Freight brokers and forwarders

Freight brokers and forwarders are the middlemen of goods transport: they find space on a truck, a ship or a plane for someone else's goods, and earn a margin or a fee for arranging it. Three words explain the business. The shipper is the company whose goods are being moved, such as a paint factory. The carrier is the company that owns the trucks, ships or planes and moves the goods. The broker or forwarder stands between the two.

Here is how it works in general. The shipper has a load: what it is, how heavy it is, from where to where, and by when. It asks a broker to move it. The broker knows many carriers, finds one with space on that route, and agrees a price with each side. The difference between what the shipper pays and what the carrier receives is the broker's margin. The carrier then moves the goods, and the broker follows the trip and settles the payments.

Why not deal directly? A large shipper may send goods on hundreds of routes, and a carrier may own a single truck. Neither can easily find the other. The broker's value is that it knows both. In India, most trucks belong to owners with one or two trucks each. For decades, these owners found loads through brokers in each city's transport market, mostly by phone.

A freight forwarder does more than a broker, usually for international trade. It arranges the whole journey: the truck to the port, space on a ship or a plane, customs clearance, and the documents for each step. It often books the space under its own contract with the shipping line, and then sells it to the exporter.

Take, for example, a digital freight marketplace. It does the broker's job in software: it matches a load with a truck that has space on that route, and prices the trip from data on past loads.

Consider an owner with two trucks. A trucking app for owners shows the owner loads posted by shippers and brokers, so that a truck does not drive back empty.

Say a tea exporter in Kolkata sends a container to a buyer in Dubai. The forwarder books space on a ship and prepares the papers in freight forwarding software, and the goods are declared through customs clearance software.

How are brokers and forwarders different from a transportation management system? A TMS is software that a shipper or a carrier uses to plan its own loads, routes and trucks. A broker is a business that sells a service to others. Large shippers also use freight procurement software to ask carriers to bid for their routes directly, so they need brokers less.