Impact of Freight Forwarders in the Shipping Industry
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The basic ideology of this thesis is to determine the impact of freight forwarders in the shipping industry of Pakistan. This chapter briefly describes an introduction of the thesis. Being the introductory chapter of the thesis, the present chapter includes the introductory outline of the research as it will lay an emphasis on the background of the research and clearly identify the rationale for undertaking this research.
Liner shipping is characterized by a range of economies of scale and scope suggesting that low cost supply is likely to require some form of industry combination and concentration or cooperation; this could be achieved by a comparatively small number of large global operators. There are many reasons behind it including bad economic situation of Pakistan, Shippers interests in relation to shipping services coincide with the public interest and shippers as profit maximizes generally will have a strong incentive to obtain the best possible service for the lowest possible price
Contextual Frame: The shipping business plays a vital function in the international economy because it carries a large portion of world trade
The Industry trends towards expansion of liner shipping and needs developments in Containerization because they cover scale of economics. With the passage of time the shipping liner industry has moved into an era of affluence, and containerships have been moving require for other Ship types, the demand growth is generally and also several other factors have been putting force on smaller carriers, including upsizing and route network developments. Currently the trends become visible into independent process over vessel allocation and rising profitability suggests that carriers will seek to own additional of their own assets.
Shipping lines is an essential part of Pakistan's trade, which provides intermediate service input for Pakistan's merchandise trade merchandise. According to bulk shipping where each vessel carries one commodity on a charter basis, the demand for liner shipping is diverse. The costs of coordinating these diverse demands virtually rule out ship leasing as an efficient form of service delivery. The supply of regular and scheduled liner services provides a means of reducing transactions costs so that exporters with diverse demands are able to access liner shipping services. The trend to larger ships has been accompanied by strong growth in available liner capacity. The reason of significant development in shipping liner business because of its cheap freight rate and the large volume of freight transported. Compared with the other modes of transport, for example air, water transportation offers the cheapest freight rates
The idea third party logistics providers are as basic as deficient to have somebody else do the work for you instead of exporters who facilitate according to maintain their transportation or distribution and as so on. Supply chain management applications have a small amount of capabilities in ordinary. The data must be available to a user anyplace in the world; it must be exact, flexible, visible, and fast. With the help of supply chain software they can attain inventory effectiveness, faster information flow more exact determinations of when and how much material/capacity must be purchased, manufacture or moved and watchful monitoring of events and inventory within and external the venture and electronic enterprise linkage, which replaces manual linkage . These systems can help companies to incorporate similar process spread over different place and limit needless activities, enhancing their skill to cope with consumer requirements and meet goods quality standards
The use of supply chain applications varies in diverse parts of the world. In 2003, North America's top five 3PL-centric data technologies were applications for…..
- Warehouse management
- Shipment tracking and trace/event management
- Export/import/forwarding/customs clearance
- Web-enabled communications
- Transport management
The dilemma of supply and demand is the driving force of people history, and it is directly connected to carry, Normally we cannot produce all the food or goods but we want to consume or use that goods so the requirement to consume we must transport. In the age of trade between farms and villages, today the products we consume travel long distance along global supply chains to reach us. Product, inventory control, transport, and delivery, and particular handling and management are all division of these supply chains. As supply chains become more geographically elaborate, their success depends additional and more on the expertise of competent transport intermediaries (Freight forwarder, or Freight logistic providers).
Supply chains engage lots of groups of trading partners, and logistics is the key to holding them jointly. Logistics is the function of planning, implementing, and controlling the well-organized flow and storage of goods and their associated information. As global logistics become more challenging, and as the savings accessible through supply chain efficiency become more striking
The international freight forwarding business emerged in Pakistan in the early 1980s. originally, the industry comprised a only some organization and focusing on the niche market that focus on the shipment of plants and equipment for the increasing weaving segment of the textile industry, household stuffing companies support families re-locating overseas and multilateral agencies providing food supplies under aid or crisis programs
The job of the International freight forward is to move the supplies from one place to another place on the given time frame and make sure that the delivery will be on time and economical as well. Particularly freight forwarding companies arrange transport from shipper's factories or storehouse to ports, stuffing or consolidation of cargo if necessary according to the clients needs, documentation, customs clearance, shipping (land, sea and air or combination thereof), unpacking or deconsolidation if necessary and delivery at customer selected location
International freight forwarding firms in Pakistan can be segmented according to figure no 1.1
- Primary service providers classification themselves as freight forwarders but efficiently working as brokers offering aggressive tariffs to little and average shippers for LCL cargoes, negotiate highest margins from consolidators search for lesser consignments to full container loads and arrange customs clearance, documentation and payment of custom's levies.
- Middle order firms providing main services provided by primary services acting as selected agents for abroad buyers.
- Total solution providers contribution full range of services with access to worldwide networks through abroad associates.
In Pakistan Freight Forwarding companies provide services as intermediaries and made become part of international trade activity, actually the Pakistani's exporters faced many difficulty if it does not take into description how the goods will be deliver to the market .The matter of freight forwarding must be careful at an early stage of the growth of the export marketing plan as it raise more than a few concerns that require to be address rapidly not only does the exporter require to recognize which to specify and work to, but the method of transport also requirements to be careful ( road, rail, sea, air). Packaging is also another issue that requirements to be considered, as is insurance. Much of the hassle can be taken out of the exporter's hands by using an efficient freight forwarder, but as with any supplier care requirements to be taken to ensure that the supplier meets the requirements of the organization
Problem Identification/ Statement:The research aim is to analyze the factors that are impact freight forwarders in shipping industry and also analyze the relationship of freight forwarders with shipping lines. In the modern world the trend has been changed in shipping industry now the Forwarding agent is playing a vital role in shipping industry as a middle man with the name of Fright Forwarder between the shipping line and exporters. Freight Forwarder has strong negotiating power to shipping lines due large numbers cargo velum because of the exporter's preference that do exports through freight forwarder. They take an advantage with the bulk of cargo from the shipper (exporters) and play a role of big intermediaries among the shipping lines, buyer and exporters, and they provide a full of supply chains management and transportation, from the exporters where house to buyer door which is called pin to point service or door to door delivery. Therefore the Pakistani shipping sector and particularly the leading position of Freight Forwarder act as intermediaries between the shipping lines and exporters.
