Posted: October 9th, 2022

Impact of Freight Forwarders in the Shipping Industry

The Implications of Freight Forwarders in the Shipping Business

Please make reference to this.

1. INTRODUCTION TO THE WORK

1.1. An Overview of the Subject

According to its central thesis, the impact of freight forwarders on the shipping industry in Pakistan is being investigated and quantified. This chapter provides a succinct description of the thesis’s introduction. This chapter, which serves as the thesis’s introductory section, contains a summary of the research’s background and rationale for conducting it. As the thesis’s first chapter, it emphasizes the importance of background research and identifies clearly why this research is being conducted.

As a result of the variety of economies of scale and scope that exist in liner shipping, achieving low-cost supply is likely to necessitate some form of industry combination and concentration, or cooperation; this could be accomplished by a relatively small number of large global operators. The reasons for this include the poor economic situation in Pakistan, the fact that shippers’ interests in relation to shipping services coincide with the public interest, and the fact that shippers, who are profit maximizers, have a strong incentive to obtain the best possible service at the most competitive price.

Contextual Frame: Because it transports a significant portion of world trade, the shipping industry is extremely important to the international economy.

Because they cover the entire scale of economics, the industry is moving toward the expansion of liner shipping and the advancement of containerization. Throughout history, the shipping liner industry has evolved into a prosperous age, and containerships have displaced other ship types. In addition, a number of other factors, such as upsizing and route network expansions, have exerted pressure on smaller carriers. Currently, the trend toward an independent process for vessel allocation is becoming more visible, and rising profitability suggests that carriers will seek to acquire additional assets of their own in the future.

1.3. The Purpose of the Study

It will only include shipping lines and freight forwarders in Pakistan, specifically those who are familiar with the concept and practice of how they conduct business and provide service to customers. No other fields will be considered for inclusion. This research will only look at factors that have an impact on the shipping industry’s business and that may result in an increase in trade, increased profitability, a reduction in shipping line risk, or any combination of these factors. Therefore, all operations and other activities that contribute to the revenue of shipping lines will be excluded from this calculation. It will only include those forwarding companies in Pakistan that are directly involved with international forwarders and the shipping line business, and it will not include any other companies.

Questions for Further Investigation:

What are the factors that influence the decision between shipping lines and freight forwarders for exporters and buyers?

What are the most pressing issues that freight forwarders are experiencing right now with shipping lines?

What are the most pressing issues facing shipping lines today as a result of the involvement of freight forwarders?

What is the nature of the relationship between freight forwarders and shipping lines, and how do they plan to grow and expand?

As a developing country with foreign investment and an internal market, our justification and scope are as follows: Due to a lack of sufficient resources to meet even our own consumption needs, we must export and import around the world. For export and import, we have two sources around the world, which are shipping lines and air lines, which connect to every destination in the world, allowing us to consume international products and trade our local products around the world for the purpose of generating revenue.

The purpose of this thesis is to provide a more comprehensive understanding of the freight forwarding and shipping lines industries. This research will provide a clear picture of the benefits and relationship between freight forwarders and shipping lines, as well as between shipping lines and exporters. The findings of this study will aid in understanding the significance of freight forwarders in the shipping industry, as well as how they can be used most effectively in this industry.

International Freight Forwarder: The job of an international freight forwarder is to transport supplies from one location to another within a specified time frame while ensuring that the delivery is both timely and cost-effective. They allocate resources in accordance with the needs and requirements of the customer, for example,

Shippers’ factories to port destinations are transported.

Transportation documentation is packed or consolidated.

Clearance of customs

Shipping & Handling (land, sea and air or combination thereof)

It is necessary to unpack or deconsolidate the shipment.

Clearing Agent: A person who has been certified by the Central Board of Revenue to complete the official procedure and assemble, on behalf of the merchant, the disbursement of custom duties, taxes, and other levies.

