Freight, Transportation and Logistics Blog Part 2

Determining the Best Transportation Mode for Global Freight Shipping

How to Determine the Best Transportation Mode for Global Freight Shipping

Should you ship your global freight by land, sea or air?  That is the question.  How should you decide?

Selecting the appropriate mode of transportation for your global freight can mean the difference between your products arriving on time and on budget and making a costly mistake.

When selecting transportation modes for use for global freight, the following should factor into the decision:

  • Distance
  • Travel speed
  • Capacity
  • Travel duration/transit time
  • Loading procedure
  • Potential for damage of freight
  • Geographic location of the destination (i.e. proximity to seaports, railway stations, airports, etc.)
  • Availability of needed facilities and equipment at port of destination
  • Nature and characteristics of the freight (i.e. size, weight, fragility, high value, dangerous cargo, etc.)
  • Budget
  • Cost of transportation mode
  • Reliability, availability and regularity of service
  • Safety
  • Terms of the export sales contract
  • Fuel consumption
  • Fuel efficiency

How to Calculate Freight Transportation Costs for Air Shipping and Ocean Shipping

Billing for air freight is calculated through chargeable weight.  This is a standard of measurement that is calculated by combining the size and weight of the shipment.

Contrarily, the shipment weight is typically not factored when calculating the cost of ocean shipping.  Billing for ocean shipping is done on the container basis:

  • Each full standard 20’x 40’ container is charged a flat rate
  • Each less than container load (LCL) is charged by cubic meter

Heavy, sizable shipments are typically sent via ocean shipping as the cost is much lower.

In general, as the size of the shipment decreases, so likewise does the margin between ocean and air freight shipping.

In addition to the actual transportation cost, it is necessary for shippers to calculate inventory costs.  It is important to note that warehousing fees related to ocean shipping typically exceed those charged at airports.  Customs and destination fees will also need to be paid on international shipments.

How to Determine Freight Class

To determine freight class, follow these steps: 

1. First, measurements of the shipment must be taken, specifically the height, width and depth of the shipment. When taking measurements, it is critical to measure to each of the farthest points.  This includes measuring the pallets or similar external packaging, in other words, the largest dimensions of the goods being shipped.

2. The next step is to multiply the height by the width and the depth of the shipment.

3. The final step is to divide the weight of the shipment in pounds by the total cubic feet.

Shipping Freight by Sea

Shipping by sea is especially popular for internationally exported goods and is usually the best option when transporting large shipments that do not require fast transport.  Ocean shipping is usually lowest cost option.  Ocean shipping transit times vary widely and depend upon weather and nautical conditions.

Industry protocols require containerization when transporting freight.  The practice of containerization is used to make cargo faster and easier to handle by utilizing standardized containers that can be moved interchangeably between ships, rail cars, planes and trucks.

Because so much freight is handled intermodally, standardized containers are designed to handle the intact handling of containers from mode-to-mode.

Today, there are specialized ships for all kinds of goods including liquids, bulk commodities, perishable goods.  These ships help to safeguard the cargo and prevent damages.

Working partnerships between ocean carriers are developed to enhance the reliability aspect of ocean shipping but may result in complexity.  This is largely because each ocean carrier operates under its own set of rules regarding which commodities are permitted on board.  This may mean that a commodity that is allowed on one carrier may be denied by another ocean carrier.

Shipping Freight by Air

Air shipping is often the best transportation model for the transit of time-sensitive goods.  Air travel is more expensive as compared to that of land or sea transport.  The cost of air freight is mainly dependent upon cargo weight and time constraints.  Time-sensitive freight shipping is usually the most expensive.  The insurance cost for air shipping is lower.  Insurance is typically obtained as air freight is usually valuable cargo.

Although weather conditions can disrupt flight schedules more readily than shipments by ocean carrier, flights usually can be rescheduled or rearranged more quickly when problems arise.  In addition, most markets offer multiple flights each day between major cities.  By contrast, ships leave on a weekly, not daily basis.

Airlines are accustomed to handling schedule changes and do so frequently and fluidly.  Ocean carriers are less adept at schedule changes. When flight schedules have been significantly disrupted, however, it can sometimes take days to get back on schedule.

