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The Fundamental Roles of Freight Forwarder in


the Execution of International Logistics

Thesis · October 2015


DOI: 10.13140/RG.2.1.3885.1282

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The Fundamental Roles of Freight Forwarder in the Execution of
International Logistics

Kaan Aydin Ataoglu

A dissertation submitted in partial fulfilment of the requirements of the


Birmingham City University for the degree of
Master of Science

Project Supervisor: Christine Lloyd

Faculty of Computing, Engineering and the Built Environment

September / 2015
Abstract
Master`s thesis in Logistics and Supply Chain Management
Title: The Fundamental Roles of Freight Forwarder in the Execution of
International Logistics
Author: Kaan Aydin Ataoglu
Tutor: Christine Lloyd
Date: 01.10.2015
Keywords: Freight forwarder, International Logistics, Custom Clearance,
Competitive advantage, Warehousing and Consolidation.

Introduction: In today`s challenging competition in the international business, the


manufacturers strive for their processed products to deliver its final consignee before
starting competition to the rival ones. However, developing business volume brought
along logistical challenges, so this research attempts to identify the fundamental roles of
freight forwarder and investigate how the fundamental roles can be integrated to execute
the manufacturer firms` international logistics activities smoothly and distribution in terms
of gain competitive advantage, and creating a case study to show the real business
observations and implementation.
Purpose: The purpose of this dissertation is to investigate how the fundamental roles of
freight forwarder can be integrated to transport processed hazelnuts goods and illustrate
freight forwarder`s roles as a formal real sector approach in terms of executing
international logistics activities through the comparison with the centralized transport
service.
Frame of Reference: Based on various sources of literature concerning freight forwarder
and its fundamental roles, interviews by experienced persons on distribution
management and forwarding.

Method: The study is considered as qualitative a case study, but the numerical data is
collected from the interviews in order to calculate transport expenses and used as
quantitative by the abductive research method to take the advantage of the real-business
observations. Secondary is retrieved from the research, report and publications.

Conclusion: Integration of the fundamental roles of freight forwarder to execute


manufacturer firm`s logistics activities, and comparison of the transport expenses of
freight forwarder quotation with the firm`s centralized distribution service based on time,
security and cost.
Table of Contents
Chapter 1 – Introduction ……………………………………………………………….…1
1.1 Project Aim and Objectives …………………………………………………....5
1.2 Case Study Description …………………………………………………….…..6
1.3 Disposition of the thesis …………………………………………………….….9

Chapter 2 - Literature Review ……………………………………………………….….11


2.1 History of Freight forwarding ………………………………………………....11
2.2 Freight Forwarder ……………………………………………………………..13
2.3 Freight forwarder fundamental roles ………………………………………...14
2.3.1 Quotation, Booking …………………………………………………….…16
2.3.2 Custom clearance ………………………………………………………...17
2.3.3 Documentation ………………………………………………………….…18
2.3.4 Freight Consolidation ………………………………………………….….20
2.3.5 Cargo Warehousing ………………………………………………….…...21
2.3.6 Delivery ………………………………………………………………….....23
2.3.7 Insurance ……………………………………………………………….….23
2.4 International logistics …………………………………………………….……24
2.4.1 Subcontractor road transport providers …………………………….…..24
2.5 International Freight Forwarder ………………………………………………26
2.5.1 Integration of Freight Forwarder in Multimodal Transports …………..28
2.5.1.1 Operational factors …………………………………………………...29
2.5.1.2 Transport mode characteristics ……………………………………..29
2.5.1.2.1 Conventional Sea Transport …………………………………....29
2.5.1.2.2 International Road Transport …………………………………...30
2.5.1.2.3 Rail Transport …………………………………………………….30
2.5.1.2.4 Air Transport ……………………………………………………...30
2.5.1.3 Consignment Factors ………………………………………………...30
2.5.1.4 Cost and Tonnage Requirements …………………………………..31
2.5.2 Freight Forwarder as Contracting Carrier ………………………….…...32
2.6 The related government custom clearance transactions ………………….32
2.6.1 Import process ………………………………………………………….....33
2.6.2 Export process …………………………………………………………….34
2.7 Conclusion ……………………………………………………………………..36
Chapter 3: Research Methodology ………………………………………...………….37
3.1 Introduction ………………………………………………………………….….37
3.2 Research Ethics ………………………………………………………….….....38
3.3 Defining challenges and Research Objectives ……………………….….....39
3.4 Developing and Applying Research plan …………………………………....40
3.4.1 Literature Survey ……………………………………………………….….41
3.4.2 Primarily Research ………………………………………………………..42
3.4.2.1 Qualitative and Quantitative ………………………………………….42
3.4.3 Data Analysis and Collection ……………………………………………..42
3.5 Collaboration of research factors …………………………………………….44

