelly says. While this project began with the goal of making the order management process easier, it evolved to a system that leverages intelligent visibility to mitigate supply chain disruptions and better serve customers—offering Dukal a competitive advantage.

“Now, we’re able to see the supply chain end to end and can take action,” she adds.

The solution continues to evolve. “We’re continuing to add information and insights,” Frisbie says, “and provide them for our customers.”

5 Things to Look for in a Freight Forwarding Relationship

Here are 5 factors to consider when evaluating prospective freight forwarders.

1. Your organization’s size. “While the biggest shippers often get dedicated staff, smaller shippers can get lost in a big shop,” says Lauren Pittelli of Baker Logistics Consulting.

2. Customer service. Ask about the process if something goes wrong. For instance, how quickly can you connect with a person?

3. Visibility to first generation data. Freight forwarders should be able to access automated feeds from carriers and government agencies. If they can’t and instead, have to retype data, the risk of errors and delays increases.

4. Consolidation and deconsolidation services. The ability to consolidate shipments boosts transportation efficiency.

5. Expertise. The freight forwarder should possess in-depth knowledge of regulations, custom procedures, and other complexities of international trade.

A freight broker acts as a middleman between a shipper and a carrier. A freight broker’s job is to find available carriers to transport the shipper’s freight. Once they find a carrier, the broker negotiates rates and manages the shipment from start to finish.

A forwarder specializes in arranging the freight logistics of shipments, including everything from booking cargo space on ships and planes to preparing customs documents. A forwarder does not typically own a fleet of trucks or transport vehicles.

So, which one is right for you? It depends on your domestic and international shipping needs. Here’s a closer look at the definition, benefits, and differences between a freight broker vs. freight forwarder.

What Is a Freight Broker?

A freight broker is a company that connects shippers with carriers. They act as a middleman, working to find available carriers and negotiate rates. The broker is responsible for the entire shipping process from start to finish, including arranging transportation, managing to prepare paperwork, improving delivery accuracy, and tracking the shipment.

Benefits of Using a Freight Broker

There are several benefits of using a freight broker, including:

Cost Savings

Freight brokers have relationships with multiple carriers, allowing them to negotiate the best rates for their clients and save money. In some cases, brokers may even be able to offer discounts and provide more bargaining power.

Convenience

Freight brokers handle all aspects of the shipping process, including finding available carriers, arranging transportation, and preparing customs paperwork. This process can be a time-saving convenience for busy shippers.

Expertise

Freight brokers are experts in the shipping industry. They know the ins and outs of arranging transportation and can provide valuable advice and guidance

What Is a Freight Forwarder?

A freight forwarder specializes in arranging the logistics of shipments, including everything from booking cargo space on ships and planes to preparing customs documents and foreign commerce. A freight forwarder does not typically have its own fleet of trucks or transport vehicles.

Benefits of Using a Freight Forwarder

There are several benefits of using a freight forwarder, including the following:

Global Reach

A freight forwarder has the connections and resources to ship freight worldwide, which can be a valuable resource for companies that need to ship internationally and handle foreign commerce.

Customs Expertise

Freight forwarders are experts in customs regulations. They can help ensure your shipment complies with all applicable laws and regulations.

One-Stop-Shop

Freight forwarders offer a one-stop shop for all your shipping needs, from booking cargo space to preparing customs documents.

Experience

Freight forwarders are experts in the shipping industry. With years of experience, they know how to handle international movements and can offer great tips along the way.

Differences Between Freight Brokers and Freight Forwarders

Now that you know the definition and benefits of freight brokers and freight forwarders, let’s examine the critical differences between the two services:

Services Provided

One of the most significant differences between a freight broker vs. freight forwarder is their scope of services. Freight brokers typically only arrange transportation and manage the shipping process. In contrast, freight forwarders offer a wider range of services, including booking cargo space and preparing customs documents.

Carrier Relationships

Another difference is the relationship freight brokers and freight forwarders arrange with carriers. Freight brokers typically have relationships with multiple carriers, allowing them to shop for the best rates for their clients.

In contrast, freight forwarders typically only work with a few select carriers that provide some advantages regarding shipping reliability but may only sometimes result in the best rates.

Pricing Structure

A freight brokerage typically charges a percentage of the shipment’s total cost. In contrast, a freight forwarder usually charges a flat fee for services.

Billing

Another difference is how freight brokers and forwarders bill for their services. Freight brokers typically bill their clients after delivery. In contrast, freight forwarders usually require payment upfront before beginning work on a shipment.

Shipping Experience

Finally, a freight broker typically has less experience than a freight forwarder because freight forwarding is a more specialized service. As a result, a freight forwarder can offer more expertise and guidance when arranging transportation services and managing the shipping process. This includes export documents, legal liabilities, legal responsibility, arranging storage, ocean freight forwarders, and more.

Now that you understand the differences between freight brokers and freight forwarders, you can decide which service is right for your business. A freight broker may be a good option if you need help arranging transportation and managing the shipping process.

However, freight forwarders may be better if you need a more comprehensive range of services, such as customs expertise or one-stop-shop convenience.

What Is the FMCSA?

The Federal Motor Carrier Safety Administration (FMCSA) is a government agency that regulates trucking companies in the United States.

The FMCSA started in 2000 due to the Motor Carrier Act of 1980. It aims to reduce accidents, injuries, and fatalities involving large trucks and buses in the freight business. To achieve this goal, the agency enforces safety regulations and provides education and training resources for truck drivers and bus operators.

How To Become a Licensed Freight Broker or Freight Shipper

To become a licensed freight broker or freight shipper, your company must first register with the FMCSA online through their website or by mail. Once registered, you will be assigned a unique identification number (an MC number).

After registering and being assigned an MC number, you can apply for a license. There are two types of licenses that you can use: a broker license or a shipper license.

A broker license allows you to arrange transportation and manage hauling freight on behalf of your clients. A shipper license will enable you to handle shipper’s cargo.

To apply for a shipper license, you will need to submit an application form along with a fee of $300. After your application goes through, you will be issued a license that must be renewed every two years, with a renewal fee of $300.

The FMCSA also requires a freight brokerage authority and a freight shipper to maintain specific insurance coverage, so brokers must prepare cargo and liability insurance policies with minimum coverage levels of $5,000 per occurrence. Likewise, shippers must have liability insurance with a minimum coverage level of $5,000 per occurrence.