Although this research, the researcher will try to find out the reason of impact of freight forwarder's in shipping industry, serious emphasis on the relation of freight forwarders and shipping lines, currently major problems b/w Freight Forwarders and Shipping Lines.
1.2.Purpose of Study
This research will provide you better understanding and benefits of Freight Forwarders to the Shipping Lines and the Customers (Importer / Exporter).
With respect to Shipping Lines
- Decrease the Shipping Lines risk
- Increase of cargo volume from single customer
- No pain for warehousing delivery
With respect to Customers
- Accessibility from any location
- Reduce in transportation cost
- Convenience of logistic
- Pin to point delivery (Warehousing)
1.3. Research Objectives
It will only consist of shipping lines and freight forwarders in Pakistan, specially with concept and practicing of how they doing a business and facilitate to customer no other fields will be considered. This research will only focus the factors which are impact the shipping lines business which may cause an increase in trade, profitability and reduce shipping line risk or any other. That's why this will not include the all operations and other activities, which raise the revenue of shipping lines. It will only consist of those forwarding companies of Pakistan, which are directly involved with the international forwarders and involve the shipping line business.
- What are the influencing factors of shipping lines versus Freight Forwarders for Exporters and buyers?
- What are the major problems of freight forwarders presently with the shipping lines?
- What are the major problems of shipping line presently due to involvement of freight forwarders?
- What are the relationship between the Freight forwarders and Shipping lines, how they will grow and build up?
Justification / Scope: We are a developing country under foreign investment and internal market. We do not have enough resources to meet even our consumption so to meet our own usage we need export and import world wide, for doing export and import we have two sources world wide which is called shipping lines and air lines which connect to world wide in every destination due to which we are able to consume internationally products and trade our local product world wide for generating revenue.
This thesis is aimed at providing better conceptualization of freight forwarders and shipping lines business. This research will give clear image of the benefits and relationship of freight forwarder for the shipping lines and exporters lines. The findings of this study will help to understand the importance of freight forwarder in shipping industry and how they can use effectively.
International Freight Forwarder:The job of the International freight forward is to move the supplies from one place to another place on the given time frame and make sure that the delivery will be on time and economical as well. They arrange the resources according the needs and requirements of the customer like
- Transportation from shipper's factories to ports
- Packing or consolidation of cargo documentation
- Customs clearance
- Shipping (land, sea and air or combination thereof)
- Unpacking or deconsolidation is required
Customs Clearing Agent: An agent certified by the Central Board of Revenue through the Customs authorities to complete documentation official procedure and assemble, on behalf of the merchant, disbursement of custom duties, taxes etc
Shipping Agent: An agent licensed by the Central Board of Revenue through the Customs authorities for servicing vessels calling at Pakistan's ports. The agent represents interest of the vessel/carrier and arranges payment of port dues.
Shipper: Merchant or manufacturer or Supplier who's selling goods to overseas buyers
Consignee: Merchant or manufacturer buying goods form overseas suppliers
SCM: Supply chain management
TEU: Twenty-foot equivalent unit a standard measurement of volume in container shipping. The bulk of containers are either 20' in length, or 40' in length. A 20'Container is one TEU, a 40' container is two TEUs
LCL: Less than container load cargo
FCL: Full container load cargo
SIZE: Freight forwarding companies have been classified according to annual TEUs handled as under:
Small = 360 TEUs Medium + 1200 TEUs Large = 4800 TEUs
POL: Port of load
POD: Port of discharge
We are a developing country under foreign investment and internal market. We do not have enough resources to meet even our consumption so to meet our own usage we need export and import world wide, for doing export and import we have two sources world wide which is called shipping lines and air lines which connect to world wide in every destination due to which we are able to consume internationally products and trade our local product world wide for generating revenue.
This thesis is aimed at providing better conceptualization of freight forwarders and shipping lines business. This research will give clear image of the benefits and relationship of freight forwarder for the shipping lines and exporters lines. The findings of this study will help to understand the importance of freight forwarder in shipping industry and how they can use effectively
CHAPTER # 2 LITERATURE REVIEW
The previous chapter describes the background and the problem area of the study. In this chapter we discuss the literature related to the research topic. In this Literature Review, an attempt has been made to develop the conceptual framework of impact of Freight Forwarder in Shipping Industry. This chapter will review the literature on Shipping Line and Freight Forwarder. It will include material obtained from books, journals, academic journals and internet articles.
The shipping industry is very important in the international economy because it carries a large portion of world trade. The Liner shipping is characterized by a range of economies of scale and scope signifying that low cost supply is likely to require some form of industry assimilation and hence concentration or cooperation, this could be achieved by a relatively small number of large global operators .The Industry trend to expansion of liner shipping and need to developments in Containerization which cover scale of economics. With the passage of time the liner business has optimistic into an age of affluence, and containerships have been moving require for other Ship types, the demand growth is generally but several other factors have been putting force on smaller carriers, including upsizing and route network developments. Currently the trends become visible into self-determining process over vessel allocation and rising profitability suggest that carriers will search for to more of their own resources. Rivalry from logistics providers will gradually more dictate how the industry develops. The lower costs of condition of services require the various economies of scale and scope to be capture, a single shipping line may be unwilling to commit several large vessels in order to provide an inclusive, regular, scheduled service where demand is uncertain and where that uncertainty is exacerbate by the possibility of rivals encroaching on the trade.
