Mitigating Risks and Challenges in Freight Forwarding

Risk management is a critical component of successful freight forwarding. A proactive approach to risk helps ensure smooth operations and minimize disruptions, supporting better outcomes for clients and others in the supply chain.

Freight forwarding is a process related to moving goods through the supply chain. However, it doesn't refer to the actual transportation of items, which is a service provided by carriers. A freight forwarder acts as a travel agent for goods and materials. They work with a network of trusted partners, including shipping companies, common carriers and global authorities, to support the expert and expedited transport of goods.

The complexity of modern global trade increases the potential for operational, financial and regulatory risks. Effective freight risk management strategies help reduce those challenges and support timely deliveries. By investing in experienced freight forwarding solutions, organizations protect their interests, help drive efficiencies and lower their chances of freight-related losses. 

Understanding Freight Forwarding Risks

Freight forwarding involves numerous risks that impact businesses and distribution chains. You must look at operational, financial, regulatory and supply chain categories to understand the comprehensive nature of these risks for optimal  logistics planning. 

Operational Risks

Operational risks directly impact your production and client experiences and have knock-on effects on other processes. An example of an operational risk is materials being delayed, which can result in a loss of one or more production days or a late project completion. 

Common operational freight forwarding risks include:

• Delays: Items can be delayed by backups in warehouse processing, customs reviews, carrier strikes or temporary misplacement. When goods aren't delivered in a timely manner, it can create bottlenecks in processes, customer dissatisfaction or challenges in meeting future milestones. 
• Lost goods: Goods that are misplaced during transport and never recovered — or that aren't recovered promptly — can reflect a material loss for an organization. As lost goods may result in reorders and waiting for new items to ship, this risk also carries potential negative outcomes of general delays.
• Cargo damage: When goods or materials are damaged during transport, it can lead to quality concerns. If damaged items need to be replaced, it causes delays.

Financial Risks

Freight forwarding includes a variety of financial risks and the potential for monetary loss related to lost or damaged goods. Two common financial risks are:

• Unexpected costs: While you likely try to plan proactively to manage transport costs, constantly evolving expenses associated with fuel or other factors can rapidly drive up expenditures.
• Currency fluctuations: Organizations that manage or rely on global supply chains may also be impacted by fluctuations in currency that can create pricing uncertainty. Constantly changing currency values also make it difficult for freight forwarders to accurately predict costs, which creates the risk of monetary loss due to underpriced transactions.

Regulatory Risks

Freight forwarders must remain aware of potential regulatory risks, including: 

• Changing international laws: Moving goods through multiple countries is challenging when each nation — and each jurisdiction within a nation — can update shipping and transport rules and demand companies adapt, even when freight is already in motion. 
• Customs requirements: Getting goods into and out of each nation can be challenging, and freight forwarders must understand what is and isn't allowed. These professionals must also proactively plan for customs processes, which might include quarantine or other delays for certain goods. 
• Security concerns: Growing security concerns across the globe can slow freight as more checkpoints and compliance processes are implemented. 
• Increasing environmental regulation: Globally, more nations are seeking to protect the planet via legislation, and some of that lawmaking directly impacts freight processes. One example is the Clean Shipping Act, which seeks to set intense carbon standards for ship fuel and eliminate certain in-port emissions. Complying with this type of legislation can be costly, but not doing so can result in restrictions and penalties that negatively impact businesses. 

Supply Chain Risks

Complex supply chains involve risks, given the multiple parties and moving parts. A disruption at one point can significantly impact the whole. However, some external factors can affect supply chain logistics,  including:

• Political instability: Geopolitical relationships, internal civil unrest and international tensions or wars can significantly impact supply chains and the freight within them.
• Environmental disruptors: Hurricanes, earthquakes, drought, flood and other environmental disasters and obstacles impact a carrier's ability to reach certain locations or delay shipments. In extreme cases, they can result in a total loss for the carrier. For example, cargo ships may be lost at sea during a storm.
• Shortages: Storage space, such as secure containers, staff and land around a port can all run low when it comes to supply, resulting in challenges within supply chains. 

Key Challenges in Freight Forwarding Risks

Aside from the risks discussed above, specific challenges in freight forwarding must be addressed to mitigate losses. 

Port congestion is a common challenge. Generally, only a small number of ports in each nation are considered major ports, and only some accept and process international shipments. The result can be a metaphorical queue of goods lining up at each port, waiting for physical space or staff time to allow for processing. For freight forwarding organizations and others in the distribution chain, the consequences of port congestion often include delayed shipping timelines and increased costs.

Evolving and complex customs regulations are an ever-present concern for international freight forwarding. You must meet specific health, environmental and safety regulations related to the countries through which the goods are being passed, and those laws don't always align with each other. Paperwork must be perfect, which means accounting for commercial invoices, certificates of origin, packing lists and other documents, and you may need to contend with tariffs and other financial trade barriers.

Even after goods pass through customs, security challenges, such as cargo theft, fraud and piracy, require constant vigilance. 