In addition to these requirements, freight brokers and freight shippers must also comply with the hours-of-service regulations set by the FMCSA. These regulations limit the number of hours drivers can work a day and week.

The FMCSA provides various resources to help freight brokers and shippers comply with their regulations. These resources include educational materials, compliance reviews, and an online complaint filing system.

Surety Bonds and Trust Funds

Brokers and forwarders must post a BMC-84 surety bond as part of their licensing requirements. The bond amount must be at least $75,000, and a company that the FMCSA licenses must issue the bond.

In addition to the surety bond, brokers must maintain a BMC-75 trust fund. This fund can cover expenses related to a freight shipment, such as storage fees and transportation costs.

A company must maintain the trust fund in a segregated account at a financial institution. The broker must have sole control over this account, and the funds in the account can only go toward expenses related to freight shipment.

The FMCSA provides information on surety bonds and trust funds on its website.

Final Thoughts

Freight brokerage is an important and necessary part of the shipping industry. It involves a complex process that requires knowledge of the freight shipper and broker industries and government regulations from the FMCSA. 

Licensing is required to become a freight broker or forwarder, and many companies offer these services. If you’re interested in acquiring a license, it’s important to do your research and find the best company for you.

This article will provide an in-depth look at these concepts, including definitions, examples, and steps for recording these costs in your financial statements. By understanding the difference between freight in and freight out, you can accurately track your expenses, make informed decisions, and ultimately boost your business’s bottom line.

What is Freight In?

Freight in describes the cost incurred by a business for shipping raw materials or goods into their storage facility or production. It is a direct expense incurred as part of the business’ daily operation and recorded as a debit in the inventory records. When a business needs to import items or raw materials to meet manufacturing demands, freight in can be relatively high.

The cost of freight in is a portion of the cost of goods sold that include the cost of raw supplies, shipping fees, and other transportation-related costs. The shipping company will directly bill the freight charges, which will reflect as an operating expense in the business’ financial statement. Freight in must be accurately recorded in the correct period to ensure that the business’ financial statements accurately reflect the cost of goods sold.

How Do You Record Freight In?

Recording freight in is a necessary step to manage your spending and keep track of the cost of goods sold. The steps to record freight are as follows:

1. Determine the freight charge amount: This should cover all expenses, such as shipping, handling, and other supplemental costs incurred in bringing raw materials to the business.
2. Debit the inventory account: The freight charge should be deducted from the inventory account to reflect the cost of the received raw materials.
3. Credit the cash or accounts payable account: The freight charge, which represents the payment paid to the shipping business, should be credited to the cash or accounts payable account.
4. Update the inventory records: An updated inventory record is essential to reflect the price of the raw materials received, including the freight charge.
5. Record the freight charge on the financial statements: The freight charge needs to be listed as a direct cost under the cost of goods sold on the income statement. It should also appear as a decrease in the inventory account on the balance sheet.

What is Freight Out?

Freight out is the expense incurred by a business to send finished goods to customers. The sales department is responsible for paying this operating charge, commonly reflected as a credit in the inventory records. The freight out cost is a direct freight expense that the company incurs regularly and is typically expressed as a percentage of product sales.

The freight out cost can vary greatly depending on the type of goods shipped, the shipping company or courier used, and the shipment’s destination. Freight out is typically billed by the shipping company and is reflected in the company’s financial statements as a selling expense.

To accurately record freight out, it is crucial to understand the FOB (Free on Board) shipping point or FOB destination concept, which determines when ownership of the goods is transferred from the seller to the buyer.

How Do You Record Freight Out?

The process of precisely documenting the freight cost incurred by your company includes recording freight out. The steps to record freight out are as follows:

1. Determine the freight charge amount: This should cover all expenses related to getting final products to clients, such as shipping, handling, and other ancillary fees.
2. Credit the inventory account: The freight charge must be applied to the inventory account to reflect the cost of the completed items sold.
3. Debit the cash or accounts receivable account: The freight charge should be deducted from the cash or accounts receivable account since it represents the client’s payment.
4. Update the inventory records: The cost of the finished goods sold, including the freight charge, should be updated in the inventory records.
5. Record the freight charge on the financial statements: The freight charge must be shown as a selling expense on the income statement. If the customer has not yet paid the freight charges, it should be shown on the balance sheet as an increase in accounts receivable.

Examples of Calculating Freight Out

Let’s say a company has sold $10,000 of finished goods to a customer, and the freight charge to ship the goods is $500. The accountant would credit the inventory account with $500 to reflect the cost of the finished goods sold to determine the freight out. The $500 would then be deducted from the cash or accounts receivable account by the accountant as it represents the customer payment.

The cost of the finished goods sold, including the $500 freight fee, would be reflected in the inventory records after they have been updated. The $500 freight charge would then be shown as a selling expense on the income statement by the accountant. If the customer has not yet made payment for the freight charges, it would also appear on the balance sheet as an increase in accounts receivable.

FAQs

There are often inquiries made regarding freight costs. We’ll answer some of the most frequently asked questions about freight in and freight out.

Who pays the freight in freight out?

Depending on the conditions set forth by the buyer and seller, one party may be responsible for paying the freight in or out. The buyer often covers freight out, whereas the seller typically covers freight in. Nevertheless, depending on the particulars of each transaction, this may change.

How do you know if it is freight in or freight out?

Freight in refers to the cost of transporting raw materials to the business, while freight out refers to the cost of shipping finished goods to customers. You should consider the direction of the goods and the person paying the transportation costs when determining whether a cost is a freight in or freight out.

Wrapping Up Freight In vs Freight Out

Understanding the difference between freight in and out is crucial to evaluating a company’s financial situation. Businesses can enhance their bottom line by measuring and recording freight costs effectively and making educated decisions regarding their shipping prices.

This article has shown what freight in and freight out are, how to record these expenses, and provided examples of how to calculate them. Whether you are an accountant, business owner, or anyone involved in managing a business’s finances, it is essential to understand these concepts and how they impact your financial statements.

Getting there, however, can be challenging, whether the move involves people or products. “Hawaii is smack-dab in the middle of the Pacific and surrounded by water,” says Troy Pagaduan, director of operations for Logistics Plus Hawaii.

“As an island state, Hawaii is the most isolated population center on earth,” says George Pasha, IV, president and chief executive officer with Pasha Hawaii, a leading domestic ocean shipping company. “The closest landmass is California, which is about 2,400 miles away.”

