Logistics is an essential industry that facilitates international commerce in a globalized world. Two critical entities that enable international shipping are freight forwarders and Non-Vessel Operating Common Carriers (NVOCCs). Regardless of their differences, both entities can benefit from a robust freight management system that drives operating efficiency.
Understanding the subtle but important distinction between these two models can help logistics providers select the right technology solutions that cater to their specific workflows. If you are a freight forwarder or NVOCC, understanding how the adoption of a robust freight management system that is integrated within a logistics ERP system can help unleash your productivity and accelerate business growth.
Let’s delve deeper into these concepts!
Freight Forwarders vs. NVOCCs
Before we get into the nitty-gritty of freight management systems, let us introduce what are freight forwarders and NVOCCs, as well as their key differences.
Freight Forwarders
These entities are the logistical maestros who manage your goods’ movement from point A to point B. They are intermediaries between shippers and transportation carriers that do not own any vessels; instead, they leverage their vast network of carriers across all modes of transport (sea, air, road and rail) to ship cargo efficiently and economically on behalf of shippers.
NVOCCs
Non-Vessel Operating Common Carriers, or NVOCCs, are akin to freight forwarders but with an added dimension. They function as a carrier without owning a vessel. They buy space in bulk from shipping lines and sell it to shippers, essentially ‘acting’ as carriers.
How are They Different?
- Transport mode: Freight Forwarders can offer services across all transport across air, ocean and land modes while NVOCCs only offer ocean freight services.
- Function: While both Freight Forwarders and NVOCCs do not own vessels and both help to coordinate space with carriers, NVOCCs are contractually regarded as carriers that issue their own bill of lading to the shippers. This difference is of major significance as NVOCCs assume direct responsibility for loss or damage of the goods during transit. On the other hand, Freight Forwarders tend to assume only limited liability as they primarily act as intermediary between the shipper and the carrier.
- Bills of Lading: Freight forwarders typically issue house bills of lading (click here to learn more about bills of lading), which represent their contract with the shipper. On the other hand, NVOCCs issue their own bills of lading to the shipper or its agent.
- Ownership of Assets: Unlike Freight Forwarders, NVOCCs may own containers to offer the same services as carriers.
- Regulatory Requirements: Due to their different functions, freight forwarders and NVOCCs may be subject to different regulations. As an example, NVOCCs typically do not have direct involvement in customs compliance, as that is the primary responsibility of the shippers themselves or their appointed custom brokers / freight forwarders. NVOCCs may also be subject to tariffs and rate schedules filing with certain authorities.
4 Ways How a Freight Management System Can Help!
Whether you are a Freight Forwarder or a NVOCC, managing complex shipping processes manually can be labor-intensive and prone to errors. This is where a freight management system can be a game-changer for your operations.
1. Streamlined Operations
A freight management system effectively organizes and streamlines all aspects of the shipping process. It allows logistics providers to consolidate data, monitor shipments in real-time (NVOCCs will also have greater emphasis on container management that provide visibility into container utilization), handle documentation electronically, and automate various operations. This saves time and reduces the chances of error significantly.
2. Automated Rate Management
Both Freight Forwarders and NVOCCs will benefit from digital tools to compare rates, surcharges, and pricing discounts dynamically. The system can also offer insightful data analytics, equipping companies with the necessary tools to make informed decisions.
3. Integrated Real-time Visibility
Both Freight Forwarders and NVOCCs work with ocean carriers directly. The ability to integrate with carrier’s IT systems will allow them to gain real-time visibility into the shipment status and support carrier selection.
4. Optimized Financial Reporting
A freight management system that is integrated with a logistics ERP can provide core accounting and financial management features such as quotation, invoicing, payment tracking and reporting. Accurate and timely reporting of business performance can help you gain strategic insights.
Bringing It All Together with Freight Management System
In conclusion, Freight Forwarders and NVOCCs are both intermediaries that provide international shipping services. However, they differ in terms of transport mode, function, bills of lading issued, asset ownership and regulatory requirements. Embracing a digital solution such as a Freight Management System can be transformative for both Freight Forwarders and NVOCCs especially in the areas of streamlining operations, automating rate management, providing real-time tracking and optimizing financial reporting for the business.
Contact One Logis today for a chat to understand how our best-in-class Freight Management System can help unleash efficiency for your Freight Forwarding or NVOCC business!