Chapter 4: Result and Analysis …………………………………………………….…..46


4.1 Introduction …………………………………………………………….………46
4.1 Case Study operational Structure ............................................................49
4.2.1 Scenario A – Centralised Transport Procedures …………………….. 50
4.2.2 Scenario B – Freight Forwarder Quotation ……………………….…….53
4.2.3 Custom clearance transactions in Turkey ..........................................57
4.2.4 Maritime transport process between Calais and Dover .....................59
4.2.5 Custom clearance transactions in England …………..........................60
4.3 Explanation and Evaluation of process of freight forwarding …………......61
4.4 Result and Conclusion …………………………………………………….….63

Chapter 5: Conclusion …………………………………………………………….……66


5.1 Recommendations and Future research ………………………....….……68
Table of diagrams and charts ……………………………………………………...….70
References ………………………………………………………………………………..72
Bibliography ………………………………………………………………………………83
Appendix …………………………………………………………………………………..84
Appendix I: Abbreviations ……………………………………………………....84

Appendix II: Interview Questions with Hazelnuts firm in Turkey ……………..85


Appendix III: Interview Question with the Freight forwarder Firm …………...85
Appendix IV: Interview Questions with Logistics firm in Birmingham ….…....85

Appendix V: Interview question with subcontractor firm`s manager ……......85


Appendix VI: Interview Information …………………..…………………………86
Chapter 1: Introduction

Globalization affects all sectors deeply and sharply, the global logistics sector has

been subjected with various structural changes, many organizations faced

comprehensive challenges to execute of their international transport activities in the

utilization of global sourcing. Hence, these structural changes enabled global logistics

firms to set up new a customized logistics service provider which is named as freight

forwarder. Freight forwarder is defined as an “architect of transport,” and the main

roles provide efficient specialized transport solutions through integrating its

fundamental roles such as; quotation/booking, consolidation, cargo warehousing,

custom clearance, delivering and insurance for manufacturer firms in the execution of

international transport (FIATA, 2014).

Moreover, it is also an intermediary institution that act on behalf of importers, exporter,

or another companies in order to make transport organization safe, efficient and cost-

effective shipping (Ciltuk.org.uk, 2015). From this perspective, the main roles of freight

forwarder is to arrange appropriate customized transport models by taking the

advantage of the collaboration of the fundamental freight forwarding components in

order to transport manufactured goods to its final destination under convenient

circumstances. Murphy and Daley (1996) said that the most firms employ international

trade specialists to assist with documentation requirements and other vagaries of

cross-border commerce and booking spaces, the payment of freight charges,

shipment consolidation, and the preparation of documentation for smoothly custom

clearance by an expert international freight forwarder.

Nowadays, the manufacturer companies still continue to export their produced goods

all over the world and import some unique raw material from another countries

therefore transporting goods from one country to another country underlines much
emphasis at the shipping activities and capabilities which have fairly significant for

competitive advantage. However, the process of logistics are increasingly being

burdensome, complex and schedule-dependent transactions which need an

accurately systematic process flow, therefore, the fundamental roles of freight

forwarder service provider is to make available just-in-time delivery and smoothly

logistics services by using multi-modal transport models.

The purpose of this research is to integrate the fundamental roles of freight forwarder

on a case study in order to investigate and identify, and illustrate its impact on the

transport operation, transaction and organization of the manufacturer firms in terms of

transporting produced goods smoothly to the final destinations. Poor infrastructure,

lack of efficient transport organization, unaccomplished documents and erroneous

custom clearance transactions have huge impact on the transport expenses while

increasing efficiency and productivity, delivering time and security to be competitive.

Therefore, manufacturer companies prefer to transport their goods by hiring an expert

freight forwarder service who provides standard quotation and professional

differentiated transport solutions with the understanding of cross-border operations in

order to satisfy customers and industry expectation with their multimodal transport

network capabilities, both nationally and internationally. Manufacturers and retailers

are relying more on freight forwarders to be the managers of their intercontinental

logistics and supply chain activities (Knigge, 2015). This is to say, cooperating with an

expert freight forwarder service provider is enabled manufacturer firms to (CME,

2003);

 reduce the complexity of logistics requirements

 establish relationships and liaisons with supply partners, both internally and

externally
 improve trade volume

 reduce the overall transport costs and lead-time by providing integrated

transport solutions

In addition, efficient multimodal transport network capabilities refer an ability for freight

forwarder to manage and integrate transport processes within one-stop logistics

services which provide competitive advantage for manufacturer firms at their

marketplace (Harris et al., 2015:90). Today, integrated logistics is generally

considered to include planning, allocating, and controlling the internal or external

transport services` committed to manufacturing support and providing customized

operations as well as physical distributions (Daugherty et al., 2006). In other words,

the integration of multi model transport systems mean that the systematic coordination

of all logistics activities enable manufacturer firms to reduce their transport expenses,

utilize the network to fulfil manufacturer firms’ requests in a timely way and provide

competitive advantage for delivering goods to their overseas destination through

multimodal transport models.