As a result of its distance from other population centers, about 85% of goods used in Hawaii are imported, and 91% of the imports come through the state’s commercial harbor system. “It takes a tremendous amount of planning and expertise to sustain Hawaii’s supply chain without disruptions,” Pasha says.

Adding to the challenges, storage capacity on the islands is limited, so most shipping needs to be done on a just-in-time basis. An effective just-in-time approach requires constant communication between shippers, carriers, and others involved in logistics.

Shipping to Hawaii: Cost and Transit Time

Most shipments to the Aloha State travel by ocean, because it’s more economical than air transit. Overnight shipments are doable, but costly.

Ocean transit time from the West Coast is about four days, says Phil Hinkle, general manager with SeaWide Express, a supply chain solutions provider. Of course, some shipments first need to get to the West Coast. For those originating in eastern United States, shippers typically need to add four or five days of travel time.

Another fact to keep in mind is that the ocean carriers sail to Hawaii from the West Coast twice a week. Miss a sailing date, and you need to wait for the next one. “This puts transit time from origin to destination at about 10 to 14 days for most goods,” Hinkle says.

Floating Inventory

Some higher-volume shippers use what they refer to as “floating inventory,” says Chris Palmer, director of the Hawaii trade lane with Lynden, a logistics solutions provider.

Given the lack of warehouse space, businesses ordering goods to fulfill inventory needs typically factor in 8 to 10 days transit time from their source to their facility. Disruptions, whether from weather or mechanical problems, can easily upset this scheduling, Palmer says.

Along with the U.S. Postal Service, major integrators support Hawaii, including UPS, FedEx, and DHL, for both mainland and international packages. U.S. passenger carriers fly most of the air cargo to Hawaii.

Once shipments arrive in Honolulu, which is where most shipments from the mainland United States arrive, some need to go to the other islands. Most travel by barge, says James P. Beidleman, president and chief executive officer with Honolulu Freight Service. This adds another day or two of travel time.

Hawaii’s unique location offers a logistical upside. “Vessels have been calling on Hawaii for 100 years,” Palmer says. “Shipping is always a challenge, but shipping to Hawaii is now a specific science.”

Island Regulations: What You Need to Know

While getting goods to Hawaii takes time, the documentation required is generally no different than for shipping goods to any other state. However, shippers of fish, wildlife, agricultural products, and hazardous materials typically must comply with more stringent requirements, says Randy Tutor, vice president of strategic accounts with Approved Freight Forwarders.

The Jones Act also impacts shipments to Hawaii. Also known as the Merchant Marine Act of 1920, the Jones Act requires, among other provisions, that U.S.-flag ships conduct shipping between U.S. ports. To qualify, a vessel must meet several requirements, including that it was built in the United States, and owned by a company with 75% U.S. ownership.

Hawaii’s Foreign Trade Zone No. 9 (FTZ9) can offer shippers savings through duty deferral and avoidance, and the ability to avoid some state and local taxes, among other benefits. Since 1966, FTZ9 has handled nearly $60 billion of goods.

Despite its isolation, Hawaii hasn’t been immune to the challenges that have impacted supply chains in other parts of the country. Labor is one. “Hawaii has one of the lowest unemployment rates in the nation, and labor remains a big challenge,” says Kane McEwen, president, DHX-Dependable Hawaiian Express.

Hawaii’s topography, while stunning, can also present logistical challenges. Most trailers on the island measure 40 feet long, rather than 53 feet. The reason? Narrow streets and a lack of loading and unloading docks, as well as forklifts. “Many locations are tight,” McEwen says.

Packaging Shipments

Because most freight to Hawaii moves over the ocean, proper packaging is critical. “It’s not a smooth ride,” Hinkle says. Machinery and equipment that might travel easily over the mainland with little protective packaging likely will need to adhere to International Packaging Guidelines for ocean travel.

The packaging that might suffice for, say, a grocery pallet traveling 50 miles from a distribution center to a store might not hold up for a trip of several thousand miles and multiple handlings.

“You need to make sure it’s packed properly,” Beidleman says.

“It’s important that products are packaged to withstand transit, and not just from the mainland origin to the outbound port,” McEwen says. “They must also be packaged strong enough for the roughly 2,600 miles over the water to Hawaii. There is considerable movement inside the containers while on the ocean vessel.”

At the same time, because shipping rates to Hawaii are typically calculated based on cubic feet rather than by weight, shippers will want to minimize unneeded packaging.

Given that shipping is done just-in-time and with limited storage capacity on the islands, shippers should reserve their bookings as early as possible, Pasha says. Making the reservation helps activate the primary and ancillary logistics required for seamless deliveries.

The state of shipping to Hawaii continues to evolve. For example, the Kapalama Container Terminal project, a new container terminal scheduled for completion in January 2024, features an 84-acre cargo yard and 1,800 linear feet of new berthing space.

Technology also is evolving. “Ocean carriers and logistics providers are upgrading their systems to offer more automation and visibility,” says Mike Kraft, vice president, Pacific, with Honolulu Freight Service.

As the U.S. government looks to the Pacific to counter China’s dominance, shipments to Hawaii may increase, Palmer says. It’s likely material and equipment will travel through the state to locations in Guam, the Kwajalein Atoll, and the Philippines, among other locations.

Several leading service providers can help shippers move freight in and out of Hawaii with ease.

Approved Freight Forwarders: Local Experts with Global Knowledge

Approved Freight Forwarders brings 30 years of experience serving the Hawaii market. Among other services, it provides ocean freight consolidations, air freight, and over-the-road transport of goods and commodities, as well as project management, white-glove delivery, assembly and installation, drayage, pickup and delivery, consolidation and deconsolidation, and inventory management.

“We offer a great deal of knowledge of this market and have many experienced employees on our team,” says Randy Tutor, vice president, strategic accounts.

In working with clients, Tutor and his colleagues first engage and identify their pain points. “We use this information, complemented by our experience, to work together to come to the best choices and drive improvements,” he adds.

Through its daily dedicated air freight service to Hawaii, Approved Freight Forwarders operates as an indirect air carrier, using passenger flights to move cargo. This approach offers more flexibility than is typically the case when using an asset-based carrier, given the large number of passenger flights that take off to and from Hawaii each day.

From its consolidation center in southern California, Approved Freight Forwarders moves all types of goods in approximately 300 to 400 shipments per day to Hawaii. Its warehouses span more than 300,000 square feet and can accommodate a diverse set of logistics needs. Employees load freight with extra caution, keeping the company’s damage and claims rate to one of the lowest in the industry, Tutor says.