According to DELTAS, SERFES, SICOTTE the Agents of the various Lines meet and discuss the conditions which are changing from time to time, and which are affected by the competition of vagrant Vessels and decide on the policy to be pursued by all the Lines named with reference to the maintenance of stable rates of freight and to prevent demoralization.
The liner shipping is becoming more concentrated via mergers and acquisitions, while average vessel size continues to grow as carriers attempt to capture scale economies. Rationalization is being driven by technological change and intense competition in most trades which has seen freight rates fall significantly in real terms and profitability decline, according to the researcher the expansion of global shipping companies has increased competition on individual routes. The constitute the total shipping demand of a particular market. The density of demand is then defined as the trade volume per kilometer of coast. This affords an admittedly imperfect demarcation of the system, unless there happen to be clear-cut geographical boundaries.
The picture emerging is of a global liner shipping industry experiencing significant, and rapidly change, the trend towards greater industry concentration via mergers and acquisitions does not appear to have reduced competition. Appears the expansion of global shipping companies has increased competition on individual routes. The Hoffmann said that Asian lines have entered the North Atlantic trade, east-west lines are incoming north-south markets and the feeder services of big carriers are competing with traditional regional lines. In shipping liner service the growth in alternative types and the growing role of freight forwarders has placed increasing competitive pressure on carriers. To a minor extent potential competition in transporting general cargo exists in the form of alternative modes of transport such as air transport and tramp shipping.
Market power is sustainable only where entry barriers to entry or exit is high, the Potential barriers to entry include regulatory and other essentially man-made or institutional barriers or economic barriers driven by characteristics of the market .when the barrier are low for entry and exit the competition will increase and the profitability will minimum accordingly
Shipping liner business mean the process of transporting goods from one place to another that process of transportation may take place through sea, land or water, further more the process have been done underway of buyer and the seller with the negotiate and entering into an agreement/contract based on the mutually agreed upon terms .Their terms would include the description and the quantity of goods, the time by which the merchandise require to be delivered, the price and the documentary requirements. After the agreement is struck, the seller usually contacts the forwarding agents who are responsible for moving the goods from the seller's location to the ship. The Shippers' interests in relation to shipping services agree with the public interest and shippers need to required profit-maximizes generally and the shipping lines offer the best-possible service for the lowest-possible price.
In this era the shipper might play the role of the Forwarding agent too if it has the necessary expertise in the area, the following Forwarding agent contacts the shipping line and based on the terms and conditions mutually agreed upon, an agreement is reached for the goods to be transported from the port of origin to the destination port to the shipping line. A custom clearing agent is then assigned by the shipper for the handling of the custom related documentation or even this may be taken care of by the forwarding agent, thereafter the goods are moved by the forwarding agent to the port of origin or the shipping line. The goods can be picked from the shipper's factory or may have already been moved from the shipper's premises to the forwarding agent's premises in which case they are further moved from the agent's premises to the port of origin of shipping line. Once the goods are loaded on the ship, they are transported to the destination port where a similar process happens while the goods make their way to the buyer's premises
The cargoes mostly were carried from country of origin to country of destination on a direct service or through involvement of transshipment port. Today shippers have a choice between a direct service and via transshipment port, but due to longer transit times and the possibility of cargo being damaged during transshipment or however, the quality of transshipment services often is comparable to that of direct services.
It is likely to be at least in part to the trade imbalance, which means exporters are competing with increased volume with the involvement of supply liner efficient service.
Freight rates are most major element for the liner shipping services, the requirement of competitive control of liner freight play a major roll in liner business, these general trends are illustrated by various freight rates cited in industry publications .Initially the first task is to identify the relevant markets which will clear define the density of demand for a particular transport service. International trade in bulk agricultural commodities recently has become more important to the world economy. Economists have devoted little attention to international shipping. Transport costs between countries can pose a formidable barrier to trade, similar in effect to tariffs and institutional constraints. Ocean transportation changes can affect the domestic grain transport system of major exporters.
The shipping lines base on service provider from one place to another place according to the requirement of their customer, the nature of shipment which follow of cargoes very frequency. The involvement of transit time, ports of call, and reliability are all important characteristics of service quality, which can, in certain circumstances (for example, ‘just-in-time' manufacturing or consumable cargoes), be more important than simple price considerations.
An increase in service frequency does not of itself indicate that service levels have improved, For example, if average vessel sizes declined significantly so the level of service may be reduced even though the frequency of service has increased, since the monthly capacity available to shippers would be less and voyage duration would be longer.
Capacity of itself is not an indicator of service levels, it provides an indication of the carriers' ability to meet shippers' demand which is important to note that vessel capacities presented here are optimum capacities and do not take into account weight limitations and the fact that some of this capacity may be used for cargo from other countries such as New Zealand. Ocean liner are illustrious from other suppliers of sea transport because they are committed to regular schedule of service between particular port at a price which fixed in the short run more over the shipping line agree to satisfy all reasonable needs of the respective shipper in both quantity and quality of service.
The Globalization of business and the departure of ‘just-in-time' inventory management has increased shipper preference for intermodal or door-to-door transport services, although facts given to suggests that this trend has been less marked in Australia than in the United States or Europe. While a single transport provider usually coordinates the intermodal service (so that the shipper has a single point of contact and receives a single bill of lading), the physical transport service may be provided by several land and sea carriers so Liner shipping operators have responded to shipper preferences by offering shippers a range of transport options, including door-to-door and terminal-to-terminal services.
