What role does freight logistics play in making sure your products are delivered on time, and on budget?

What Is Freight Logistics?

Freight logistics comprise the core systems and infrastructure of an estimated $270 billion global business.

At any given point, the knowledge of shippers and carriers, the technology, experience, and human resources make possible the smooth and efficient movement of goods around the world.

One major example, international maritime shipping, accounts for about 90 percent of world trade, and without these logistical mechanisms, simply would not be possible.

The following is a useful look into the key components of freight logistics including: communication, tracking and tracing, warehousing and distribution, customs, and insurance.

The Seven Rs of Logistics

To understand the complexities of strategically coordinating the elements and functions necessary to the efficient operation of the international maritime shipping industry, it’s helpful to understand the basic principles represented by:

1. The Right Product

2. The Right Place

3. The Right Price

4. The Right Customer

5. The Right Condition

6. The Right Time

7. The Right Quantity

In practice, making sure the correct cargo reaches its intended destination safely and on time is priority one.

The logistical systems of freight management are equal parts mechanical and organic. In order for their respective supply chains to properly function, each  must pull its weight in perfect synchronicity.

To get a better idea of how massively intricate the global flow of freight is, the interactive map below illustrates just how much the world relies on coordinated logistics systems:

How Freight Forwarders Play Their Part

Managing the specific needs of such a highly coordinated system requires a freight logistics team dedicated to:

• Negotiating freight rate contracts
  
• Ensuring continued customs compliance and insurance protection
• Maintaining relationships with steamship lines
• Minimizing empty miles by coordinating efficient shipping routes

Freight forwarders oversee the following logistical responsibilities:

1. Communication

2. Tracing and Tracking

3. Warehousing and Distribution

4. Customs

5. Insurance

Logistics Communications

Logistics companies partner with businesses to make the right decisions impacting finance, production, engineering, marketing, transport, warehousing, purchasing, and inventory management.

What does this do for your business’s bottom line?

By minimizing the amount of connections needed to link a variety of economic players, third party logistics providers help reduce costs.

Tracking and Tracing

Freight Forwarders typically utilize specialized software called a Transportation Management System, or TMS, to trace and track shipments, making any freight’s journey transparent. This helps logistics management to:

• Develop more efficient procedures
• Improve customer service
• Save money

An integrated TMS reports crucial data about carrier performance, transportation costs, and market trends.

Though the goal is always in smooth logistical operations, the TMS detects hiccups that may defer delivery, facilitating prompt notification for any customers who may be affected by the delay.

This enables freight forwarders to continually refine their strategies in creating a cost-effective supply chain.

Warehousing and Distribution

Diligence in warehousing and distribution pays dividends for your supply chain. There are many opportunities that can cause costly mistakes, there are just as many to excel.

Freight is the life’s blood of both buyers and sellers, therefor faithfully adhering to regulated warehousing and distribution procedures help logistics partners earn trust and strengthen relationships.

A breakdown of value-added warehousing and distribution services include:

• Cargo Packing and Crating
• Pick and Pack
• Labeling+ Barcode schema:
  + Label materials
  + Label placement
  + Complementary technologies
• Vendor Assembly and Consolidation
• Kitting
• Visual Inspection Services:
  1. Inspect the carrier for cleanliness, dryness, ventilation, and cargo separation to be sure the vessel is appropriate for its designated cargo.
  2. Report on markings, type of packing (bulk, cartons/drums, etc.) and a count of goods.
  3. Confirm that a valid mate receipt (document signed by an officer of a vessel evidencing receipt of a shipment on board the vessel) was received.
  4. Verify that units match those listed on the order description.
  5. Check packages and labels for correct dates and batch numbers as well as supplier certificates.
  6. Document when and where product was loaded, and the processes used to do it.
  7. Maintain a time log that includes dates and times of arrival, departure, loading, and delays (citing the reasons for the delays). Descriptions of loading gear and weather conditions should also be listed.

Managing Customs

In simple terms, customs brokers produce documentation for shippers to prove that the required customs procedures have been performed and the goods have cleared for shipment when entering or leaving a country.

If warehousing procedures aren’t complied with properly, the warehoused freight waiting for clearance might instigate extra fees. This can add up to hundreds or thousands in avoidable shipping costs.

Whether importing or exporting, the documentation is extensive, plus laws vary from country to country and port to port.