Leveraging its Local Footprint

To handle freight once it arrives in Hawaii, Approved Freight Forwarders operates its own terminals and trucks on Oahu, Maui, and Kuai and in Hilo and Kona on The Big Island.

Approved is the only freight forwarder in Hawaii with five terminals on four islands. The company offers drayage and inter-island shipping, as an example, moving daily merchandise from Honolulu to Maui. “The process works like a hub and spoke system and is done via a set barge schedule,” Tutor says.

Because Approved Freight Forwarders has its own fleet of trucks and workforce on the islands, it has less need to engage third parties. This gives it more control over service and costs, Tutor says.

Approved Freight Forwarders uses Wise Tech Global, a robust system for managing the many steps in its freight forwarding operations, including receiving, cross docking, loading, tendering, and delivering. “All the steps are managed in our system at a high level of efficiency,” Tutor says. Shippers can access all shipment data through the company’s online portal.

Clients engaging in major construction projects and complex distribution models can turn to Approved Freight Forwarders to help them manage the transport and delivery of materials and equipment, including those that are over-sized.

“Managing projects and replenishing goods twice per week is part of the expertise we offer,” Tutor says. “We can provide the right product in the right place at the right time.”

Each Approved Freight Forwarders client is matched with an employee who is dedicated to their account. “We call it the Customer Experience department,” Tutor says. “Rather than trying to connect with various departments to find an answer, customers can call one person.

“We work hard to understand our clients’ business, and to become trusted advisors and identify ways where we can add value,” he adds.

DHX-Dependable Hawaiian Express: The Dependable Difference

DHX-Dependable Hawaiian Express has operated in the Hawaii logistics sector for nearly 43 years, giving it one of the longest tenures among freight forwarders in Hawaii, says Kane McEwen, president.

Among other services, DHX can book full container loads (FCL) and less-than-container loads (LCL). They can coordinate their customers’ shipments to travel throughout the continental United States, to and from Hawaii, and to and from Guam.

Along with shipping from four West Coast ports—Long Beach and Oakland, California; Portland, Oregon; and Seattle, Washington—DHX offers flexible sailing cut-off times and consistent transit times tailored to customers’ expectations and particular shipping requirements.

Seamless Coverage

With their asset-based operations on Oahu, Maui, and the Island of Hawaii, as well as their partnerships with delivery agents in Hilo and the island of Kauai, DHX can provide customers with seamless coverage to all major points throughout Hawaii.

“We load containers directly to all ports, reducing handling and transit time,” McEwen says. DHX is committed to delivering within 48 hours of container availability.

On the islands, DHX has supported many construction companies that operate in confined areas and lack the space to hold materials for any length of time. DHX provides warehousing at all its Hawaiian Island terminals, Guam, and in Southern California.

“When timelines are critical, DHX excels in providing solutions,” McEwen says. “The value of being fully asset-based provides our customers transparency and visibility of their product from origin to destination.”

DHX also provides specialized logistics services, like frozen or chilled transport, as well as project cargo management support. “We provide detailed solutions based on the customer’s needs,” McEwen says.

The average tenure of DHX employees is 22 years. To retain this level of expertise, DHX aims to lead the industry in pay, and offers competitive retirement savings and healthcare benefits.

In providing all modes of services, DHX has maintained a focus on long-term sustainability. DHX has been a certified member of GreenWay Miles for more than a decade. During this time, they have reduced facility emissions by more than 75%. The company’s facilities in Hawaii, Guam, and Los Angeles are completely solar-powered, and management is evaluating the use of electric vehicles.

By leveraging its expertise, dedicated employee base, transportation assets, and use of technology, DHX has helped numerous companies open locations in the Hawaiian Islands.

“We walk through the process with our customers and draw up a timeline to address their specific needs for moving construction material and other goods,” McEwen says. “We focus on dependability and execution that exceeds our customers’ expectations.”

Honolulu Freight Service: A Tradition of Superior Service and Cost-Effective Solutions

During the nearly 90 years Honolulu Freight Service (HFS), a multimodal freight forwarder, has been in business, managing shipments to Hawaii has advanced tremendously, says James P. Beidleman, president and CEO.

The company started when his grandfather, Paul Beidleman, resurrected a trucking company, Yuma Merchants Express, moving loads between Yuma, Arizona, and Los Angeles.

When some truckers didn’t want to deliver cargo headed for Hawaii to the docks in southern California, Beidleman started a new company, United Drayage, to handle the work. This occurred more than 20 years before Hawaii became a state.

Today, HFS, a successor company, provides partial and full container load services and offers short-term warehousing. Through its carrier agreements, including for less-than-truckload, truckload, and rail, HFS can pick up and deliver dry freight from across the United States, and to and from Hawaii.

HFS also offers refrigerated pickup and delivery from three West Coast mainland ports to Hawaii, and can handle chilled and frozen shipments to all the islands. If a shipment needs to be rushed to the islands, the company also provides air service for customers.

“We’ve built decades of trust and enjoy many long relationships,” Beidleman says.

Because it operates its own Oahu and Maui trucking services with more than 100 power units along with Oahu warehousing services, HFS can ensure optimal transit and delivery times. It also brings decades of experience in handling over-sized, over-height, and over-wide cargo.

Honolulu Freight Service Honolulu, the company’s terminal, is located less than two miles from major steamship lines and carriers. The 60,000-square-foot facility offers 14 dock-high doors, ramp access, and quick access to the freeway. The operations department runs 24/7, and customer service is located on-site.

HFS has the volume to direct load shipments that are traveling from the mainland to Honolulu and then to the outer islands. Shipments stay in their containers and aren’t handled again until they get to their destination island. Direct loading reduces touch points and adds only one or two days of travel time.

As a privately held company, HFS has “the flexibility to invest to meet customers’ expectations, without being beholden to shareholders or private equity investors,” Beidleman says.

Expanding Capabilities

In particular, the company is focusing on technology and infrastructure. It’s upgrading its technology to offer more capabilities, focusing on customer-centric visibility into their supply chain as well as gaining operational efficiencies across the entire company. Customers can be confident they will continue to receive the highest quality service they expect from HFS.

With its purchase of the former headquarters of Love’s Bakery, HFS gains approximately 100,000 square feet of space, including 25,000 square feet of chilled and freezer space.

“This will allow us to consolidate all our Oahu operations and offer all logistics services from a single building,” Beidleman says.