The liner industry is necessarily responsive to trends, and nobody appreciated. What changes were going to occur in the second half of the twentieth century? In the late 1940s and 1950s, liner companies were thinking primarily in terms of replacements for those conventional ships that had been lost in the Second World War But reconstruction and returning servicemen with significant back pay to dispose of, created a post-war boom, and wages rose sharply, reflecting labor shortages as well as being partly intended to stave off the expansion of Communist ideology. That situation affected the previously labor intensive liner industry, pushing up crew and shore labor costs and squeezing liner company profitability. After the Eighteen years the Second World War, Carrefour opened the world's first hypermarket in outside Paris. Five years later the first fully cellular container service started operations, although carriers, who otherwise faced the prospect of block obsolescence and the requirement for simultaneous replacement of the by now 25-year-old replacement fleets that had been introduced after the war, were nervous about introducing a system that, by very specifically defining the way cargo had to be shipped, reduced cargo owners' ability to call the shots, and particularly affected the sorts of cargo in which British and American liner cargo exporters were strongest modified shipments to specific importers.
Acceptance of containerization by smaller and niche liner operators, labor, port authorities and other vested interest was slow, but cargo-owner enthusiastic participation came much quicker than the liner companies had expected. The surprising growth of demand for container services over the last almost 40 years has been both an annoyance and a lucky thing to the industry. It has put great pressure on carriers' balance sheets as a result of the unchangeable demand for capital, aggravated by the steady decline in freight rates that has so often been consequence of technical innovation. The world's growing dependence on container liner services and the size of profits recorded by carriers in the middle years of the first decade of the twenty-first.
As shipping companies adjust to a dynamic and rapidly changing environment so do the financial methods and instruments available to rise funding and materialize vital investment budgets. The core business strategy of shipping companies in recent days is gradually shifting from simple profit maximization to an increase in firm market value.The following achievement of shipping firms should consistently focus on promote investment plans that bear growth potential and have positive returns which outperform more than requirement of costs undertaken. The intermediaries to provide the funds required to financing new investment projects and sustain business growth, fresh funds are channeled to shipping firms in need through the issuance of securities
One significant path to economic development is shipping and this is because of their offer cheap freight rate and the large volume of freight transported and according to compared with the other modes of transport, for example air, water transportation offers the cheapest freight rates Adam Smith, “writing in the last quarter of the eighteenth century (1776), noted that shipping is instrumental to economic development”. In his book The Wealth of Nations he argues that the key economic power in capitalist societies is the division of labor, and the scope of the market determines the extent to which this can be practiced because the limited nature of the business will equally limit the degree of specialization. Shipping as a source of cheap transport, Smith pointed out, opens wider markets to specialization.
The idea third party logistics providers are as basic as deficient to have someone else perform the job for you instead of exporters who facilitate according to maintain their transportation or distribution and as so on. 2007).Supply chain management applications have a small number of capabilities in general. The data must be available to a user anyplace in the world; it should be correct and flexible, visible, and fast. With the help of supply chain software they can attain inventory efficiency, quicker information flow additional accurate determinations of when and how much resources should be purchased, manufactures, or moved and careful monitoring of events and inventory within and outside the venture and electronic enterprise association, which replaces manual linkage .These systems can assist companies integrate similar process spread over different areas and limit unnecessary activities, enhancing their ability to manage with customer needs and meet product quality principles.
The requirement of marketing and customer service exploitation organizations that work together to create and retain potential market positions for end products .Unlike the case of supply chain management, there is no well-established approach to design chain management or marketing chain management, It should be noted, how ever, that through the ideas and practices of concurrent engineering, design for manufacturability, design for logistics, and mass customization, the discipline of supply chain management has already been concerned with its own integration with design chain management. It is evident that in the current business environment of keep competition, of fast technological and market changes, and of demanding customers, the successful delivery of end products and services to the right markets at the correct time requires integrated operations of the marketing chain, the design chain, and the supply chain, In order for the supply chain, design chain, and marketing chain to be integrated, the resulting integrated system may be characterized by a network of knowledge and competence in manufacturing and distribution, and in design and marketing that the companies bring to the table., it seems reasonable to call such integrated systems knowledge supply networks.
The Researcher defines the “Big Middle” as the market space in which the bulk of suppliers compete for the majority of respondent and the preponderance of expenditures occur. It is the space in which retailers wish to exist in their quest for increased revenues, scale economies, and profits, the Big Middle appears in any economy in which huge scale retailing has develop, it is a mind space that lies between other competitive arena, with the help of low-price fringe and the innovative fringe. Low price fringe retailers use basic merchandise and low prices to compete though other elements of the retailing mix are present, they are not the primary reason people shop at these stores. Although a retailer does not have to be in the Big Middle to be successful in the short run, those that become the largest and, by implication, the most successful, are inexorably drawn there over time in their search for scale economies, increased revenues, and incremental profits
The Supply Chain is an integrated process from raw from of material to Finish goods reaches to consumer, the supply chain mainly involves the following process/functions:
- Production Planning
- Ware house and Distribution
It's all a function of the “core competency” plan that has producers concentrating on developing and creation their goods, and then hire an external firm direct exactly how those goods will get to the customer
The Brief identifies intermediaries as commonly independent 3rd party that play an essential part in collaborative activities supporting any aspect of the innovation procedure for the joint advantage of 2 or more parties, Intermediaries are seen to play a key role in the market for information within relation to the relocate and translation of facts and technologies from creators, but not always, located in research organizations, to application and use in a business (commercial) context
The investigate point out that businesses that do not contribute in networks or other forms of non-market based interaction next to the value chain are improbable to thrive. There is a rising identification that markets are community as well as economic institutions and those industries, or more mainly business owners and managers, do business on the origin of personal associates and associations established through a choice of formal and semi-formal organizations and communities
A wide range of organizations perform as intermediaries for welfare recipients. These organizations comprise nonprofits, for-profit companies, learning institutions, and government or quasigovernment agencies. The organizations that operate as mediators bring a wide range of knowledge to the job of linking welfare recipients with jobs.