Finally, unplanned and uncontrollable factors, such as natural disasters and weather, can disrupt logistics operations. For example, hurricanes and other tropical weather events impact shipping throughout the year, requiring companies to invest in backup plans and redundancies in the supply chain when possible. 

Risk Management Strategies for Freight Forwarding

Proactive strategies for freight forwarding should be part of any transportation logistics plan. Some tips for reducing risks in your supply chains include:

• Partnering with experienced logistics providers: Freight forwarding partners that bring expert knowledge and proactive solutions to your processes help you mitigate risks and drive positive outcomes, such as efficient shipping and accurate delivery timelines. Experienced providers often come with a network of cultivated partnerships, which can help grease the wheels of your supply chain and ensure you can seek assistance when running into a challenge. 
• Diversifying transportation routes: Redundancy goes a long way toward supporting a cohesive and efficient supply chain. Consider a metaphor: If you only have one road coming in and out of your neighborhood, you run a greater risk of delays on that road and being late for work than you would if you could choose from several roads. Having backup routes and alternative ports lets you avoid delays related to congestion. 
• Investing in comprehensive insurance coverage: Realistically, it's not a question of whether you'll experience a freight-related loss. For organizations that regularly rely on global supply chains or engage in international shipping, it's a question of when freight-related losses may occur. Get ahead of the risks by purchasing comprehensive insurance to safeguard against losses associated with damaged or missing goods. 
• Using advanced technology: Leverage real-time tracking systems and other technology to monitor shipments and support data-backed decision-making that mitigates risks. Some technology critical to modern freight forwarding includes GPS tracking, barcode scanning and electronic data interchanges, transportation management systems and AI and machine learning. 

Regulatory Compliance and Customs Management

Customs management is a huge part of freight risk management, and you must be up-to-date on international trade laws and customs regulations, particularly across borders crossed by your supply chain. Ongoing education and compliance help you avoid unnecessary — and sometimes debilitating — delays and fines.

One way to manage this is by working with customs brokers. These licensed providers help you meet specific requirements when importing or exporting. They can help with the following:

• Ensuring your declarations are complete, accurate and compliant with local laws
• Checking to make sure required taxes and duties have been paid and notated
• Obtaining clearances to move certain products across borders

When possible, consider how you can speed up your supply chain now and in the future with proactive processes. For example, you might engage in pre-declaration. This process lets customs know about future goods you plan to import. By submitting the necessary paperwork ahead of time, you can find out about potential problems with clearance early. By working proactively, you may resolve issues before the items reach customs. You also provide customs authorities with an opportunity to begin processing paperwork early, which might expedite clearance processes.

Always ensure goods are classified properly. Incorrect classification can lead to delays in customs and extra costs associated with noncompliance penalties. In more extreme cases, noncompliance with accurate classification requirements can result in you forfeiting the goods or your future ability to import items. 

Security Measures to Mitigate Freight Forwarding Risks

Enhance the security of your shipments with intelligent use of technology and common-sense decisions about logistics. Some tips include:

• Use GPS tracking and cargo monitoring systems. Ensuring the visibility of your cargo helps reduce theft risks. It also provides organizational peace of mind and the information you need to keep stakeholders updated. 
• Partner with secure and trusted carriers. Choose carriers with a proven track record of secure and well-managed shipping processes. Alternatively, work with a freight management provider that invests in good carrier partnerships. 
• Use tamper-evidence seals. Invest in tamper-evidence seals and other low-tech approaches to protect items during shipment. This type of proactive approach also provides an easy way to understand whether the integrity of your shipment is intact upon delivery. 
• Maintain secure storage areas. Enhance loss prevention with secure logistics hubs and storage areas. Security should be about more than reducing theft — consider how storage areas might be impacted by natural disasters, fire or other risks to cargo.
• Work with supply chain security experts. By working with an experienced partner, you can ensure secure, risk-mitigated processes while freeing up your internal resources for other work. Your goal should be to ensure your logistics are in good hands with a partner who keeps you updated on all freight and any challenges that may need to be addressed. 

Atlas International's Approach to Freight Forwarding Risk Management

Atlas International offers expertise in mitigating risks through strategic logistics solutions. Our approach to freight logistics includes the use of technology, such as predictive analytics, to proactively assess and address risks, and our network of trusted partners includes secure carriers, customs brokers and others to ensure smooth operations.

While there are certainly best practices for freight forwarding risk management, and Atlas International leverages them to support clients, we also recognize every organization has unique shipping needs. Best practices also vary from industry to industry, and what works for one business or location may not work for another. That's why we offer tailored risk management strategies, ensuring support for organizations in varied industries and with different shipping needs. 

Connect With Atlas International to Support Better Freight Risk Management

A comprehensive risk management approach is critical in maintaining a successful freight forwarding operation. Strategic planning, integration of the right technology and partnerships with expert and trusted resources help you overcome risks and challenges within the global supply chains.

Leverage Atlas International's expertise in freight risk management. Contact Atlas International to learn more about our services or get a quote for services today.