Along with its technology and facilities, HFS’ people remain key. “You can have the greatest software and infrastructure, but it comes down to people,” Beidleman says.

The list of employees who have been with the firm for several decades continues to grow. “We are very blessed in that we continue to create an environment where we get great people,” he adds.

Logistics Plus, Inc.: A 21st Century Logistics Company™

A leading provider of transportation, warehousing, fulfillment, global logistics, business intelligence, technology, and supply chain solutions, Logistics Plus can call on 1,000-plus employees in more than 45 countries around the globe. The company has traveled quite far since Jim Berlin founded it in 1996, with three employees, one customer, and a $120,000 purchase order.

In August 2022, Logistics Plus announced the opening of an office located in Honolulu, Hawaii, specializing in the movement of project cargo, international freight, warehousing, furniture, fixtures, and equipment, and other supply chain-related projects. It is the 16th state in the United States with a Logistics Plus office or warehouse.

Troy Pagaduan, a 20-year veteran in the transportation industry, manages the Hawaii office. “We offer 3PL, 4PL, and project management services,” he says. “We’re a solutions provider, and we figure out what steps need to happen to move shipments to Hawaii or elsewhere in the United States or the world.”

Among other capabilities, Logistics Plus can handle project work, freight, and over-dimensional shipments, including those coming from foreign countries.

Addressing Customer Needs

“When meeting with a client, we try to strategize,” Pagaduan says. Along with handling typical shipments, Logistics Plus also manages shipments of larger items, like furniture and fixtures for hotel renovations, the equipment needed for solar projects—a growing focus in the state—and massive transformers.

It also handles consolidations of products from the West Coast, along with air freight forwarding.

Logistics Plus has long focused on reducing its environmental footprint. It joined the U.S. Environmental Protection Agency SmartWay Initiative in 2010 and has since received SmartWay approval for 13 consecutive years.

Through its partnership with Ocean Integrity, an organization dedicated to making the oceans safe for all life above and below the water for generations to come, Logistics Plus assists with multiple aspects of supply chain management. This includes the transportation of collected plastic debris, assistance with international regulations, cross-border trading, and navigation of customs and global trade compliance.

To date, through the financing and logistical support it has provided, Logistics Plus has helped remove more than 3.5 million kilos of ocean plastic waste, or the equivalent of about 175 million plastic water bottles.

“Handling logistics in Hawaii is unique, but it’s possible to identify and then choose from multiple options to find the best solutions,” Pagaduan says. “We have a great team with a lot of experience. We can look at all angles of a challenge and figure out a solution.”

In the Hawaiian language, “Ohana” means family and taking care of each other. “All of us at Logistics Plus believe in and practice these traits,” Pagaduan says.

Lynden: Innovative Transportation Solutions to Hawaii

For nearly four decades, Lynden has offered transportation services in the Hawaii market. “We’re stalwart and we’ve been there a long time,” says Chris Palmer, director, the Hawaii trade lane with Lynden.

Lynden offers both air and ocean freight forwarding services, as well as regularly scheduled barge service. Given Lynden’s multimodal capabilities, customers can optimize their time and money by shipping via air, land, ocean, or some combination.

“You pay for the speed you need,” Palmer adds.

Through its partnerships with two major steamship lines, Lynden offers four ocean shipment options each week from the West Coast. Sailing time is typically five days, port-to-port. Shipments can be full container loads or less than container loads.

Aloha Marine Lines, also part of the Lynden family, operates barge service from Seattle. The barge sails several times per month. It takes longer but costs less than many other options, and provides a great advantage for shippers who can plan their projects or inventory replenishments with longer lead times.

Lynden also handles daily air freight shipments, with direct flights from all West Coast cities, as well as from the Midwest and East Coast.

Offering a Range of Options

“Through our multiple transit options, Lynden offers the equivalent of priority, standard, and economy options,” Palmer says. “Whether you need it there next-day or have more time, we can do it.”

Lynden can move shipments to Hawaii from just about any place in the United States or around the globe. It serves all main islands in Hawaii, offering door-to-door service.

Shippers can mix transport modes to gain the right blend of cost and service. Say a shipper has 10 pallets of cargo, and three need to get to Honolulu the next day, while seven can arrive over the next few weeks.

Lynden can work with the company to arrange for the three pallets to fly, and for the other seven to travel over the ocean by ship or barge, so they don’t need to spend a long time in a warehouse. This is key, as the biggest driver of logistics cost in Hawaii—even more than freight—often is property or land for warehousing.

When its shipments travel from Long Beach to Hawaii, Lynden uses its own containers. “We’re the only known operator to use shipper-owned containers (SOC) in Hawaii,” Palmer says.

Within their containers, Lynden uses the Kaptive Beam decking system. “The system helps mitigate damage and allows us to use more space within each container, which keeps costs down,” Palmer says.

The Kaptive Beam system also enables Lynden to more easily mix different commodities. “You can put two heavier pieces of freight on top of each other, and still know they’re both protected,” Palmer says.

Lynden was working with a construction supply company that moves construction materials, appliances, and other products. During the pandemic, when purchases of appliances spiked, the company began to run out of warehouse space in Hawaii.

“We worked with them to bring in appliances through ocean less-than-container load shipments and provided warehouse space to help with their space constraints,” Palmer says.

Through its “One Lynden” approach, clients can make one call, and Lynden will assemble the various departments and capabilities needed to address any challenges.

If a shipper needs to move oversized equipment from, for instance, Texas to Hawaii, Lynden will use its fleet of trucks to move the equipment to the West Coast and then transfer it to an ocean vessel. Once it arrives in Hawaii, the process reverses. “Our One Lynden strategy means one call can solve it all,” Palmer says.

Pasha Hawaii: Family Culture and a Hands-on Approach

As a world leader in integrated transportation and logistics services, Pasha Hawaii offers specialized container, vehicle, and oversized cargo ocean transport, making it easier to ship all types of cargo between the mainland United States and Hawaii.

Pasha also provides total logistics management from origin to destination, utilizing time-tested systems and leading-edge technology.

“Our personalized customer service differentiates us,” says George Pasha, IV, president and chief executive officer.

Pasha Hawaii, an independent operating subsidiary of The Pasha Group, is one of the nation’s leading domestic ocean shipping companies serving Hawaii from the continental United States, and a trusted partner for many leading retailers, manufacturers, and U.S. government agencies. The company operates a fleet of Jones Act-qualified vessels and operates out of multiple port terminals. It provides reliable containerized and roll-on/roll-off cargo services that leverage its ocean transportation and inland distribution capabilities to deliver vital goods.