The allocation is the procedure of moving a product from its manufacturing basis to its customers. The focal point of allocation logistics is the shipment of goods from the producer to the customer.
Distribution logistics comprise all actions associated to the provision of finished products and merchandise to a client. The good can be dispatch straight from the production process or from the trader's stock located close to the production site or, possibly, via additional logistics is a market-linked logistics system. The word logistics has originated from the Greek word logistics and the Latin word logistic, meaning the science of computing and calculating.
The job of the International freight forward is to move the supplies from one place to another place on the given time frame and make sure that the delivery will be on time and economical as well. They arrange the resources according the needs and requirements of the customer like Transportation from shipper's factories to ports
Packing or consolidation of cargo documentation
- Customs clearance
- Shipping (land, sea and air or combination thereof)
- Unpacking or deconsolidation is required
The problem of freight forwarding have to be considered at an early stage of the growth of the export marketing map as it raises numerous concerns that need to be addressed rapidly not only does the exporter want to appreciate which to stipulate and work to, but the technique of transport also wants to be considered ( road, rail, sea, air)
The traditional freight forwarder's market is defined as “managing the door to door transportation of goods (larger than parcels but smaller than bulk) by reselling transport capacity purchased wholesale. The freight forwarding industry was impact by two events over the last two decades. First, the swing to just-in-time manufacturing since the late 1980s has increased the importance of transport. Second, world trade has continued to expand and has accelerated since the 1993 GATT round. Both those developments meant that the markets for forwarding have grown considerably, bringing with it a large number of profitable opportunities, all of which involve information technology on a global scale
A freight forwarder is a person or company who arranges transportation for other people's goods against the charges, since the transportation of goods between two locations will often involve multiple transportation choices (e.g. truck, rail, ship, air), a freight forwarder will usually be involved in coordinating the transportation of goods where different carriers are required for different portions of the journey. The freight forwarder arranges for these different modes of transportation, but might not necessarily be occupied in the actual carriage of the goods or handling of the freight, and may not even issue a bill of lading.
Freight forwarders may assume one of two legal roles: agents and principal contractors. The liability of a freight forwarder will depend on which role they assumed when agreeing to make the shipping arrangements. This characterization is not always black and white, and may require a careful factual analysis.
Some time freight forwarder may act as an “agent” for a shipper/owner of goods. When acting as an agent, a freight forwarder will generally not guarantee that goods will reach a final destination, but rather may only assume responsibility for the logistics of the delivery process. As an agent, a freight forwarder will usually operate in one of the following ways……
- By receiving commissions on bookings made with the actual carriers, calculated based on the transportation services to be performed.
- By charging the shipper/owner a fee calculated as a percentage of the total shipping expenses.
Accordingly, the freight forwarding agent should disclose all of the carriers' costs to its customer since it is the customer who ultimately selects and contracts with the various carriers.
The recent emergence of carriers who offer a package of transportation services such as door-to-door delivery, which includes packing and assembling of goods into containers and arranging for multiple modes of transportation, has led some freight forwarders to start acting as “principal contractors” in direct competition with carriers who offer transportation services packages. When operating as a principal contractor, the freight forwarder will usually charge the shipper/owner of the goods a straight freight charge for the delivery of the goods, the freight forwarder is entering into a contract with the shipper/owner to deliver the goods to a final destination. According to above the freight forwarder is acting as a principal contractor, even though the actual carriage to that destination may be undertaken by one or more successive sub-carriers.
The primary responsibility of a freight forwarding agent is to use reasonable care when selecting carriers to transport the goods. The freight forwarder may be held liable in tort or for breach of agreement if it fails to live up to its system/procedures in this regard, would have the onus of proving that the freight forwarding agent had breached this duty.
Where a freight forwarder acts as a principal contractor rather than an agent, so far as a shipper/owner of the cargo is concerned, the freight forwarder is a carrier. A transporter has a responsibility to carry goods safely from the place of shipment to the place of delivery, and the shipper/owner will have a right of action against the freight forwarder on that basis.
1. According to the law a public carrier has a extensive degree of liability for any scratch to goods that has been entrusted to him for shipment, and in some cases, his responsibility may amount to almost that of an insurer of the cargo against the loss unless it can be established that the loss falls within a moderately some classes of exceptions, namely where the damage is caused by an Act of God, the public enemy, an act or default of the shipper or owner, or natural shrinkage.
The freight forwarder may be held to the standard of a private carrier. He is responsible for any scratch to goods that have been entrusted to him for transportation. A freight forwarder, in these circumstances, is duty bound to take the similar care of the goods as would a careful and prudent person of his own property. Where goods are damaged while under his charge, he may only escape liability by establishing a complete absence of negligence for damaged goods Finally, the freight forwarder may be subject to certain contractual or statutory liabilities and protections that would be imposed on actual carriers in similar circumstances, for example, where the freight forwarder has issued a bill of lading for the goods. Significantly, this may include shorter limitation periods in which to bring an action against the freight forwarder, or monetary limits on responsibility based on the number of packages being accepted or the weight of the merchandise.
