What Does Freight In Logistics Mean? How It Works

1. What is freight in logistics?

Freight in logistics entails the supervision and coordination of cost-effective operations for the transportation of goods. It demands a blend of logistics expertise, human resources, and knowledge to guarantee the smooth transit of goods between carriers and shippers.

A prime example is international maritime shipping, which accounts for approximately 90 percent of world trade; without these logistical mechanisms, such operations would simply not be possible.

The Seven Rs of Logistics outlined below embody the fundamental principles necessary for strategically orchestrating the elements and functions vital to the effective operation of the international maritime shipping industry. These principles include:

• The Right Product
• The Right Place
• The Right Price
• The Right Customer
• The Right Condition
• The Right Time
• The Right Quantity

In practice, ensuring the safe and timely delivery of the right cargo to its intended destination is a paramount concern. The freight management logistical systems are a combination of mechanical and organic components. Each must contribute in perfect synchronicity for their own supply chains to run smoothly.

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2. Basic operations of Freight in Logistics

In their most basic form, freight in logistics activities include:

• Establishing contact, choosing, and collaborating with carriers and transportation companies.
• Negotiating the terms, conditions, and fees for goods transportation.
• Preparing labels and relevant documentation associated with shipment transportation.
• Scheduling carriers for timely pickup of shipments.
• Optimization of the most efficient mode of transportation, routing, and load balancing.
• Monitoring the movement of goods throughout the supply chain.
• Collaborating with customs brokers to guarantee compliance.
• Securing necessary insurance coverage to protect goods in transit.
• Managing freight claims.
• Handling the reception and processing of invoices related to the shipment of goods, ensuring accurate and timely payments.
• Continuously exploring optimal methods to enhance delivery performance, reduce time and costs, and minimize environmental impact.

3. What are the 3 types of transportation most popular?

Freight shipping is the transportation of commodities, goods, and cargo. For the majority of freight, the three primary modes of transportation are land, sea, and air, each encompassing various methods of transportation:

3.1 Road 

Trucks serve as the most common mode of Road Transport freight across the supply chain, given their flexibility and accessibility to diverse destinations. Other modes of transportation may not always be suitable for reaching all needed destinations.

Trucks are frequently used to deliver big quantities of products because of cost and accessibility.

There are different approaches to truckload shipping:

• Full Truckload (FTL) or Truckload (TL): This requires the entire 53 feet of trailer space to transport freight.
• Less Than Truckload (LTL): This term denotes a situation where the available freight doesn't occupy an entire truck, requiring only a portion of a trailer. LTL shipments share truck space with cargo from various shippers, leading to multiple stops or transfers throughout the journey.
• Intermodal (ITML): This method entails transporting freight using multiple modes of transportation without the need to open the container.For instance, freight arriving by ship may be transported to a warehouse by truck without opening the container, showcasing the intermodal approach.
• Chassis: This term refers to a technique for transporting ocean containers over the road. A chassis is a specialized trailer required for transporting container shipments by truck. Utilizing a chassis incurs a chassis fee, and this aspect is directly associated with intermodal modes of transportation.
• Multimodal (ML): This term denotes the use of multiple modes of transportation after the container is opened, and the goods have been transferred to another method of transportation.

Due to the continuous oversight of one driver along a designated route, full truckload shipments are generally more secure against theft or damage. FTL typically boasts faster delivery times compared to LTL shipping, as it follows a direct route from the point of origin to the destination. Conversely, LTL shipping often takes a longer duration, encompassing a hub-and-spoke network.

Intermodal transportation is commonly utilized for extended journeys, such as the conveyance of goods from a port.

3.2 Sea 

In the present-day global economy, sea freight accounts for the majority of global trade transportation, mainly due to China's continual dominance in manufacturing. This is a common method of transportation for heavy and oversized goods, as well as perishable items, moving from one continent to another.

For businesses dealing with heavy and continuous cargo, this is the optimal solution. However, the limitation of sea transport is that the delivery time is slow, usually taking several days to several weeks depending on the distance traveled.