Transport intelligence (2015) emphasizes estimated growth of global freight

forwarding;

2013 2017
5.2% 3.1%
2.5% 0.5%
7.2%
5.2% Asia Pacific Asia Pacific
7.6%
Europe Europe
35.9% Nort America Nort America
45.6%
23.5%
Soulth America Soulth America
Middle East
36.0% Middle East
27.6% Africa Africa

Figure 1.1: Global Freight forwarding (TI, 2015)


As a service intensive industry, according to the latest report from TI (Transport

Intelligence), looking generally to the global freight forwarding sector declined by 3.3%

year-on-year in 2013 but the viewpoint through to 2017 is slightly bright. More

importantly, the percentage of freight forwarding illustrates statistically significant

increase from 27.6% to 31.0% in Europe (case study related with the Europe). This

forecast is specified that there will be a growth on global forwarding so freight

forwarders have to increase their operational and organizational service capabilities

by providing smoothly delivering services in the overwhelming competition which will

be faced in 2017. Therefore, in an era of accelerated global freight forwarding,

manufacturing firms and transport services must be performed to high levels of

logistics service reliability in order to meet increasing demands or under the

overwhelming competition in terms of transportation costs which have directly impact

on prices by organizing effective international transport processes between supplier

and consignee in rapidly changing trade environment.

Thereupon, this research also will be focusing on a case study as its one of objectives

which based on transporting hazelnuts from Turkey to England as a formal reel sector

approach through applying integrated fundamental roles of freight forwarder within

required information which will obtain through interviewing with predetermined expert

persons who work at the logistics sector. These data will be used mostly qualitative

and some information will be used as a quantitative in the calculation transport

expenses. Looking at generally, qualitative research will be used as a theoretical

approach to identify the functions of the study, because it is exploration of deepening

your knowledge and understandings as theoretical perspectives of the research

process (Volante, 2008). The interviews were conducted by face-to-face


communication and e-mail, and operational and organizational observations of

managers were expressed in the interviews.

1.1 Project Aim and Objectives

The primary aim of this dissertation is to identify the how the fundamental roles of

freight forwarder can be integrated, and its impact on the manufacturer in the

execution of international transport as research question. Secondly, investigate to the

fundamental roles of freight forwarder, and create a case study to implement all

fundamental roles while transporting hazelnuts as a best practice for the fulfilment

process of shipping transactions, and focusing on develop an understanding of why

manufacturer companies are hiring freight forwarder service. Qualitative research will

be used more than quantitative approach in order to have a tangible result, and in

terms of achieving the aim, following objectives have been formed:

 To research on multi-modal transport functions in order to express a convenient

shipping model based on requirement.

 To analyse and provide data concerning the operational management process

of international logistics that must be fulfilled by the freight forwarder.

 To illustrate freight forwarder`s roles on logistics operations, respectively.

 To facilitate required transactions while transport operation which is according

to the government regulations based on the documentation.

 To create a case study in order to implement the fundamental roles in the

execution of international logistics, both organizationally and operationally.


 To determine the advantages of hiring freight forwarder services for the

manufacturer companies.

Authors need to make a clear focus on the limitation in order to scope of the study and

the research of the topic, through keeping the study in the field of specific research

structure within aim and objectives.

1.2 Case study Expression and Interpretation

Case study research excels at bringing us to an understanding of a complex issue

through examining to the subject detailed and deeply (Taylor et al., 2006). From this

definition, transporting processed hazelnuts will be the best practise of integrating the

fundamental roles of freight forwarder in the utilization of appropriate transport model

to deliver merchandise in the perspective of the real logistics industry in this

dissertation. Therefore, a case study is created to show understanding and illustrate

the fundamental role of freight forwarder in the execution of international logistics

between Turkey and England.

