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Hiring a Freight Forwarder: A Cautionary Tale

Amazon Basics / October 29, 2018

Today we have a special treat for you (just in time for Halloween!) from one of our good friends, Nate Tomasi. Nate wanted to share his story about hiring a freight forwarder and the lessons he learned. Nate’s been selling on Amazon for two years and lives in the Kansas City area. Other than selling on Amazon, Nate is also the Chief Operations Officer at Mycroft AI.

“I listen to all the podcasts, read the articles, and ultimately spend at least 5 minutes an hour thinking about Amazon.  Most of the time I am worried about sales, but I found that inventory management and logistics are some of the most challenging for me.

I’m small. This is only my third order.  But with each time I have reordered, I have doubled the size of my order. After listening to a podcast before my second order, I decided I would take the question about a freight forwarder to a forum.   For the first order, shipping represented almost 40% of my cost of goods (COGS). My factory was handling the shipping for me, and I was hoping there is a better alternative.

When I posted it I got a few people advertising their services, but after a little deeper dive they all told me that the size of my shipment was too small.   So again on my second order, I let my factory arrange it and paid close to the 40% again. So when it came to my third, my factory suggested I try looking for a freight forwarder too.  On Alibaba, there is a place to look at shipping companies as well. Before reaching out to them, I asked my factory to give me the box dimensions and weights so I could get accurate information to the freight forwarder.  To my surprise, after posting these inquiries I received detailed information back with quotes. After a few questions back and forth with these companies, there was one I was impressed with in terms of customer service, pricing, and included services.   Prices were half of what I paid for shipping previously. Remember that was half the size. They also included free inspection and also any repacking needed to save on costs. They were also very flexible with me about the amount sent via air versus sea. I let the other shippers know that I had made a decision, and told the selected company the details of the factory, and connected all of us by email.

The relationship progressed as the days grew closer to the goods being ready.  The items were scheduled for September 15th completion date. On September 14th at around midnight, my freight forwarder contacted me via email and told me there was an issue with the factory.  When I woke up in the morning I asked the factory what happened. They wrote back and I had no idea what she was talking about, but they said we should just fire the freight forwarder and find a new one, or have them ship it. I had been very pleased with the freight forwarder until now, so I thought I would reach out to them. They helped me understand the issue a little more. Apparently, if you purchase and pay via Alibaba there is some sort of credit that the factory can get.  In this agreement, the name of the customs documentation has to be the factory’s name for them to claim this. My freight forwarder also has some similar discounts available to them, and they quoted me based on them having their name on the shipment. At this time, the freight forwarder gave me another option.  They said they could switch the name on the documents to the factory, but since there was an air and a sea shipment, I had to pay it twice. This number was still way cheaper than what I expected to pay, so I decided to pay the fee.

I wire the money and have to wait for 3 days for Alibaba to clear my payment, and as soon as it does my freight forwarder is at the factory picking up the goods.  So I think I’m finally going to get tracking information any day now. Then I get another midnight email from my freight forwarder telling me that the weight that the factory had me use to get the quotes was significantly wrong.  “Great, just great,” I thought. “Am I getting scammed, or is this real?” I see the order come through from Alibaba, and all I can think is, “Get this stuff shipped now!” I am currently out of stock on one SKU and the other is getting dangerously close.  So I paid it again. I don’t even contact my factory. Now we get to wait another 3-4 days for the payment to go through.

At this point, I am still doing ok on overall shipping costs, and my main concern is stock levels.  I had 25% sent by air, and the remainder shipped by sea. I ping my freight forwarder again to check on tracking numbers. I get a response back within a couple hours, and they tell me there is another issue. For some reason about the customs documentation, they couldn’t ship it by sea, and they needed to remove it from the boat, which of course costs money to do.  Since they can’t ship it by sea, now my only option is by air. As you can guess, this is significantly more expensive. At this point, some of my goods are en route and the other is on a ship and has a likelihood of getting destroyed if I let it sit there.  What can I do? I pay this huge fee to get it done.

As I re-read this I can see how the perception is that this was a terrible experience with a freight forwarder, but I find myself not seeing it that way.  I left out quite a bit of back and forth. I just searched my email, and I see over 100 messages back and forth about this process. The first part I glanced over was that the factory and the freight forwarder were brought together early.  They exchanged emails, text, and had some phone calls. All bases should have been covered in this timeframe. The contract I had with the factory did not stipulate that it had to be labeled with their name. Many times through this process the freight forwarder called the factory to walk their team through the process of still “claiming” the shipment with a different name.  The factory was not willing to answer the calls. The freight forwarder tried to make things work in my mind, they were the only ones coming to the table with solutions. They even chipped in on some of the fees. The factory didn’t take any responsibility either financial or just morally on this.

Order 1 Order 2 Order 3
Factory Weight 100 lbs 200 lbs 400 lbs
Shipping/Customs $550 $1,000 $2,000 (estimated)
Total $550 $1,000 $2,000
Shipper Shipping/Customs $556
Switch Title on Factory $234
Overweight Charge $299
Switch to Air Freight $515
Total $1,604

My goal here is to just show you that you have to be on top of all details in your own business.  This ultimately is my fault, I lost track. I thought the easy button was real, and that I’d found it.  It doesn’t matter if it is quality control, logistics, communications or PPC spend, you have to know what to look for and what to problems to watch out for in each area of your business.”

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