3.3 Air Transport

In the realm of global trade, sea freight takes precedence. For cross-border shipments, land transportation is commonly employed, especially for last-mile logistics. Air freight, on the other hand, proves most beneficial for high-value and time-sensitive cargo, particularly in industries such as automotive, aerospace, electronics, and pharmaceutical/healthcare.

Chosen for its swiftness, dependability, and enhanced management of inventory carrying costs to tackle concerns such as shrinkage, perishability, and insurance, air freight provides an array of shipping alternatives:

• Next Flight Out (NFO): Cargo is scheduled on the earliest available flight.
• Consolidated: Cargo is combined with shipments from other shippers to form larger loads, reducing shipping expenses. This option is favored by larger freight forwarders, and inadequate quantities of commodities ready to ship can lead to delayed consolidation.
• Deferred: Typically the lowest-cost freight option, though it comes with a trade-off of longer shipping times. This alternative is frequently employed for cargo that is less valuable and non-perishable.
• Air Charter: Mainly utilized for sizable and/or highly valuable cargo, given the elevated fuel costs and restricted aircraft availability.

Air freight is typically utilized for distinct categories of cargo, encompassing, but not confined to:

• Perishable goods
• Live animals
• Top-priority cargo demanding immediate delivery
• Extremely high-value cargo, particularly when enhanced security is required
• Small quantities of goods or cargo with a low volume-to-weight ratio.

4. Who are the key players involved in shipping freight?

4.1 Freight Forwarder

Freight forwarders play a crucial role in consolidating freight in logistics services. They gather and merge smaller shipments, and may also break down larger shipments into more transportable units. Additionally, aside from consolidation, freight forwarders frequently manage warehouse storage agreements and supervise the shipping of freight on behalf of their clients. Responsible for the transportation, consolidation, and cargo insurance, they assume control of the cargo, utilizing their own Bill of Lading (BOL).

Freight forwarders coordinate the movement of goods from one destination to another, utilizing various carriers, including air, ocean, road, and rail. Operating similar to "travel agents" for freight, freight forwarders specialize in coordinating the entire process for shippers, from storage to freight transportation, without physically moving the cargo. Serving as agents for freight shippers, they act as effective intermediaries between transportation service providers and shippers, negotiating terms of service and pricing. 

Leveraging their expertise in supply chain logistics, freight forwarders alleviate stress for shippers by providing guidance and handling logistics arrangements, including packing, warehousing, customs, and beyond. Leveraging their negotiation skills, extensive experience, and established relationships with shipping carriers, freight forwarders often secure exclusive pricing that shippers may not access independently.

Freight forwarders offer a diverse range of services, including but not limited to:

• Air transportation
• Ocean transportation
• International export and import documentation.
• Inland conveyance by road or rail from the point of origin to the point of destination.
• Container tracking
• Customs clearance
• Cargo insurance
• Negotiating freight rates
• Ensuring accurate labeling of cargo to adhere to established requirements and standards
• Providing support in packaging products for shipping, transportation, and delivery
• Customs compliance
• Warehouse storage

While freight forwarders manage transportation and logistics arrangements, it's crucial to understand that they are not accountable for shipping delays. Delays may arise from different factors, such as weather conditions, unforeseen route adjustments, port delays, and mechanical breakdowns. Some freight forwarders may offer additional services, such as warehouse storage, cargo insurance, tracking of cargo, and handling dangerous goods.

Drawing on their expertise and cultivating robust relationships and networks with seasoned shipping carriers, transportation and logistics providers, and other industry professionals, freight forwarders enhance their ability to move freight punctually. Whether focusing on the transportation of specific cargo types or coordinating the movement of diverse goods, these elements are crucial factors to consider when choosing a freight forwarder.

Freight forwarders commonly use their own bills of lading or waybills. Internationally, they are frequently known as "destination agents," offering document delivery, freight deconsolidation, and collection or delivery services.

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4.2 Freight Brokers

Freight brokers serve a unique function in the logistics industry, distinct from freight forwarders. Operating as transportation intermediaries, they act as connectors between shippers and carriers. Importantly, freight brokers do not take possession or responsibility for the freight, absolving them of liability for claims related to cargo damages.