Inventory controls in air shipping are more stringent and often air freight companies provide the ability to track goods via web-based technology.  This level of visibility can be highly useful in enabling critical decision making and facilitating activities that can aid in moving the freight to the final destination point.

At the end of the day, the decision whether to use air shipping is largely dependent upon location and distance from airports.  Having quick access to an airport is especially important when dealing with perishables and regulated goods such as pharmaceuticals and healthcare and life science goods.

What is a Bill of Lading?

  • Obligatory document used when moving freight
  • Legally-binding contract between the shipper, agent or broker and carrier
  • Provides driver and carrier with every detail necessary to process the freight shipment including invoicing
  • Functions as a receipt of freight services
  • Provided to the freight carrier on pickup and should be attached to packaged freight

Here are the elements of a Bill of Lading:

1. Names and addresses of shipper and receiver (consignee)

2. Reference numbers or purchase orders

3. Special instructions to the carrier excluding extra service requests

4. Date of pickup

5. Description of freight: number of shipping units, dimensions, weight, information about material and its composition

6. Type of packaging, i.e. pallets, cartons, etc.

7. NMFC freight class: must specifically identify which of the 18 classes of freight is being shipped

8. Department of Transportation hazardous material designation

Shipping Freight by Rail

Effective for shipping cargo over long distances or for bulk goods, rail shipping is not as flexible as road transport.  Rail shipping is typically used as part of an intermodal transport chain to move goods to an international port for export or from a port to a final destination point.

In terms of cost, rail shipping tends to be less costly, especially for long distance travel.  Bulk commodity goods are frequently transported via rail as it is typically the most convenient option

Most goods must be transferred to planes, cargo ships or other transport necessitating payments for transshipments. The most effective way to reduce these costs and speed up shipping times is to use containers.

In addition, specialized rail cars for bulk goods are used when transporting goods by rail to facilitate easier unloading.  Perishable goods are stored in refrigerated rail cars and containers to safeguard goods and help prevent damages.

Shipping Freight by Truck

Trucks are used for freight transport across the world and are usually used at some point in the journey of getting most goods to the final destination.

Size of shipment determines whether it is regarded as Less than Truckload (LTL) or full truckload (FTL or TL):

  • Freight is loaded on a truck with cargo from other shippers. Multiple stops are made during the route and freight may be transferred during the journey.
  • Transit time is longer for LTL than for TL due to the number of stops and interruptions in transit.
  • Average component of LTL freight weighs 1200 pounds and is the size of one pallet
  • LTL freight ranges from 100 to 15,000 pounds
  • TL freight can take up an entire semi-trailer truck and transits directly from the point of origin to the destination.
  • Because TL transportation does not make stops en route or transfer freight, goods are at less risk for damage.

Large shipments are usually shipped more economically via TL rather than being mixed in with other LTL shipments and loaded into multiple vehicles along the route.

In terms of pricing, TL service providers usually charge a per mile rate.  This rate varies based upon factors such as the items being shipped, distance of travel, required equipment, etc.  Often brokers are used to take advantage of larger discounts.

Tips on Freight Quote and Selection of Transportation Modes

Do

  • Develop long-term shipping strategies.
  • Consider leveraging air shipping when speed of delivery is a critical factor in moving freight.
  • Understand that both air shipping and ocean shipping are proven reliable modes of transportation that are subject to disruptions.
  • Double check the destination address on the Bill of Lading for accuracy. This is an area where a common shipping mistakes occur.

Don't

  • Only conduct a one-time evaluation of your supply chain logistics needs. This requires ongoing data collection, insight and analysis to ensure the transportation mode(s) you select are right for your cargo and business.
  • Underestimate shipment weight. Buy a scale and be certain.
  • Rely strictly on one transportation mode and carrier, if at all possible.

Conclusion

Working independently, shippers may be confused by all the work needed to get freight ready to ship.  Reviewing shipping rates and freight quotes for international shipping can be time consuming and complex.

Balancing the need for lower freight costs with that of transporting expedited freight and other services can help you determine the optimal transportation mode for your goods.

In summary:

  • Be aware of all the various intermodal freight mode options.
  • Evaluate freight costs by balancing the costs with the needs of your business, characteristics of your freight and other relevant factors.
  • Continually review and evaluate your business needs to see if your choice of transportation modes should be changed.

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