As a freight forwarder, we understand the popularity RFQs hold when it comes to comparing freight forwarders. Typically, companies will fire out as many RFQs as they can to see which forwarder offers the best deal.
Well… selecting the lowest-priced forwarder on an RFQ could actually end up costing you the most depending on what factors were considered in the RFQ.
RFQs Are Not Always Accurate
RFQs are an easy way for companies to compare shipping quotes between forwarders. Businesses think they are being efficient by sending RFQs to as many potential forwarders as they can. The issue is that forwarders are all-too familiar with this behavior and understand that you are just looking for the cheapest rate. As a result, forwarders will respond with cheap, inaccurate rates in hopes of attaining your business.
The unfortunate case with RFQs is that they are simply too vague. Companies will attempt to reduce the margin for error in freight forwarder RFQ submissions by creating their own template, but even at that, there are so many volatile factors in the shipping process that all affect price. Are you including everything that’s required for an RFQ? Have you considered the cost implications that different incoterms will have on your shipments?
Have you considered the opportunity cost of sacrificing leading forwarders’ industry expertise for cheap-alternatives? A freight forwarder’s true value isn’t found in their pricing models, but rather the network they hold, their commitment to their customers, and their unique expertise. Cost savings don’t come from low line items on an RFQ – they come from the right decisions and strategies made from a place of experience and knowledge.
Comparing Freight Forwarders Without RFQs
All freight forwarders operate differently, and an RFQ submission does not show the valuable essence of any individual forwarder. The lowest-priced forwarder isn’t always the honest one, and the quotes you might receive may not be all inclusive of charges, hidden costs, and extra steps that will occur down the line. Here are factors aside from pricing to consider when selecting a forwarder:
1) Industry Experience
All freight forwarders, no matter the size, go to the same 13 ocean carriers, 50 airlines, and final mile truckers. But depending on the forwarder, they might not have contracts with all those carriers.
Every forwarders shipping experience is different. There are billions of different combinations between modes of transit, origins and destinations, carriers, and regulations along each route – no forwarder has experience with every possible combination. Some may not do many ocean shipments, so they only have a couple contracts with ocean carriers. Have a conversation with forwarders about their experience and areas of focus to discover whether or not they will have the options you need.
2) Communication Behaviors
With all the uncontrollable events that could potentially occur during the shipping process, you cannot risk being left in the dark by your forwarder.
We understand that on some level, pricing matters and money talks. But poor communication can cost you additional money in the long run, and oddly enough, a forwarder’s communication capabilities should be easily identifiable at the start of the RFQ process.
How fast do they get back to you? How neat and detailed are their quotes? This gives you a little insight to what working with them may look like. Forwarders who are responsive and communicate with brief and concise messages will lessen the unnecessary clutter of notifications and get straight to the point. Communication is critical for a smooth shipping process. Have a conversation, and evaluate their communication behaviors.
When it comes to forwarder selection, a lot of people wonder if company size matters. The short answer is, yes, but as always – there’s a catch. Big forwarders focus all their energy on big clients. That’s just how business works.
Working with bigger forwarders does not always mean better. In fact, any clients that don’t make their priority “big clientele” lists rarely receive an adequate or respectable amount of attention. Communication and customer service are low and communication on critical factors inevitably falls through the cracks.
Understanding the differences between small and large freight forwarders can have a huge impact on your decision. Receiving the short end of the stick with big forwarders is an indication you simply are too small for them. Depending on how much you ship, you may receive better customer service and communication from smaller to midsize forwarders.
4) Management Structure
How forwarders manage their company correlates directly with how smooth working with them will be. Logistics gets complicated really quick, so forwarders need to be organized and efficient in their processes. Management structure is ultimately the backbone of efficiency (or lack thereof) in business.
Poor management structure creates issues at the root of a company – it creates a detrimental problem for internal decision making. When forwarders lack management structure, it shows through missed deadlines, damaged cargo, and other complications. Take the time to examine forwarders management structure. Will they meet all your expectations in a timely fashion or are you going to deal with delayed cargo because of lazy organizational skills during the process? Are you able to get in contact with employees or managers who can take action when something goes sideways?
We understand that pricing is a high priority for shippers. If you still think RFQs are good enough for comparing freight forwarders, make sure to include every necessary detail for accurate pricing. We wrote an article on methods to submit RFQs for freight forwarders that can lead you down a path for more accurate quotes. But there is so much more to forwarders than just their price tag. Comparing forwarders based on their experience, communication, size and management structure are good indicators on how forwarders operate. Choosing the lowest-priced forwarder gives you no advantage if you are left frustrated with unexpected expenses or unmet expectations.
Are you currently looking for a freight forwarder to handle your shipping practices? Our experienced team at InterlogUSA would love to have a conversation about how we run our business or would love to answer any questions you have!