Due to their capacity to generate higher business volumes for carriers than individual customers, freight brokers secure lower rates, passing these savings on to shippers. This arrangement proves advantageous for both parties. Shippers benefit from the enhanced negotiating power of freight brokers, while carriers save time and resources otherwise required to secure high-volume clients. Freight brokers earn a commission, calculated as a percentage of the total transaction cost, for their services.

Freight brokers usually:

• Manage the negotiation of freight rates
• Optimize transportation routes
• Arrange transportation through outsourcing
• Optimize shipping logistics
• Process insurance claims for shippers

Freight brokers play a crucial role as intermediaries between shippers and transportation carriers, facilitating seamless communication and coordination. They understand shipper needs, wants, and expectations, effectively communicating these to transportation providers to ensure successful cargo delivery. Freight brokers may also work as consultants with shippers, assisting in optimizing the best method for shipping goods.

Using a freight broker offers several advantages:

• Reduced transportation costs
• Ability to enhance capacity or resources
• Optimized transportation routes and modes, potentially saving time

4.3 NVOCC

While shipping carriers own the modes of transportation, they typically do not directly handle the arrangement of freight movement beyond port-to-port or airport-to-airport transfers. Instead, carriers frequently depend on third parties to sell and coordinate bookings on their vessels. In cases of very large companies or enterprises, direct services may be offered by the carrier.

Some companies, not classified as carriers, have the ability to sell bookings using a special legal arrangement known as a non-vessel-owning common carrier (NVOCC). In this arrangement, after reaching an agreement with a shipping line, an NVOCC can ensure the shipment of a designated number of units each year and is offered preferential rates by the shipping line. NVOCC operations play a significant role in container shipment trade, serving as major facilitators and handling issues related to bill of lading as well as overseas distribution.

4.4 Shipping Carriers

Carriers, owners of various transportation modes including planes and ships, typically engage third-party companies to facilitate transport bookings. In instances involving very large companies, direct collaboration with shipping carriers is common.

4.5 Customs Brokers

Specialists in customs filing and clearance, and customs brokers play a pivotal role in the logistics chain. They can either work with freight forwarders as agents or provide in-house customs brokering services.

4.6 Third Party Logistics Providers (3PLs)

Shippers frequently choose to outsource specialized services rather than manage them internally. 3PLs play a crucial role in handling tasks such as warehousing, distribution, fulfillment, and other related services.

4.7 Shippers

Shippers are the owners of the freight, representing the party who needs the products transported.

5. How freight forwarders play their part in logistics?

Freight forwarding, or a freight forwarder, is also referred to as a forwarder. This term denotes individuals or companies engaged in the business of providing forwarding and transportation services.

For example, Son Nam Company in Ho Chi Minh City wants to import a shipment in a 40-foot container, consisting of equipment from the United States to Vietnam. The transportation company EGF (Forwarder) will arrange a transportation contract to receive and deliver this shipment with Son Nam Company. Subsequently, based on the available ship schedules, a plan will be made to transport the shipment from this container to Cat Lai Port. Afterward, customs clearance will be carried out at the Sai Gon border gate. The goods will then be delivered to Son Nam Company at the agreed-upon location.

Coordinating the specialized needs of such a highly synchronized system requires a dedicated freight logistics team to:

• Negotiating contracts for freight rates
• Ensuring continuous compliance with customs regulations and providing insurance protection
• Fostering and maintaining relationships with steamship lines
• Efficiently coordinating shipping routes to minimize empty miles

Freight forwarders oversee the following logistical responsibilities:

5.1 Logistics communications

Logistics firms partner with businesses to guide strategic decisions that influence diverse areas, such as finance, production, engineering, marketing, transportation, warehousing, procurement, and inventory management.

So, what does this mean for the bottom line of your business?

By streamlining the connections required to link diverse economic players, third-party logistics providers contribute to cost reduction.

