Advantages and disadvantages of agency networks (international versus local)

Posted by Mervyn Timothy on 07 Sep 2021 4:30:00 PM
Mervyn Timothy

Advantages and disadvantages of agency networks (international versus local)

For goods to be transported efficiently, fleet providers either use a freight forwarding network, or they opt to open their own operations base in each area where they operate. Barloworld Logistics is an independent freight forwarder and uses an agency freight forwarding network to ensure the best possible service. Below is some insight into the pros and cons of such an operation.

What is a Forwarding Network?

A forwarding network is a centralised or umbrella organisation that acts as a platform from which various freight forwarders can operate. A forwarding network allows for common rules of engagement, which ensures that all operators are working within defined procedures and known parameters. It provides a structured and safe environment that transport and logistics companies use to ensure goods reach their destination securely and on time.

A forwarding network allows independent forwarders entry into markets or areas where they may not have a base, but where they need to operate to provide the best service to their clients. A proper forwarding network means companies such as Barloworld Logistics work with global partners that are vetted, trusted and working according to common rules in a controlled environment.

Advantages of an International Forwarding Network

1. Pricing:

Network agents tend to be more aggressive in their pricing as every deal, irrespective of the trade lane, is important to their overall business. There’s also no ’bias’ on the different trade lanes and every origin and destination agent works towards the common goal of securing the cargo with the best possible rates.

With some exceptions, independent freight forwarders can offer competitive or lower costs on freight because of their leaner operational models and more extensive carrier options. Independent freight forwarders have more choices in terms of selecting the best routing, carrier and price combinations which, in turn, means they can offer their clients better solutions.

2. Expertise: 

The spread of service offerings and different types of expertise, some very specialised, is expanded and enhanced when an independent forwarder becomes part of a forwarding network.

A network may have one, two and sometimes even more agents in one area, depending on the size of that area. Some agents specialise in specific cargo, such as vehicles for example, which gives companies such as Barloworld Logistics instant access to experts in different fields of logistics.

Working with a ‘sister’ or ’single’ office can be very restrictive if you’re part of a single organisation instead of making use of a network because you are limited to only using one specific agent or office in every region. They may not be able to assist within your timeframe which leaves you in a predicament.

Independent forwarders, however, can move between the different forwarding agents within the same area in the network and draw expertise, best advice and workable solutions for a client from different sources in one place. This opens doors and allows them to give their clients multiple options and services.

3. Reliability:

Independent forwarders within a network must work according to strict criteria and rules. Companies such as Barloworld Logistics must keep their business ethics, financial processes and operational levels at high standards in order to keep operating within the network.

4. Agility:

Independent forwarders are generally quicker to react in situations where flexibility and agility are required. This is due to the uncomplicated and ‘unlayered’ reporting structures and operational mechanisms within such organisations. Independent forwarders can quickly adjust their models to suit a client’s specific requirements without too much hassle or time.

5. Flexibility:

Networks give you access to more than one agent in a country or region giving you the flexibility to switch agents if you experience service issues with a particular agent.

Disadvantages of an International Forwarding Network

1. Financial Constraints:

Some independent forwarders may face financial constraints when it comes to large projects and servicing global accounts. Within a multi-national framework, there is generally financial comfort between offices knowing that they can cover the transactions between the different offices. However, with the independent forwarders, each entity operates separately, and it happens that they sometimes don’t have the funding available to take on large accounts.

2. IT Systems/Platforms:

Big multinational companies must have the ability to operate on the same IT systems and platforms within their global network, and this means they will have a robust system that includes all departments and regions.

Independent forwarders, however, are all autonomous companies and don’t necessarily work on the same or compatible platforms. This can lead to extra administration and complexity when it comes to tracking orders. It is up to each independent forwarder to ensure this doesn’t negatively impact their ability to service their clients.

3. Non Exclusivity:

Some forwarding networks have multiple agents in certain areas. Sharing of information with different agents means that independent forwarders must have solid non-disclosure agreements in place with all relevant parties in the network in order to protect themselves and their clients.

Not sure which model is right for your business? Get in touch with us and let's explore your needs together, contact us.

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Topics: Freight Forwarding