Figure 1.2: Hazelnuts

Hazelnuts transport has chosen to be an example scenario which is familiar in the

industry, and this transport process is demonstrated as a real example of the planning,

organization, control and execution of freight transport at the right place and time. In
order to introduce, the hazelnuts manufacturing firm established in 1996 in Turkey,

and its seminal turning point was in 2010 because the manufacturer firm established

the sixth factories and employed approximately 850 people to fulfil customers`

demands in Turkey. Before this time, the manufacturing factory was working

domestically which means factory was purchasing unprocessed hazelnuts from the

farmers in order to process and sell at their market places. Over this period, the global

structure of manufacturer firm has been changed increasingly, and the firm start taking

order on their processed hazelnuts products, internationally. This situation affects firm

production structure in terms of being fast, efficient and quality production so

manufacturer firm start improve the volume of production capacity which was the

messenger of the new agreement in 2012 as a hazelnuts supplier of the biggest

chocolate manufacturer firm in the world. In addition, company started to take orders

from another countries which were directly affected company production strategies

and decisions. These developments and the increasing demand on the volume of

international trade of the company also brought a growth at the flow of liquidity so firm

started to be supplier of the processed hazelnuts to the Italy, England and Dubai, these

deliveries had to be arrived their final destination timely and under convention

circumstances.

Briefly, according to the interview A, the numerical values have been taken from the

hazelnuts producer firm`s distribution manager, this is clearly shown that how the

biggest company is and the increase of the hazelnuts transport from 2010 to 2015;
209,000
205,000
200,000

155,000
152,500
150,000

141,000
117,000
70,000
55,000

53,000
45,000

35,000
34,000
33,000
25,000

19,000
18,500
16,000
13,000
12,000
7,500

5,000
2,500

2010 2011 2012 2013 2014 2015


Total Transport 55,000 70,000 150,000 200,000 205,000 209,000
Italy 45,000 53,000 117,000 141,000 152,500 155,000
England 7,500 12,000 25,000 33,000 34,000 35,000
Dubai 2,500 5,000 13,000 16,000 18,500 19,000

Figure 1.3: Hazelnuts export values (Interview A, 2015)

In this graph above, the numerical values are shown of the hazelnuts exports based

on six manufacturing points. The centralized distribution service was transporting

approximately %70 of these amounts by the road and/or maritime transport for the

Italy, %22 of the processed products were transported to the England through the road

transport and %8 of the annual production delivered to the Dubai via air transport.

However, growth in demands and new agreement with the biggest chocolate

manufacturer firm leads hazelnuts supplier firm to face some organizational

operational and distributional challenges.

From this perspective, these challenges are caused to the hazelnut manufacturer firm

to be faced that the processed hazelnuts were not arrived to the chocolate production

point at predetermined times and caused to stop or slow down to another production

processes like dominoes. The reasons of these challenges, lack of knowledge,

insufficient documents, incorrect custom clearance transactions and inexperienced

staffs have been the reason of suffering from stuck of the goods at custom clearance,
security, and delay of delivery times caused to the payment of the huge amount of

penalties which affected to increase the transport expenses, directly.

Therefore, hazelnut manufacturer firm decided to contract with a global logistics firm

which provides customized and expert freight forwarding service in order to eliminate

the transport challenges and concentrate on just production, processing product in

order to meet the demands, both internally and externally.

1.3 Disposition of the thesis

The structure of the dissertation consists of five chapters and will be regulated as

follows:

In chapter one, which is the introduction chapter of this research and will be focused

to introduce dissertation`s research question, aim and objectives in terms of theoretical

perspective, and implementation of the case study as a real sector observational

approach.

In chapter two, this part of research will be consists of gathering data in order to

analysis critically with the related literature reviews and taking the advantage of real

sector observation as primary research method. In addition, some literature reviews

will be evaluating and supporting with the interviews which will be done with the

persons who experienced logistics and supply chain management procedures.

In chapter three, the approaches of collecting data will be identified and appropriate

research method will be applied in order to accomplish and complete to the entire

dissertation. Moreover, the effective research plan will be developed which based on
the research of the data source, rationale and technique within the collaboration of

these research methodology to define the challenges.

In chapter four, this chapter of dissertation will consists of case study analysis, main

finding and its results in terms of generating an understanding of the integrated

fundamental roles of freight forwarder and its impact on the predetermined

manufacturer company based on time, security and transport expenses.

 Comparison of centralized transport system and freight forwarding service

provider`s intelligent transport solution

 The fulfilment of operational and organizational functions

 Result of created transport models will be evaluated that based on cost, time

and security

 Custom clearance transaction and maritime transport procedures will be

explained in the case study

In chapter five, the comparison of the result of integrated fundamental roles of freight

forwarder with the centralized transport service, and its impact on the hazelnuts

processing firm will be interpreted in terms of gaining competitive advantage. In

addition, recommendation and suggestion for future research.

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