Transport companies and their classification

Printer-friendly versionSend to friendPDF version

Transport companies may roughly be divided in two large groups: 

  • Forwarders
  • Carriers

Forwarding companies

What is a forwarding company?
A forwarding company is a transportation arranging company, in which generally a large number of people handling transportation, i.e. freight forwarders, are employed. The company may or may not own any vehicles. The freight forwarders communicate with the customer, offering them the most expedient transport solution for delivering their cargo. Success of a forwarding company is largely dependant on the subcontractors and agreements concluded with the subcontractors. By seeing cargo move only on paper, a forwarder may move thousands of tons of goods per year. Today's forwarder generally has storing (terminal) facilities, either their own or belonging to a cooperation partner. Forwarders are often required to deal with customs formalities too.
What are the customer's advantages in using a forwarder?
The task of the company's logistic is to organise the delivery of cargo timely and without losses. Naturally, the easiest way to execute the assumed task would be to delegate it to someone else whose cargo flows from the same region are considerably larger. Apparently this 'someone else' with whom one would cooperate would be a competitor, operating in the same field and supplying goods from the same factory. On the other hand, such cooperation may prove to be much more dangerous than it would appear; after all, a competitor is a competitor. The alternative is to find a carrier who has a truck in the given region and sufficient extra room in the truck for the additional cargo. Finding such a company and truck is highly time-consuming, considering the fact that there are over 1 400 companies holding international trucking licences in Estonia (ERAA 2007). This is exactly when the advantage of a forwarding company becomes clear: it is much easier for the transportation customer to call a forwarder and order the transportation from them, as the forwarder has a good overview of trucks that are located in a given region at a given time and have an opportunity to deliver the goods at a time and to a place suitable for you.
Fast and timely movement of cargo is most certainly based on information received from the customer. Often the movement of information affects the movement of cargo. The freight forwarder should possess at least the same amount of information on execution of a transportation process as the consignor (sender) does. On several occasions a relevant marking regarding the nature of goods or package is left out from the transport order. However, such 'small slip' can grow into a claim of tens of thousands of Euros and result in destroying good cooperation relationships. A good freight forwarder appreciates the devil is in the detail.
Combined transportation
In order to avoid risks arising out of the nature of cargo, such as possible breakage (e.g. furniture), the forwarders use combined transportation. It is a common fact that trucks rattle and vibrate well driving your cargo can result in damage to the goods. So forwarders use the services of marine transportation as an intermediate link in combined transportation (read: in order to avoid Polish roads). A semitrailer (see bolster-type truck with semitrailer) is sent directly from Germany to Tallinn by ship.


What is the task of carriers?

The carriers are transportation companies that own vehicles and that deliver the cargo from point A to point B. The carriers hold international transportation license and most of them are the members of ERAA (Estonian Truckers Association), where the transportation company receives the necessary papers, such as the TIR Carnet workbooks, road permits, CEMT permits. Today carriers are increasingly leaning towards subcontract-based relationships with forwarders, as minimising costs has become a generally recognised success factor.

Why don't carriers handle forwarding?

Actually, the question could be rephrased: why don't forwarders handle transportation? Many of them do, however, these two things are largely different: working tools of a forwarder include a mobile phone, computer and a pen, while the carrier's tools include truck road trains that require maintenance and repairs, they must deal with personnel problems, obtain the necessary transportation documents, certificates, etc.

Who are the customers of carriers?

The carriers' customers mainly include forwarding companies that have extensive customer bases and large transiting cargo flows. From the carrier's point of view it is important that its truck is in constant motion, so the truck would not have to wait in e.g. Germany or Holland to find a new cargo before it could head back to its home country. This is also one of the reasons why it is easier for carriers to use forwarding company, rather than looking for cargoes from the potential customers itself. The price of truck standstill is significant. If a truck is idle without a cargo for 5 days, the loss would already be EUR 650 (average).