Following are the selecting criteria to select the freight forwarder
Cost: Keeping expenses down will always be one of the majority significant criteria for any exporting business in the first instance to ascertain the finest price. Rates among forwarders always vary because some forwarders focus in some target but not others, so their prices for those places will always be better.
Members of the British International Freight Association (BIFA). ‘BIFA' is the Professional association for freight forwarders: to become licensed for membership, forwarder must adhere to certain standards and system. This results in normal procedures, which have to be maintaining in all areas of their operations. However, at the same time as it may be preferable to the exporter for the freight forwarder to be an associate of BIFA, it is not against the law for them to operate without membership and does not mean they will not be able to offer a quality service.
Traditionally, the function of the FF was just to undertake shipping on behalf of exporting agents. However, they must now present an entire choice of extra services to stay with the rivalry.
- Export shipping this is still the key position for most FF.
- Export records suggest. Forwarders are continually trade with export transportation so it is very important for them to remain up to date with records requirements for the countries with which they do trade. It will be surrounded by their own attention to express any information and counsel to existing and possible exporters, so they may get the trade when transport transportation is necessary.
- Storage: FF now possess depots and warehouses as well as offices, and are enthusiastic to stock up goods for exporters for a number of reasons.
- Order Picking: Many FF, such as mail order companies, may stock up a big Quantity of merchandise with forwarders, which may be broken down and consolidated into commands as and when they are processed at the company's building
To meet the increasing demands of global manufacturers (and to seek a better financial return) more carriers are offering multimodal and door-to-door transport services rather than just sea carriage (BTCE 1995a, p. 8). Competing against carriers in offering multimodal and door-to-door services is an increasing number of freight forwarders. Freight forwarders book and pay for blocks of container slots, at a discount from carriers, for some or all sailings of liner vessels, and sell these spaces on to shippers. Though forwarders compete with carriers for customers, they offer carriers a stable cargo base. In the United States and Great Britain one third of all liner cargo is handled by freight forwarders and in Germany the figure is more than three quarters.
For a number of years shippers have enjoyed relatively low (and often falling in nominal and real terms) freight rates. Meyrick & Associates stated: According to UNCTAD (1998), average container freight rates to and from Europe fell, in nominal terms, by around 10% between 1991 and 1999.
Low profits may be a force driving carriers toward strategies involving alliances, mergers and building larger ships in an effort to capture economies of scale and scope. Concluded that in general, ocean carriers have returned less value to shareholders than other transportation modes and have underperformed US equity benchmarks, the view is that profitability of liner carriers is poor because of intense competition rather than lack of efficiency.
Logistics participate a significant part in determining several country's competitiveness in the worldwide market. Research has recognized that such expenses vary from 10% to 30% among countries depending on the competence of their transport and international FF services. A lot of countries, an incompetent logistics communications impose far better economic charge than tariff hinder restricting market access. The function of the global FF as the “architect of efficient logistics” is acquire rising significance as global traffic becomes driven by competitive market forces. Countries with the ability to ensure timely and safe transportation of goods among their main producers and final consumers are likely to win rising market share in the emerging world trade surroundings
CHAPTER # 3 RESEARCH METHODOLIGY
3.3. Research Design
3.5. Data Collections
3.6. Data Analysis Techniques
This chapter discusses the methodology. The methodology in this study gives us the guidelines for information gathering and processing. Researcher intends to identify the impact of freight forwarder in shipping industry of Pakistan; therefore the methodology of this research will be phenomenological research approach. Phenomenology holds that any attempt to understand professional reality has to be grounded in people's experiences of that professional reality. Hence, phenomenology insists that Current understandings have to be ‘bracketed' to the best of our ability to allow phenomena to ‘speak for themselves; Hence, phenomenology becomes an exploration, via professional experience. This chapter will include research purpose, research approach, research strategy, and data collection methods, expected models of analysis and quality standards.
Research can be carried out in different ways depending on the research problem before the investigation is started, they divide research into three different categories: exploratory, descriptive and explanatory. Exploratory research is useful when the problem is difficult to limit, when the perception of which model to use is diffuse and it is unclear what characteristics and relations that are important . The reason of an exploratory research is to collect as a great deal of data as possible concerning a specific topic. It is additional ordinary to use many diverse sources to collect this data (Patel and Davidson, 1994). An exploratory learning ought to be intended by stating a reason and stating the criteria to moderator the examination successful
The purpose of this research will to determine the impact of freight forwarder in shipping industry, the study is Exploratory to describe in detail for better understanding, and the issue will be analyzed on data gathered through unstructured base interviews from the top management of shipping line and freight forwarders. To gather these sources basically document analysis will be undertaken for collection of data and the need will be analyzed whether the Freight forwarders impact in shipping industry or not, it is beneficial for the shipping industry and exporters or not. Weather the involvement of freight forwarder in shipping business the line risk reduces or not. Weather the exporters are doing business with healthy environment or not. No previous research has been done and this will be the first of its kind to be undertaken
After the selecting the method the research go for the selection of the approach for research in the process there are mainly two approaches.
There are 2 major research approaches to prefer from when conducting research in social science: qualitative or quantitative method. There is single important difference between these 2 methods. In the quantitative approach, consequences are based on information and figures that are obtainable in figures. Whereas in the qualitative approach where focus lies on telling an event with the use of words. Which approach to choose depends on the difficulty meaning together with what type of information that is needed? The two approaches can in cases where it is suitable also be combined.
