Freight forwarding - a dark art

[Pish_Pash]

So, having imported for over 10yrs, I've never quite wrapped my head around the murky world of Shipping Agents & how they price things up Never really had to as the sea freight was always relatively low - not now)

My Supplier supplies me FOB LCL.... therefore there are three distinct areas of pricing 1. the Ocean Leg, the 2. The Port Handling bit (<<what a ruse that is too) & then 3. the road freight.

For my latest shipment, the ocean leg element increased (a lot), so I queried it, my shipping handling agent got all narkey...and - to me - it all seems a bit opaque. He said the Ocean freight leg came in at £1245...I went back to my supplier and at current rates (albeit my shipment sailed in July) it would currently be quoted at £925 by the shipping line.

So clearly my shipping agent is skimming £220 for the ocean leg (without lifting a finger) ...then there's a further £400 this end for port fees & road freight.

So to my question - do shipping handlers work on a percentage on top of all the fees ...and if so, what percentage is typical?

My feeling is my current shipping handler is taking the proverbial.

 

[MOIC]

@Pish_Pash

Where have you been?!

You've been missed, by me anyway.

There are different options for shipping now, which may suit your products and requirements.

Send me a DM or contact me via my website below.

 

[MikeFoulds]

Hi Pish_Pash. Could I ask where your cargo is shipping from?

I would agree that freight rates can seem quite a murky world, as you say, there's 3 main parts, if your terms are FOB, Ocean Freight, UK landed costs and haulage.

To address them separately

OCEAN FREIGHT:
Due to various events (Inc but not limited to Suez Canal, Baltimore Bridge Crash, Ukraine War, etc), rates have risen quite sharply since January, especially on the Asia to UK route, and are only now falling and returning to a near normal level. Therefore if you shipped in July, this was around the time of peak rates, and likely would be quite a bit higher than if you shipped in June or now. LCL freight should be charged at weight/measure (Whichever is greater), and you should be able to see the charge per m3/1000kg, and therefore be able to see why the cost is rising.

UK LANDED COSTS:
These should have remained relatively standard, as handling costs haven't changed too much, and whilst there's a couple of fixed costs (Document Fees, Customs Clearance as examples), alot are based on weight/measure, so you should be able to compare to previous shipments and find relatively the same.

HAUALGE:
Haulage should again be based on weight/measure of the goods, however, haulage costs ARE increasing at the moment, so this may be higher than previous.

I would always suggest getting cost breakdowns, and asking your forwarder to show the weight measure rates any costs are based on (Then you can see where increases happen), and to check that the service you are getting is competitive every now and then.

Hope that helps.

 

[James]

Hi Pish

I generally work on a percentage which can vary between customers depending on volume and complexities of their requirements.

Prices are quite volatile at the moment so comparing rates a number of months apart probably won't give you a fair reflection if your provider is taking the ****.

Most freight providers will offer to do a breakdown of the costs if required.

Feel free to reach out if you want me to run a quote as a comparison next time you have an import or export.

 

[Pish_Pash]

Thanks guys...my cargo is coming from the far east (not China)...sorry for being vague, but prefer to keep the details private.

My question more related to how a freight forwarder mark up (adds profit on) .

(Sorry there were some errors in my opening post, but can't edit it now due to time elapsing...)

So, my supplier rocks up at the port, hands the cargo over...the shipping line has already given him a quote for the sea journey (in US$) to Southampton - he was quoted £934 (US$1196 ...using an exchange rate of say 1.28) by the shipping line.

My freight forwarder reckons the sea journey leg came in at £1151 (US$1450 @1.26 ...yep, they use a sh1t exchange rate) but also, I'm figuring the higher amount is because they are adding their profit onto the ocean leg (therefore it seems, I'm paying extra over & above what the shipping line quoted my supplier, just to have a freight forwarder involved - and he didn't even organise this bit!)

What I'm not clear about is how a freight forwarder makes their profit? Do they typically add their commission/fees onto ALL the main parts (1. Ocean leg, 2. Port handling & 3. Road freight) ...I realise they have to eat, but I just don't want it to be too extravagantly at my expense!.

 

[Pish_Pash]

Hi Pish

I generally work on a percentage which can vary between customers depending on volume and complexities of their requirements.

Prices are quite volatile at the moment so comparing rates a number of months apart probably won't give you a fair reflection if your provider is taking the ****.

Most freight providers will offer to do a breakdown of the costs if required.

Feel free to reach out if you want me to run a quote as a comparison next time you have an import or export.

Thanks...when you say you work on a percentage.....for a FOB arrangement (where the supplier rocks up to the port & the shipping line puts the cargo on), do you add your percentage on that leg? If so, any odea what the typical rate is (I'm not asking for your percentage, as that would be confidential)...just trying to unpick where I'm getting whacked.

 

[MikeFoulds]

Hi Pish_Pash.

Most forwarders will aim to make around 8 to 10% as an overall profit on the job, with a minimum of around £100, BUT, this does vary and some are a bit more greedy.

As you say, we have to eat, and from that 8 to 10%, sometimes there's agent fees (Plus of course staff, IT, office, etc, etc, so I don't believe we make untoward profit.

With some of my customers I have the agreement that I would send them my cost prices, and they are then aware I will charge 10% over this. They then know that I'm not overcharging, but am still making a profit. This may be an agreement you can come to with your suppliers.