The company’s link to Hawaii started during World War II, when a Pasha operation in San Francisco began to offer storage and truck-away services to troops as they were deployed to Hawaii. In early 1999, the company recognized the need to provide a new and competitive service to move rolling stock between the Pacific Coast and Hawaii.

This sparked the creation of Pasha Hawaii and the construction of its first vessel, the M/V Jean Anne, the first and only modern pure car/truck carrier (PCTC) in this trade lane, and the only PCTC vessel built in the United States.

Primary Solution Provider

Pasha Hawaii has evolved into a primary transportation solution for a diverse group of clients. “The company’s ongoing investments in infrastructure, including our terminals and vessels to support Hawaii’s growth, help set us apart,” says George Pasha, IV.

Pasha Hawaii is expecting the second of its two new Ohana Class container ship vessels to be delivered in 2023. The first arrived in 2022, operating on liquified natural gas (LNG) from day one—the first LNG-powered vessel to fuel on the West Coast and serve Hawaii.

The second vessel will also operate on LNG and offer weekly California-Hawaii express service, with additional capacity for weekly volumes in the high-demand 45-foot dry and 40-foot refrigerated markets.

The completion of the Kapalama Container Terminal (KCT) on Oahu will significantly improve cargo handling productivity and capabilities and serve as the future home for Pasha Hawaii’s sister company, Hawaii Stevedores.

The $600-million public/private collaboration between the state of Hawaii, Hawaii Stevedores, and The Pasha Group (the parent company for Pasha Hawaii and Hawaii Stevedores) represents the single largest capital investment the harbor system has made.

KCT will serve as one of the state’s most efficient operating terminals, with an environmentally focused design incorporating state-of-the-art technologies, such as an electrified ship-to-shore crane, regenerative energy storage, and microgrid battery energy storage systems.

“KCT represents our commitment to continuously enhance customer satisfaction and experience by offering efficient, expedited service, while at the same time, being good environmental stewards,” George Pasha, IV, says.

“As a third-generation, family-owned company, our corporate culture encourages us to treat each other and our customers as an extension of our ‘Ohana’ or family,” he adds.

SeaWide Express: Service in Every Shipment

Launched in 2016, with the opening of operations offices in Commerce, California, and Fife, Washington, to support service to Hawaii/Guam and Alaska respectively, SeaWide Express is part of AJC Group, a $2.2-billion global food and logistics provider with more than 50 years of experience, including 30 in Hawaii.

“We saw a need in the Hawaiian and Alaskan markets for great customer service,” says Phil Hinkle, general manager. SeaWide Express prides itself on consistently returning quotes within one hour, with a goal of whittling that down to 20 minutes.

Hinkle and his colleagues started SeaWide Express from scratch. “We had no license, and no customers,” he recalls.
Over the past eight years, they’ve built the company into one of the strongest service providers to Hawaii. SeaWide is committed to the Hawaii market, and is aggressively looking to expand and grow, Hinkle adds.

Along with its employee base in Hawaii, SeaWide’s employees are located across the mainland United States. “A shipper on the East Coast can call us and they will get an answer, even if it’s the middle of the night in Hawaii,” Hinkle says.

SeaWide Express takes pride in its low claims ratio, Hinkle says. This is the result of both educating customers on how best to package their shipments, and the care the SeaWide team takes in handling its clients’ products.

“With each shipment we are given the opportunity to handle, we do our best to find the most economical and efficient way to transport it,” Hinkle says.

He and his colleagues will consider over-the-road, rail, air and ocean—or some combination of these modes—to identify the solution that meets the customer’s goals of timeliness and cost.

Recently, SeaWide Express, which operates a consolidation center in La Habra, California, opened a second Hawaii gateway, in its consolidation center in Fife, Washington.

Why Washington? SeaWide’s extensive analysis showed that for many shipments, inland transportation to the Pacific Northwest is less expensive than to southern California.

“With our system, we can plug in the origin and destination ZIP codes, and immediately review rates and inland transit times to both gateways,” Hinkle says. “Customers can choose the option that’s best for them.”

SeaWide’s information system provides shipment updates automatically. Customers can choose when to be notified—say, when a shipment is picked up, on the ocean, and/or delivered.

A New Dimension

Over the past year, SeaWide invested in automated dimensioning equipment. The equipment completes a three-dimensional scan of packages for consolidation. It documents the size, dimensions, and weight of each package, while built-in cameras record information such as barcodes, package condition, and placement within containers.

This data is saved and can be shared for review by customers, shippers, and carriers, helping to minimize claim issues. The equipment also “is a huge time saver,” Hinkle says.

SeaWide, via AJC Cares, their global charitable organization, is involved with Feed the Children, a nonprofit that delivers food and household essentials, offers clean water programs, and assists in times of disaster, among other services.
“We provide food, financial assistance, and logistical help,” Hinkle says.

Over the past eight years, Hinkle has often asked SeaWide’s clients what they like best about the company. “Their answer always is the customer service,” he says. “When clients call, someone answers; when they send an email, they get a response.”

Hawaii By the Numbers

Hawaii consists of seven inhabited islands—Hawaii, Maui, Lanai, Molokai, Oahu, Kauai, and Niihau. It also includes about 130 uninhabited islands.

Nine ports on six islands make up Hawaii’s commercial harbor system. Cargo originating from foreign and domestic ports first enters a cargo-handling terminal at Honolulu Harbor. Cargo destined for a neighboring island is transshipped through Honolulu Harbor and then to its final destination.

In fiscal year 2022, the commercial harbor system processed 1.7 million twenty-foot equivalent containers. Also during 2022, the system processed 4.9 million short tons of liquid bulk cargo, or the equivalent of about 36 million barrels of petroleum and chemical products, and nearly 3.4 million short tons of general merchandise and dry bulk cargo.

How a Multimodal Partner Keeps Supply Chains Afloat

By Kevin Kelly
President, Freight Forwarding Division
Odyssey Logistics

In an isolated shipping environment like Hawaii, experienced, local freight forwarding partners can be the difference between on-time deliveries and late shipments.

For years, many businesses operating on the islands have relied on a handful of providers to cover their supply chain needs across ocean, trucking, and rail modes. In recent years, however, the inefficiencies associated with stitched-together supply chain strategies have led to service disruptions.