The purpose for both the qualitative and quantitative approach is to create a superior considerate of the society and to understand how individuals, groups and institutions act and have an power on each other. To reach each purpose different paths are however taken. The quantitative approach uses generalizations, based on the processed results of the investigation. For the qualitative approach the research problem is described out of the situation as a whole, without basing it on generalizations. According to Yin both methods have strengths and weaknesses. The approach best suited depends therefore on the specific study's research problem and accompanying research questions.
Qualitative research is highly contextual, being collected in a natural ‘real life' setting, often over long periods of time. Hence, it goes beyond giving a mere snapshot of events and can show how and why things happen - also incorporating people's own motivation, emotions, prejudices and incidents of interpersonal cooperation and conflict, comment: Interviewing is a powerful way of helping people to make explicit things that have to been implicit - to articulate their tacit perceptions, feelings and understandings. The majority ordinary examination of qualitative data is observer impression. That is, expert or layman observers examine the data, form an impression, and report their impression. The one of the type of qualitative research is phenomenon theory. Qualitative researchers, by contrast, are part of a phenomenological tradition where no unambiguous objectivity recognized; the way individuals construct the meanings of phenomena is important
The approach best suited depends therefore on the specific study's research problem and accompanying research questions. The researcher in this paper uses the phenomenological approach of qualitative research where the researcher focuses on the actual experiences of the shipping industry.
3.3. Research Design
Qualitative methods will be use in this research, the principal strategy will to adopt a qualitative analysis using focus interviews. The data will be collected through unstructured interviews from the ECOs and top management from the Shipping line and Freight Forwarders companies this will elicit information regarding the impact of freight forwarder in shipping line.
The researcher uses the phenomenological approach for this particular research. The approach consists of in-depth focus interviews in the shipping industry.
Phenomenology: Qualitative research examines life experiences (i.e., the lived experience) in an attempt to appreciate and give them sense. This usually is done by methodically collecting and analyzing narrative resources using method that ensures trustworthiness of together the data and the results. Phenomenology is one of many types of qualitative research that examines the lived experiences of humans. (1) Phenomenological researchers hope to gain understanding of the essential "truths" (i.e., essences) of the lived experience. The purpose of the phenomenological approach is to illuminate the exact, to recognize phenomena through how they are apparent by the actor in a situation. In the human sphere this normally translates into gathering ‘deep' information and perceptions through inductive, qualitative techniques such as interviews, negotiations and participant observation, and representing it from the perspective of the research participant(s). Phenomenological approaches are based in a paradigm of personal knowledge and subjectivity, and emphasis the importance of personal perspective and interpretation.
Phenomenology method: A variety of methods can be used in phenomenological-based research, including interviews, conversations, participant observation, action research, focus meetings and analysis of personal texts. If there is a general principle involved it is that of minimum structure and maximum depth, in practice constrained by time and opportunities to strike a balance between keeping a focus on the research issues and avoiding undue impact by the researcher. The establishment of a good level of rapport and empathy is critical to gaining depth of information, particularly where investigating issues where the participant has a strong personal stake. Research strategy is define as the universal map to use in arrange to reply the research questions .The researcher will analyze the Freight Forwarder's impact factors in shipping industry through Phenomenological approach
According to Graziano and Raulin it is not likely to gather and increase data from all the obtainable sources to solve the investigate problems and to find the solutions. By using a small number of units of a given populations as a basis to make conclusions about the whole population is called sampling. Samples of this research will be freight forwarder and shipping lines.
Interview will conduct from four responded from the freight forwarder and shipping line .Throughout the research paper the participants has been coded as RF1 (Responded 1 MR. Masoor S.Khan, Managing director of freight forwarder Schenker (CEI Logistics Pvt ltd), RF2 (Responded 2 Mr. Mohammad Ayaz, C.E.O of Freight Forwarder (Freight Logistics Pakistan Pvt ltd)), RS3 (Responded 3 Mr. Farooq Tareen C.E.O of Shipping line CMA CGM Pakistan, RS4( Responded 4 Capt Akram Ali Country General Manager of MSC Agency Pakistan Pvt Ltd) .Researcher chooses to conduct study on Pakistan shipping industry
3.5. Data Collection
There are different types of interviews and the purpose of the interview will determine which interview procedure to use. Interviews are done by method of open or closed ended questions and answers. The answers obtained from respondents will be the data that need to be analyzed according to, in-depth Interviews
In this research study, the researcher conducted focus interview with professional experts of the shipping industry and to know to phenomena of how freight forwarder impact in shipping industry. Researcher conducts four interviews with the top manager from the freight forwarder and shipping company.
Interview schedule: Having the constraints, like limited time period and the fact that only one researcher was responsibility the research, in this situation it was considered most suitable and useful to conduct un-structured interviews/expert opinion in order to reach the core of the theme rather than administering the written questionnaire.
The data collection types involve verbal questioning of experts/ respondents, from the freight forwarder and shipping line individually. Answers to the questions posed during an interview can be recorded by writing them down (itself or immediately after the interview) or by tape-recording the responses, or by a combination of both. Interviews can be conducted with varying degrees of flexibility.
In this study expert opinion was main method of data collection and for this four expert opinions were taken, two were conducted from the Freight Forwarder companies and the remaining two were conducted from the shipping line companies.
In this study Expert opinions were conducted with top level management with managing director and C.E.O. The interviews were conducted in a separate room for the sake of confidentiality. This measure gave participants a free and safe environment to share their ideas and base on their experience. The expert opinion lasted for about half or more than half an hour on many categories emerged during individual interviews and literature review. This discussion proved very fruitful as the participants, being experienced in shipping line business. They were fully aware about the whole phenomena under discussion
3.5. Data Analysis Techniques
The component in phenomenological design is analyzing the contents of the transcriptions. There are four levels of phenomenological analysis; the first level is description of the phenomena as revealed in the interviews. The transcribed narratives identify and describe the qualities of human experience and consciousness that give the person being studied his or her unique identity and outlook.