5.2 Tracking and tracing

Freight forwarders commonly utilize specialized software, often referred to as a Transportation Management System (TMS), to monitor and trace shipments, ensuring transparency throughout the entire journey of any freight. This aids logistics management in:

• Developing more efficient procedures
• Improving customer service
• Saving money

An integrated TMS offers crucial insights into carrier performance, transportation costs, and market trends. While the main objective is to ensure seamless logistical operations, the TMS identifies any potential disruptions that could impact delivery, promptly notifying affected customers of any delays.

This capability empowers freight forwarders to continuously refine their strategies for creating a cost-effective supply chain.

5.3 Warehousing and distribution

Meticulous attention to warehouse and distribution processes yields substantial dividends for your supply chain. Many opportunities can cause costly mistakes, but there are just as many opportunities to excel.

Freight plays a vital role for both buyers and sellers, making it imperative for logistics partners to consistently follow regulated warehousing and distribution procedures. This commitment is key to earning trust and fostering stronger relationships.

Value-added warehousing and distribution services encompass:

• Packing and crating of cargo
• Pick and Pack
• Labeling + Barcode schema:
  • Label placement
  • Label materials
  • Complementary technologies

• Consolidation and Assembly of Vendors
• Kitting
• Services for Visual Inspection:
  • Inspect the carrier to verify cleanliness, dryness, ventilation, and proper cargo separation, ensuring the vessel is suitable for its assigned cargo.
  • Report on marks, packaging type (bulk, cartons/drums, etc.), and goods count.
  • Verify the receipt of a valid mate receipt, a document signed by a vessel officer acknowledging the shipment's on-board status.
  • Confirm that the units match the ones specified in the order description.
  • Check for valid dates and batch numbers on packages and labels, as well as supplier certificates.
  • Record the date and location of the product loading, along with the methods employed in the loading process.
  • Keep a detailed time log documenting the dates and times of arrival, departure, loading, and any delays, including reasons for the delays. Additionally, provide descriptions of the loading equipment and prevailing weather conditions.

5.4 Managing customs

Put succinctly, customs brokers generate documentation for shippers, attesting that the essential customs procedures have been fulfilled, and the goods have received clearance for shipment upon entering or departing a country.

If warehousing processes are not followed correctly, the warehoused freight waiting for clearance might incur extra fees. These additional fees can accumulate, resulting in hundreds or even thousands of dollars in unnecessary shipping charges.

The documentation requirements are extensive, and the laws vary from country to country and port to port, whether you are importing or exporting.

Proper attention from a licensed customs broker is crucial to avoid compromising time, money, and relationships, as logistical errors can easily occur.

The necessary documents for importing or exporting cargo include:

• Purchase order from the buyer – The terms include:
  • Price
  • Quality
  • Quantity
  • Description
  • Latest ship date
  • Transportation mode

• Sales Invoice - Here are some examples of sales invoices:
  • A detailed description of the item
  • Quantity
  • The value in both foreign currency and U.S. dollars
  • Country of Origin
  • Place of purchase
  • Buyer and seller names and addresses
  • The address of the person or business to whom the goods are being transported

• Packing list - Additionally, a packing list may:
  • Accompany an insurance certificate.
  • Be utilized for issuing a Bill of Lading.
  • Contribute to electronic export information (EEI).
  • Assist customs officials in verifying goods.

• Certificate of Origin
• Shipping bill
• Bill of lading
• Bill of entry

Other requirements may include buyer-specific documents, banking institution documentation, or Letter of Credit terms in accordance with importing nation rules.

When seeking a freight forwarder, it's crucial to conduct thorough research to ensure that the chosen forwarder possesses the expertise and knowledge necessary to fulfill your specific customs brokerage requirements.

If not, contemplate dividing the responsibilities between a dedicated customs broker and a forwarder. While this might result in additional expenses, the potential cost of inadequate or negligent customs brokerage far outweighs the risks.

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5.5 Insurance

Due to the inherent nature of unforeseen problems that may arise despite the best expectations—whether accidental or intentional—insurance becomes a necessity in freight logistics.

Experts in the industry estimate that cargo theft constitutes a $30 billion-a-year business. While this is a major risk to your goods, it is far from the only unlucky incident that might occur.