Utilizing a multimodal partner with boots-on-the-ground experience lets customers leverage a much larger footprint. Consolidated shipping networks represent the key to addressing challenges in Hawaii. As businesses seek to future-proof their shipping strategies, aligning with a multimodal service provider will increase access to the end-to-end visibility and the capacity they need to move cargo on time and on budget.

Today, supply chain visibility and provider reliability matter more than ever. Odyssey can deliver the capacity and flexibility shippers need to succeed. Odyssey provides custom, end-to-end shipping solutions that grow with the customer—adapting to changing demands. From FCL, LCL, temperature-controlled, dry cargo, storage, ocean transport services to truck capacity, Odyssey’s complete multimodal service portfolio maximizes supply chain efficiency.

And Odyssey’s extensive network—including intermodal, truck, freight forwarding, consulting, warehousing, and distribution services—still sweats the details for each and every customer. That’s why we invested in local providers who have built their footprints on the islands and who bring the personalized service and one-on-one support our customers need to tackle supply chain challenges.

With the largest logistics network in Hawaii, it’s a win-win for customers who can capitalize on Odyssey’s footprint, without losing the powerful intangibles that come with working alongside local partners.

However, the industry still has a long way to go to capitalize on evolving technological advancements. Many organizations still rely heavily on inefficient manual processes.

The survey’s key findings include:

• Automation and digitization: 24% of respondents still use completely manual processes.
• Cloud: 49% are all-in on the cloud. The other half still host selected functions locally, putting them at risk.
• Priorities: The top three business concerns are customer retention, gaining new customers, and lowering costs/overhead. The top three IT investment priorities are tracking and visibility, general freight forwarding, and a tie between digital forwarding, rate management, and compliance.62% of respondents are looking to expand into new service offerings in the next 12 months. New territory coverage, warehousing, and last-mile delivery are the top priorities for expansion.
• Software market: Respondents want to see more use of AI in forwarding; 44% say that the market does not currently provide adequate capabilities in this area.
• Digital forwarding: 73% of respondents currently have a digital customer portal, but the features vary. Lack of budget and not wanting to change back-end systems are the biggest obstacles for companies without an online customer portal.
• RFQ efficiency: The average time to respond to an RFQ is 217 minutes, and the median is 30. The spread ranges from one minute to two full days.

Many companies employ third-party logistics services to handle the heavy lifting. That’s where freight forwarding comes into play. It is essential to supply chain management because it involves transporting and delivering shipments.

Read on for everything you need to know about freight forwarding: what it is, how it works, and the pros and cons involved.

Freight Forwarding Meaning

Freight forwarding refers to the coordination of transportation. It is a service that assists with shipping goods from one place to another through a single or multiple carriers. The service may utilize air, marine, road, or rail transportation.

Freight forwarders are an alternative to shipping goods yourself. The service providers offer the space needed to ship the items and help with documents, customs clearance, and insurance.

Freight forwarding streamlines the shipping process and helps you avoid international restrictions and tariffs. It also allows businesses to focus on other aspects of their operations.

The Stages of Freight Forwarding

The first step to initiate a freight forwarding project would be to determine your company’s needs and what you are shipping. Here is a list of the six stages that will help you choose the best logistics services for your business:

Export Haulage

Export Haulage refers to transferring goods from a shipper’s premises to a freight forwarder’s warehouse. It is the first step in freight forwarding and involves packing, booking, and preparing cargo for international shipment.

The export haulage’s responsibility falls on the shipper or the consignee, depending on the agreement. For example, the contract may state that the consignee assumes responsibility for the shipment from the shipper’s address.

If it is your responsibility, you’ll need to ensure your products are packaged correctly and delivered to a freight forwarder for international transportation. You can opt for a local transporter to ferry your shipment to the freight forwarder.

Items Checkpoint

Items Checkpoint is the second step in the freight forwarding process. Upon receipt, international freight forwarders check the shipment’s contents to ensure that they are the same as what was originally shipped. 

The items checkpoint helps ensure that the items are packed, labeled, and ready to travel. This process involves scanning your products for export compliance and making sure your shipment’s components are not prohibited.

The freight forwarders will check for any damages and missing parts. They will notify you of any changes to the original plan and offer advice on options to fix any problems. You will likely need to replace the shipment if there are any issues.

Export Customs Clearance

Export Customs Clearance refers to getting samples approved by the customs authority. Each country has its own set of international regulations and requirements. 

The required documentation differs depending on the country to which you’re shipping. Most freight forwarders have customs specialists on staff who oversee your product’s export. 

Some countries require customs brokers to undergo training and obtain special licenses to handle international shipments. They’ll ensure no violation or regulations occur during the export process.

Import Customs Clearance

Import customs clearance refers to getting your international shipment approved by the customs authority in the receiving country. Governments have regulations to ensure you have all necessary import licenses, permits, and certificates.

In some cases, freight forwarders may handle this step for you. They can help you with the documentation required to ensure your shipment is legally allowed into the country.

Final Destination Arrival and Handling

The final destination arrival concerns handling and transferring your shipment to the freight forwarder. Before you can ship your goods, you must arrange a secure and protected delivery location. 

Your forwarder will pick up your shipment from the final destination or arrange a transportation company to ensure the safe arrival of your parcel. After it arrives, they’ll unload it and prepare it for shipment.

Import Haulage

Import Haulage is when your shipment arrives at its place of delivery. It refers to transferring goods from international freight forwarders to the client.

Import haulage is crucial in freight forwarding because it ensures that your shipment and its components arrive in one piece. This responsibility falls on your freight forwarder, but they can hire a local transporter to handle the process for you.

Pros of Using Freight Forwarding Services

The many benefits of using freight forwarders include:

Experience and Accountability

Freight forwarders offer experience and accountability. These service providers will help you with any shipment issues, even those with international shipping regulations. 

Access to Global Partners

Freight forwarders provide access to global partners. They have experience in various industries, including manufacturing, fashion, and food. They can assist you with importing or exporting your goods or provide you with contacts and access to foreign distributors.

Cost-Effective

Freight forwarders offer discounted rates for the international transportation of your products. They have relationships with carriers, allowing them to negotiate lower transport costs for their clients.

Accurate Documentation

Through experience and training, freight forwarders provide accurate documentation for customs regulations and cargo insurance. Many freight forwarders have customs specialists who can oversee your product’s export from the shipper’s address.