Level two in phenomenological analysis is the identification of themes or invariants that emerge from the descriptions. Themes refer to commonalities present within and between narratives. Themes are identified based on the importance and centrality accorded to them rather than on the frequency with which they occur.
Level three is the development of notice / nomadic correlates. These correlates are the subjective reflections of the emergent themes. Stating that it makes the subordinate "feel important and valued" is a subjective reflection of the objective statement above and, thus, constitutes a "noesis." Notice/nomadic correlates represent the individual's perception of the reality of the phenomena under investigation. Interpretation of these correlations is fundamental to the identification of essences or of what an experience "essentially is."
The final step in the process is the abstraction of essences or universals from the notice/nomadic correlates. This is accomplished through intuition and reflection or eidetic reduction. If Noemi is described as the experience and noesis as the how of experience, then essence may be described as the why of experience. In this study the researcher follow the all these level accordingly
The mean of trustworthiness in a qualitative analysis is to support the case that the inquiry's response is “worth paying attention to”.In any qualitative research findings, there are four issues of trustworthiness require attention and which are credibility, transferability, dependability, and conformability.
Credibility:Credibility is an assessment of whether or not the research answers represent a credible conceptual understanding of the information drawn from the participant's original information
To improve credibility of the research the researcher has used three techniques.
The two managing director from freight forwarder companies and two C.E.O from the shipping lines who have long time experience in shipping industry, researcher conduct the experience base unstructured interview. They share their ideas and experiences.
1. After collecting a data the researcher has continue provide daily report to Dr. Noor Ahmed Memon who was research supervisor during the process of data analysis. During meetings, Dr. Noor Ahmed Memon received regular progress reports of the project, and posed questions regarding the research question, methodology, ethics, trustworthiness, and other research issues. Dr. Noor Ahmed Memon made pointed observations, and suggestions throughout the process.
2. Third technique was the develop the themes from the interviews transcript with the advise of Dr. Noor Ahmed Memon. In the process generate the themes researcher analysis the themes with each responded interview and provide a summary of the data analysis.
Transferability: Transferability is the degree to which the findings of this inquiry can apply or transfer beyond the bounds of the project. The complete set of data analysis documents are on filed and available upon request. This will help and provide guide line to other researchers in other research or cases.
Dependability & Conformability: Dependability is an assessment of the quality of the integrated processes of data collection, data analysis, and theory generation and Conformability is a measure of how well the inquiry's findings are supported by the data collected. After completed the data analysis and conclusion the research supervisors thoroughly examined all of the original transcripts, data analysis documents, field journal, and the text of the dissertation there self. Based on established precedent in Qualitative Research, they assessed both the dependability and conformability of the project, as well as the completeness and availability of the documents.
CHAPTER # 4 RESEARCH FINDING
4.1. Freight Forwarder in Shipping Industry
4.2. Freight Forwarder Problems with the Shipping Line
4.3. Shipping Line problems due to Freight Forwarder
4.4. Relationship between the Shipping Line and Freight Forwarder
4. RESEARCH FINDING
This chapter will present an analysis of experiential data gathered. The order of the analyzed material will follow the order in the conceptual framework and themes which come from unstructured interviews. Data analysis will be conducted in order to elaborate the Impact of freight forwarder in shipping industry .This study basis on professional‘s experience and perception which cover the with the conceptual frame work.
Researcher has conducted interviews with four responded coded, RF1 (Responded 1 MR. Masoor S.Khan, Managing director of freight forwarder Schenker (CEI Logistics Pvt ltd), RF2 (Responded 2 Mr. Mohammad Ayaz, C.E.O of Freight Forwarder (Freight Logistics Pakistan Pvt Ltd), RS3 (Responded 3 Mr. Farooq Tareen C.E.O of Shipping line CMAC GM Pakistan, RS4 (Responded 4 Capt Akram Ali Country General Manager of MSC Agency Pakistan Pvt Ltd).They have long time experience of shipping industry. According to above experts' opinion the following themes come which will explain accordingly table and further each one in detail……….
Table of 4.1 Themes
Sub- Themes 1
Sub- Themes 2
Sub- Themes 3
Sub- Themes 4
Sub- Themes 5
Sub- Themes 6
Sub- Themes 6
Cause of Impact factor of Freight Forwarders
Pin to point services
Best possible freight rate
Maximum Credit days
Check and Balance system
Shutout or hold cntr
Competition of rate
Relationship b/w Freight Forwarder & Shipping Lines
Increase of cargo volume
Decrease the Shipping lines risk
4.1 Freight Forwarder in Shipping Industry
There are some various facilities which freight forwarder offers to exporters than they prefer and move shipment through freight forwarders. The freight forwarders provide Pin to point service, Best possible freight rate, Nominated cargo, transportation at POL and POD, Maximum Credit days, Consolidation & De-consolidation cargo, Check and balance system, custom clearance and Procurement Management through all above facility they grape the position in shipping industry and play a major role between the shipping line and exporters.
Data Analysis of Pin to point service (Door to door delivery):According to all responded the freight forwarder have capable to provide Pin to Point service from the point of production to point of consignee warehouse or directly to retail store. They arrange the transportation from the exporter ware house to the terminal at port of origin and offer clearing agent for the custom purpose and also at point of destination they do issue the cargo from shipping line, clear the clearance to custom at the POD and delivered the cargo to consignee door or ware house if the customer required and also they entertain their customer when the cargo on board. Freight Forwarders continuously tracking the cargo and inform to
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