Additionally, factors contributing to the potential for loss or damage include:

• Weather problems
• Handling in General
• Long distance journeys
• Constant freight movement and shifting

Hence, ensuring the protection of your cargo from its origin to the final destination necessitates insurance coverage. Considering the diverse range of goods requiring transportation, it is essential to collaborate with a partner capable of devising a plan that aligns with the specific needs of your cargo and your business.

6. 3 types of freight in logistics

Freight in logistics encompasses a wide range of services, including inbound, outbound, and reverse logistics. Depending on your business model and the extent of your operations, you may utilize one or more of these logistics services to transport heavy freight to its destination. Optimizing inbound and outbound logistics efficiently may have an immediate influence on a company's sales, expenses, profit margin, and customer satisfaction.

6.1 Inbound logistics

Inbound logistics is employed when an organization aims to acquire materials, supplies, and/or finished products that its employees will use to manufacture or assemble goods sold to consumers. 

Lack of experience in transportation management and logistics planning can lead to various issues in inbound logistics. Challenges a company may face include limited visibility into supplier operations, escalated inbound logistics costs, and inefficiencies in in-plant operations. Due to these challenges, some organizations opt for logistic shipping companies to optimize their inbound operations, or they may encourage their suppliers to arrange freight directly.

6.2 Outbound logistics

In contrast to inbound logistics, outbound logistics involves the transportation, tracking, and delivery of commodities and products to the end-user or customer. Essential steps in outbound logistics involve order fulfillment, packaging of freight and products, shipping packages, and the subsequent customer service activities associated with the completion of delivery tasks.

Optimizing outbound logistics provides companies with several advantages, including:

• Faster deliveries, resulting in increased customer satisfaction.
• Reduced instances of order cancellations.
• Reduced instances of lost items and failed deliveries.
• Lower costs for customers, contributing to greater cost-efficiency for your business.

6.3 Reverse logistics

Reverse logistics operates similarly to inbound and outbound logistics, aiming to efficiently move freight, but with different source and destination points. In reverse logistics, shipments move from the customer back to the original sender.

Outbound logistics is completed upon the customer's receipt of the product. If a return or recycling is necessary, reverse logistics initiates. In simpler terms, reverse logistics manages the movement of freight from the end customer (back through the supply chain) to the point where the product or freight is designated for final disposal.

Reverse logistics enables organizations to minimize waste and concentrate on methods for reusing, reselling, or recycling materials from defective or unusable products received from end-users or customers. This process can enhance profit margins and reduce a brand's carbon footprint.

7. Difference between Logistics & Freight Forwarder

The two terms "Logistics" and "Freight Forwarder" are often understood interchangeably because there is currently no clear consensus on the distinction between these two types of services. Typically, companies engaged in freight forwarding often refer to themselves as providing logistics services, either in-house or through third-party logistics providers (3PL). Is logistics simply a term for transportation and delivery services, or does it encompass other services that traditional freight forwarding companies do not have? How should one differentiate between these two terms?

Logistics	Freight Forwarder
Encompasse transportation, warehousing, inventory management, and may also include forwarding services.	Entail the movement of goods from one location to another, utilizing one or multiple transportation methods.

8. Difference between Freight Management and Logistics Management

The terms "logistics management" and "freight management" are widely utilized across various business sectors. They refer to the coordination and facilitation of the transportation and movement of business products, employing diverse modes of transport like ocean, air, rail, and truck. If you aim to streamline your supply chain segment, proper execution of freight management and logistics management becomes crucial. Recognizing the distinction between these terms is crucial, particularly when you are tasked with organizing the transportation of your goods.