 

[MOIC]

@Pish_Pash

My advice is to use a local agent and ask for your goods to be delivered by train via Europe to your door, the last leg by a courier, UPS, DPD etc. (it's one service). There are many countries throughout the Far East that now use freight trains into Europe.

It's reliable, cost effective and may have other benefits for you.

How's the 'Dining table'?

 

[fisicx]

How does a train get from the far east to the UK? I'm trying to work out which possible safe route it could take.

 

[MOIC]

Train offloads it's containers in Poland, Hungary or Germany, then trucked to UK.

 

[fisicx]

OK. But how does it get to Poland? Looking at my big map of the world and the journey passes through some pretty troubled countries. Do sanctions still allow trains to cross the Russian border into the EU?

 

[James]

The China - Europe trains still run as far as i am aware. Last time i looked into it it was about 30-40 % more expensive than sea but about half the time. Not something we offer as our customers as either want cheap as possible or need it ASAP which the train services does not fulfill either.

 

[MikeFoulds]

There are 3 routes the trains use, dependant on which service is booked. Some go through Russia, and some travel south of Russia, it's very difficult to specify the route which a train will take, so it's a bit wait and see if a booking is made. As is mentioned about, the route is normally more expensive than sea freight, and also a similar transit time, so not the greatest of benefits

 

[Pish_Pash]

@Pish_Pash

My advice is to use a local agent and ask for your goods to be delivered by train via Europe to your door, the last leg by a courier, UPS, DPD etc. (it's one service). There are many countries throughout the Far East that now use freight trains into Europe.

It's reliable, cost effective and may have other benefits for you.

How's the 'Dining table'?

Alas, my supplier isn't on the mainland down your neck of the woods :-(

Dining room table has been retired, now in a dedicated dining room ;-)

 

[Mister B]

We're just in the process of booking a shipment on the train. Quite a bit more expensive than sea freight but because of the trouble caused by those pesky Houti rebels, it's coming in around 14 days faster than sea freight which makes a big difference to us at the moment.

We looked at the route taken and it does pass through Russia-I figure that they wouldn't be using that route if it wasn't safe.

 

[James]

We're just in the process of booking a shipment on the train. Quite a bit more expensive than sea freight but because of the trouble caused by those pesky Houti rebels, it's coming in around 14 days faster than sea freight which makes a big difference to us at the moment.

We looked at the route taken and it does pass through Russia-I figure that they wouldn't be using that route if it wasn't safe.

Out of interest are you booking a part load or full container ?

 

[Mister B]

It's part. 7 CBM to be precise.

 

[MikeFoulds]

Hi @Mister B, I would be interested to know if your goods do actually take 14 days. We hear most services by rail take between 20 to 30 days depending on when the cargo departs. We are finding that alot of rail services incur delays, as the goods use various national railways, some of which are on different guages of rail, and therefore move between trains

 

[Mister B]

Hi @Mister B, I would be interested to know if your goods do actually take 14 days. We hear most services by rail take between 20 to 30 days depending on when the cargo departs. We are finding that alot of rail services incur delays, as the goods use various national railways, some of which are on different guages of rail, and therefore move between trains

I think that you mis intepret me...transit time for our shipment is estimated to be around 28 days, which is 14 days faster than sea at the moment.

There or thereabouts anyway.

 

[MikeFoulds]

Ah OK, that makes alot more sense and is more in line with what I would expect for rail. Yes, transit time around 28 days is reasonable. Hope the shipment by rail works for you

 

[Mister B]

Being honest, we've looked at it before but it never really made sense. Will be interesting to see how it goes.

 

[MOIC]

Alas, my supplier isn't on the mainland down your neck of the woods :-(

Dining room table has been retired, now in a dedicated dining room ;-)

It’s not just China, trains are used slightly further afield ( not mentioning any countries), but doesn’t include Japan.

Dining Table - RIP

 

[MOIC]

OK. But how does it get to Poland? Looking at my big map of the world and the journey passes through some pretty troubled countries. Do sanctions still allow trains to cross the Russian border into the EU?

China ensures it has good relationships with countries that benefit them, especially with their ‘Belt & Road’ agreement.

The routes through Russia and Turkey are not affected (yet), that may change if NATO allows Ukraine to target Russia cities.

Shipping might be irrelevant then.

 

[MikeFoulds]

@MOIC, have you moved much cargo by rail before? I've had various customers look and consider it, but the additional cost and large variations in transit times (Sometimes around 20, sometimes as much as 45), has put alot of my customers off.

I have moved a small amount of freight, and had no issues, but do have the concern that, if the conflict in Ukraine further escalates, then we may have cargo stuck in transit with no way of releasing. This is a large part of why I have not further pushed this service.

 

[MOIC]

@MOIC, have you moved much cargo by rail before? I've had various customers look and consider it, but the additional cost and large variations in transit times (Sometimes around 20, sometimes as much as 45), has put alot of my customers off.

I have moved a small amount of freight, and had no issues, but do have the concern that, if the conflict in Ukraine further escalates, then we may have cargo stuck in transit with no way of releasing. This is a large part of why I have not further pushed this service.

To Europe & UK, we send around 2000 cartons a week by train, and similar by Sea (LCL), both have their nuances and depend on each customer's preferred requirements. It's not a case of one hat fits all.

This does not include full containers, which have their increasing difficulties.