A shipping agent is a person who has been licensed by the Central Board of Revenue through the Customs authorities to provide services to vessels that call at Pakistani ports and terminals. The agent represents the vessel/interests carrier’s and is in charge of arranging for the payment of port fees.

Shipper: A merchant, manufacturer, or supplier who sells goods to customers in foreign countries.

Market power can only be sustained in environments where entry and exit barriers are high. Potential barriers to entry include regulatory and other essentially man-made or institutional barriers, as well as economic barriers driven by market characteristics.

When the barriers to entry and exit are low, competition will increase, and profitability will decrease in proportion to this increase in competition.

The process of transporting goods from one location to another, whether by sea, land, or water, is referred to as shipping liner business. Additionally, the process has been completed underway between the buyer and the seller, with the negotiation and entering into an agreement/contract based on the terms that have been mutually agreed upon.

Their terms would include the description and quantity of goods, the time period within which the merchandise must be delivered, the price, and any documentation requirements that may be necessary. Following the conclusion of the agreement, the seller will typically contact the forwarding agents who will be in charge of transporting the goods from the seller’s location to the ship. The interests of shippers in relation to shipping services are consistent with the public interest, and shippers are required to maximize profits in general, while shipping lines are required to provide the best-possible service at the lowest-possible price in particular.

In this day and age, if the shipper possesses the necessary knowledge and expertise in the field, the shipper may also serve as the forwarding agent, as shown in the following examples. As soon as the forwarding agent contacts the shipping line, an agreement is reached based on the terms and conditions that have been mutually agreed upon. This agreement covers the transportation of goods from the point of origin to the point of destination and then to the shipping line. Custom clearing agents are then assigned by the shipper to handle customs-related documentation, though this may also be handled by the forwarding agent. The goods are then transported by the forwarding agent to either the port of origin or the shipper’s shipping line. In some cases, the goods are picked up from the shipper’s factory, while in others, they 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 shipping line’s port of origin. Once the goods have been loaded onto the ship, they are transported to the destination port, where they undergo a similar process until they arrive at the buyer’s location.

The cargoes were mostly transported directly from the country of origin to the country of destination, or through the involvement of a transshipment port. Shippers today have the option of choosing between a direct service and a service via a transshipment port; however, due to longer transit times and the possibility of cargo being damaged during transshipment, the quality of transshipment services is often comparable to that of direct services.

Almost certainly, this is due to the trade imbalance, which means that exporters are competing with increased volume and the involvement of supply liner efficient service, which is causing the problem.

When it comes to liner shipping services, freight rates are the most important factor to consider, and the requirement for competitive control of liner freight plays a significant role in the liner business. These general trends are illustrated by various freight rates cited in industry publications.

As a first step, identify the relevant markets where a particular transportation service will be in high demand and can be clearly defined in terms of demand density. International trade in bulk agricultural commodities has recently risen in importance in the global economy, as has the trade in refined agricultural commodities. International shipping has received relatively little attention from economists. Transport costs between countries can be a significant impediment to trade, having an effect similar to that of tariffs and institutional constraints in effect. Changes in ocean transportation can have an impact on the domestic grain transportation systems of major exporters.

The shipping lines rely on service providers to transport cargo from one location to another in accordance with the needs of their customers, as well as the nature of the cargo and the frequency with which it is transported. Aspects such as transit time, ports-of-call, and dependability are all important characteristics of service quality that can, in certain circumstances (for example, ‘just-in-time’ manufacturing or the transportation of consumable cargoes), be more important than simple price considerations.

Businesses that do not participate in networks or other forms of non-market based interaction adjacent to the value chain are unlikely to prosper, according to the findings of the study. There is a growing recognition that markets are both social and economic institutions, and that industries, or more specifically, business owners and managers, conduct business on the basis of personal associates and associations formed through a variety of formal and semi-formal organizations and communities, rather than on the basis of economic institutions.