Compliance

The freight forwarder ensures your shipment adheres to the documentation regulations for importing and exporting your goods. They can help ensure that the products meet any requirements specified by the customs authority in the country you’re shipping them to.

Technology: Cargo Tracking

Technology is also an essential component of forwarding services. With modern-day technology, you can track your shipment throughout its route and always know where it is. 

Versatility and Flexibility

Freight forwarders provide flexibility and versatility to clients. You can choose from various options for your shipment, including transportation options. Your freight forwarder also can recommend the best configuration for your shipment to ensure its safe transport and timely arrival.

Cons of Using Freight Forwarding Services

Freight forwarders come with their own set of drawbacks, including:

Reliance on Forwarder Assistance

Shippers may develop an unhealthy relationship with their freight forwarders. Instead of creating the needed competencies and resources to be an independent shipper, you’ll likely develop a dependence on your freight forwarder.

Price Gouging

Freight forwarding is not cheap, and it’s prone to price gouging. The price of your shipment will depend on the distance it travels, weight, size, and destination delivery site. When demand is high, you’ll likely pay more. 

Possible Product loss

Freight forwarders sometimes lose shipments. If your container load is sent to the wrong address or delivered to someone else, you could lose a lot of money, and it may damage your reputation.

Industries That Use Freight Forwarders

Several industries use freight forwarders, including:

Manufacturing 

Manufacturers of various products use freight forwarders to get their products to the market. They may have distributors in multiple countries to distribute their products, but they can’t ship the cargo themselves due to legal and logistical concerns. 

Pharmaceutical

Drug manufacturers and distributors employ freight forwarders to get their products overseas. The transportation process and delivery of drugs are sensitive because international governments treat them as controlled substances.

Medical

Medical companies use freight forwarders to send medical equipment overseas. These companies must ensure that their products deliver in original packaging, have proper documentation and insurance information, and reach the correct location within the specified time frame. 

E-commerce

The e-commerce industry has grown significantly over recent years with increased internet usage. Retailers use freight forwarders to handle the international shipping of their products. They have many distribution centers and need to ship products that have a high degree of quality and must arrive on time.

Construction

Construction projects may require the import of materials that are not available locally or the export of products created for specific overseas projects. These materials may be sensitive or hazardous, so the project owner may hire a freight forwarding company to handle the shipping details.

Fashion

Fashion companies use freight forwarders to get their products overseas to foreign markets. These companies have complex supply chains that need balance for cost-effective transfer and competitive pricing of the products.

Final Thoughts

Freight forwarding has changed significantly in the last few decades. They’re now a mainstream business that many clients use for specific shipments, notably those involving international shipments.

But remember, when the market inevitably flips and spot rates spike, this approach creates challenges to establishing profitable contracts with the carriers you steer away from now.

Alternatively, if you move premium, perishable, or otherwise sensitive products, building long-term partnerships within your carrier network will help you reap the quality, cost, and service benefits that come with them. Although this may be a more tedious and complex approach, it will likely be the most advantageous for your business in the long run.

The complexity inherent in most supply chains demands a blend of both strategies, so harness this moment to identify the right mix for your business. Although it’s wise to maintain a fluid freight management approach, I advocate building long-term carrier partnerships.

I’ve seen carriers reward shippers that honor contracts in tight markets with exceptional rates and service when demand swings again. I recommend you play the long game by maximizing your existing contracts and strengthening your carrier relationships to position yourself for future success.

Playing the Long Game

Only you understand the unique needs of your business, but these tactics can help both transactional and partner shippers adapt to market volatility and win the long game.

• Patience pays dividends. Contract rates likely will remain higher than spot rates until peak season. Push your carriers to over-deliver on service, and share your plans with them so they can prepare to offer lower rates and high service levels to stay competitive.You can simultaneously siphon contract freight to your spot arena to reap savings and drive competition. This strategy sets up discerning shippers for whatever the future brings.
• Don’t rush to RFP. If you just wrapped up an RFP, wait until peak season to rebid or renegotiate to ensure you get the best deal while contract rates continue to dip in your favor.
• Connect with carriers. If you pay premium contract rates, connect with your carriers and see what more they can offer while respectfully reminding them that a rebid might be on the horizon. Don’t settle for lower rates either—challenge carriers to find ways to deliver additional value for your business.
• Window shop: Proactive, service-oriented carriers may try to get ahead of potential rebids by offering lower rates; take the meeting, but hold out if you anticipate even better rates coming with peak season.
• Lean on your broker. Smart brokers strategically straddle the spot and the contract market so they can find low-price options that will drive down your overall network rates. Asset-based carriers also can do this—especially if they don’t factor in fuel—but they may take longer and provide fewer options.

The bottom line: Don’t fear this—or any—market shift. Instead, recognize market shifts for what they truly are—an opportunity to improve your current position and fortify for the future.

• 28% of respondents say they plan to shift volumes away from air freight in favor of other transport modes, largely to secure capacity and lower rates after largescale disruption in the airfreight market.
• 64% plan to make more use of the spot market to better manage surge capacity and secure more favorable rates.




• 25% will use more digital logistics offerings in the future, indicating that the need for greater visibility, reactivity, and flexibility is accelerating digitization.
• 76% say the crisis has increased their demand for real-time visibility.
• 64% plan to introduce more supply and flowplanning flexibility as a result of the pandemic.
• 56% say they plan to improve their business continuity planning for future crises.
• 80% will continue to integrate new technology into their supply chains in the future, and plan to use a mix of off-the-shelf and in-house solutions.
• 26% expect logistics service providers to offer their own technology solutions.
• 67% say that sustainability will be a key factor in the development of their future supply chain.

Lack of understanding: More than half of freight forwarders say they have no knowledge or need to improve their knowledge of the government’s plans for the border after the Brexit transition period.

About 70% say they understand the customs procedures required to import goods into the U.K. from the European Union after the transition regarding the Border Operating Model, but less than half say this is the case with safety and security declarations.

Regarding exports from the U.K. to the EU, 79% say they have no understanding of import procedures in individual EU member states.

Communication: Forwarders say they want more information from the government—86% need more information on import/export customs procedures, 82% on safety and security declarations, and 85% on the Smart Freight system. More than 50% say they haven’t received direct communication from the government on the EU Exit process and the end of the transition period.

Bright spot: 88% of freight forwarders say they are aware of the government’s Customs Intermediary Grant Scheme to assist with training, new technology, and recruitment costs, and 72% say they intend to or already use the scheme.