	Freight Management	Logistics Management
Definition	Freight management involves the oversight of freight transportation. To elaborate, it encompasses the control and implementation of a cost-effective process for delivering goods. Freight management integrating human resources, logistics expertise, and information to ensure smooth synchronization between shippers and carriers.	Logistics management is the full process of monitoring resource purchase, storage, and transportation to their final destination. It is a critical component of supply chain management that entails monitoring the planning and execution of effective freight forwarding and warehousing, as well as the interchange of associated information between the source and ultimate destination.
Key tasks	Selecting an appropriate transport company, establishing contact, and engaging specific carriers and transportation services. Negotiating and concluding agreements on pricing, terms, expectations, and conditions. Generating and executing detailed paperwork crucial for cargo transportation activities. Coordinating and arranging precise transporters to collect and distribute cargo at scheduled times. Choosing the optimal modes of transportation, and planning truck or trailer routes with load balancing. Tracking the movement of cargo throughout the supply chain process. Ensuring customs compliance through selection, engagement, and collaboration with customs brokers. Securing transported cargo through an optimal insurance plan while also managing freight claims. Managing and overseeing payments, receipts, and invoices associated with cargo transit. Improving transport performance, reducing travel time, minimizing costs, and considering other environmental aspects to ensure the optimal functioning of the transportation process. The tasks mentioned above encompass the majority of responsibilities carried out by freight management personnel but may also include additional tasks based on specific requirements. Without proper freight management, there is a risk of significant disruptions to organizational operations.	Storage and allocation administration, including schedule management. Vendor and customer order management. Logistics pertaining to import and export operations. Management of packing, handling, and transportation that is effective. Coordination of the supply chain and optimization of connections. Accurate tracking and management of goods throughout the entire supply chain. Management and selection of seller connections. Optimization and analysis of cargo flow. Asset management with comprehensive supply chain visibility.

Those not deeply engaged in the supply chain may not readily distinguish between the two terms: freight management and logistics management. However, with clear definitions and an explanation of the tasks each term entails, the distinctions become apparent.

Logistics management is a broader and all-encompassing term, covering a wide range of activities and key responsibilities.

Freight management is a subset of the broader logistics management but holds similar significance. Without an effective and comprehensive freight management approach, achieving successful logistics management may prove challenging. Many organizations have experienced collective failures due to the lack of accurate integration of both management services.

9. Tips for choosing a quality Freight Forwarder company

If you are an import-export company, manufacturing company, or involved in a trade that requires cargo transportation, choosing the right Logistics and Freight Forwarder company is crucial.

Firstly, you need to identify potential companies. Information about customer companies can be found online, through freight associations (such as Dolphin Sea Air in Vietnam), business directories, or through personal relationships and professional networks.

Once you have a list of leading freight forwarders in Vietnam to choose from, you must select the most suitable forwarder. Some criteria for selection include

• Experience and services offered by these Freight Forwarders for your specific type of cargo. For example, if you need to transport refrigerated goods to Europe, you need to check if these forwarders have experience with cold chain logistics on that route.
• Additional services and fees are provided by the Logistics and forwarding companies for you. Are they willing to explain the service delivery process to you? This is beneficial, especially if you are new to the import-export field.
• The overall transportation service costs for your cargo.

10. Dolphin Sea Air - The best Freight Forwarder company

If you are searching for the top Freight Forwarder company with seasoned logistics experts to ensure the security of your shipments and prompt delivery services, Dolphin Sea Air is the best choice. 

We specialize in offering customers a comprehensive range of logistics service solutions, addressing various freight in logistics and other needs to meet your business requirements. We are pleased to offer your business a streamlined shipping process that will help you achieve your goals at cost-effective rates.

Please contact us now for the best offer at:

Dolphin Sea Air Services Corporation

• Hotline: 1900986813
• Email: info@dolphinseaair.com
• Office contact: 
  • Ha Noi: 18th Floor, Epic Tower, 19 Duy Tan Street, Dich Vong Hau Ward, Cau Giay District
  • Hai Phong: 3rd Floor, No 274 Danang Street, Van My Ward, Ngo Quyen District, Haiphong City
  • Da Nang: 6th Floor, Truc Thang Mien Trung Building, Nguyen Van Linh Roadm Thac Gian Ward, Thanh Khe District, Danang City
  • Ho Chi Minh City: 6th Floor, Hai Au Building, 39B Truong Son Street, Ward 4, Tan Binh District, Ho Chi Minh City, Viet Nam

Dolphin Sea Air's article has compiled comprehensive and detailed information for you about freight in logistics. Hopefully, with this sharing, you have gathered valuable insights to ensure the smoothest fulfillment of your transportation needs. Visit our website for more similar articles.

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