A diverse range of organizations serve as intermediaries between welfare recipients and the rest of the world. Nonprofits, for-profit businesses, educational institutions, and government or quasi-government agencies are all examples of this type of organization. The organizations that act as intermediaries bring a wide range of expertise to the task of connecting welfare recipients with employment opportunities.

The process of transferring a product from its manufacturing base to its final destination is known as allocation. The shipment of goods from the producer to the customer serves as the focal point of allocation logistics operations.

Distribution logistics encompasses all of the activities involved in the delivery of finished goods and merchandise to a customer or customer base. The product can be dispatched directly from the manufacturing process or from a trader’s stock that is located close to the manufacturing site, or it can be dispatched via additional logistics, such as a market-linked logistics system. The term logistics derives from the Greek word logistics and the Latin word logistic, which both mean “the science of computing and calculating” and “the science of computing and calculating.”

The job of an international freight forwarder is to move supplies from one location to another within a specified time frame while also ensuring that the supplies are delivered on time and at a reasonable cost to the customer. They allocate resources in accordance with the needs and requirements of the customer, for example, Shippers’ factories to port destinations are transported.

Transportation documentation is packed or consolidated.

Clearance of customs

Shipping & Handling (land, sea and air or combination thereof)

It is necessary to unpack or deconsolidate the shipment.

Freight forwarding is a problem that needs to be considered at an early stage of the development of the export marketing map because it raises a number of issues that need to be addressed as soon as possible. Although the exporter is interested in knowing which specifications and work methods are appropriate for his or her business, the mode of transportation is also important ( road, rail, sea, air)

This market is defined as “managing the door-to-door transportation of goods (larger than parcels but smaller than bulk) by reselling transport capacity that has been purchased at wholesale.” Over the last two decades, two events have had a significant impact on the freight forwarding industry. First and foremost, the shift to just-in-time manufacturing, which has been underway since the late 1980s, has increased the importance of transportation. Second, since the conclusion of the GATT round in 1993, world trade has continued to grow and has even accelerated. The result of these two developments is that the forwarding markets have expanded significantly, bringing with them a large number of profitable opportunities that all rely on information technology on a global scale.

When goods are transported between two locations, a freight forwarder is typically involved in coordinating the transportation of goods where different carriers are required for different portions of the journey. Because the transportation of goods between two locations will often involve multiple transportation options (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. When arranging for these various modes of transportation, the freight forwarder may or may not be directly involved in the actual carriage of the goods or handling of the freight, and may or may not even issue a bill of lading.

Agents and principal contractors are the two legal roles that freight forwarders can play in the transportation industry. The liability of a freight forwarder will be determined by the role that they agreed to play when they agreed to make the shipping arrangements for the customer. This type of characterization is not always black and white, and it may necessitate a thorough factual investigation.

Occasionally, a freight forwarder will act as a “agent” on behalf of a shipper or owner of goods. It is common for a freight forwarder acting as an agent to make no assurances that goods will arrive at their final destination, but rather to assume sole responsibility for logistics related to delivery. A freight forwarder, in his or her capacity as an agent, will typically operate in one of the following ways……

Obtaining commissions on bookings made directly with the actual carriers, which are calculated in accordance with the transportation services to be provided,

When conducting research in social science, there are two major research approaches to choose from: the qualitative method and the quantitative approach. There is only one significant difference between these two approaches. Figures and information that can be obtained through the quantitative approach are used to determine the consequences. The qualitative approach, on the other hand, is concerned with telling the story of an event through the use of words. Which approach to take will be determined by the difficulty of the problem, as well as the type of information that will be required. When it is appropriate, the two approaches can also be combined in some instances.

The goal of both the qualitative and quantitative approaches is to develop a more comprehensive understanding of society and to better understand how individuals, groups, and institutions interact with and exert influence over one another and their environment. However, different routes are taken in order to achieve each goal. 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

3.4. Sampling

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

As there both (freight forwarder and shipping line) have intense relation to compete the competition between them and both situation the exporters gain benefit and enhance their business.

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