Time, money, and relationships can be compromised without the proper attention from a licensed customs broker as logistical errors can easily be made.

Required documents for importing or exporting cargo are:

• Purchase order from buyer – The terms include:
  • Price
  • Quantity
  • Quality
  • Description
  • Latest ship date
  • Mode of transportation

• Sales Invoice – An example sales invoice may include:
  • Clear description of the item
  • Quantity
  • Value, in foreign currency and U.S. dollars
  • Country of Origin
  • Where it was purchased
  • Names and locations of buyer and seller
  • Address of the person or business the goods are being shipped to

• Packing list – A packing list may also:
  • Accompany an insurance certificate
  • Be used to issue a Bill of Lading
  • Contribute to electronic export information (EEI)
  • Help customs officials verify goods

• Shipping bill
• Bill of lading
• Bill of entry
• Certificate of Origin

Other requirements may include other documentation specific to the buyer, or financial institution, or Letter of Credit terms per importing country regulations.

When negotiating for an appropriate freight forwarder, it’s imperative to exercise due diligence and research whether a given forwarder has experience and is knowledgeable enough to handle your particular customs brokerage needs.

If not, consider splitting the tasks between a separate customs broker and forwarder. Though the costs may rise, the price of inadequate or negligent customs brokerage is not worth the risk.

Insurance

Due to the inherent nature of unforeseen problems arising despite best hopes, whether accidental or instigated, the need for insurance is a must in freight logistics.

Industry experts cite that, cargo theft is a $30 billion a year business. While this is indeed a serious potential threat to your freight, it’s far from the only bad thing that could happen to your cargo.

Also adding to the potential for loss or damage are:

• General Handling
• Bad weather
• Long extended voyages
• Continuous moving and shifting of cargo

Therefor protecting your cargo from its point of departure to final delivery warrants insurance coverage.

Because of the broad scope of goods that require transportation, it’s imperative you work with a partner that can set you up with a plan that best suits your cargo’s, and your business’s needs.

What Is The Most Important Part of Freight Logistics?

As you can see, freight logistics is a multi-faceted and intricate balance of elements all designed to help move your business forward. But the most important thing to remember is that it always involves engaging the right people with the right expertise at each step along the way.

What is the difference between a 3pl and a 4pl provider?

The main difference between 3PL and 4PL is that 4PL handles nearly the entirety of a supply chain, while 3PL is primarily concerned with handling just the logistical process.

Third-party Logistics: 3PL

A third-party logistics company handles physical distribution and logistics. 3PL companies do this by using their own resources, such as a network of freight transportation providers and warehouse facilities to help clients ship or store their products to meet their needs.

3PL companies leverage their experience and partner contacts o ensure all steps are taken to keep the client’s products safe.

Still, a third-party logistics company can have many variations depending on their specialties. According to the Council of Supply Chain Management Professionals (CSCMP), the legal definition is: “A person who solely receives holds, or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product.”

In plain language this means that a 3PL company holds or transports a a client’s product (i.e., a product that they do not own).

What Does a 3PL Company Specialize In?

3PL companies tend to specialize in:

• Warehousing
• Distribution
• Order fulfillment
• Cross-docking
• Inbound and outbound freight
• Customs
• Freight consolidation
• Inventory management

The above third-party logistics services are scaled and customized to fit a client’s specific requirements.

One client may not require warehousing, whereas another will, yet another may require temperature controlled warehousing. This versatility and ability to accommodate makes 3PL companies adept at providing different services to different clients.

Fourth-party Logistics: 4PL

The full nature of 4PL is still heavily debated. There are other definitions out there, but here’s one that’s more popular:

In short, a 4PL company doesn’t stop at outsourcing logistics services, but also outsources the management of those same services

4PL companies will generally have no way of transportation or warehousing, but rather use the transportation and warehousing services of a 3PL company. There are of course exceptions to this.

What Does a 4PL Company Provide?

A fourth-party provider will tend to cover (generally through 3PL partners):

• Procurement
• Storage
• Distribution

If we reference the CSCMP again, a 4PL company differs from a 3PL company in the following ways:

1. 4PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners;
2. 4PL organization acts as a single interface between the client and multiple logistics service providers;
3. All aspects (ideally) of the client’s supply chain are managed by the 4PL organization; and,
4. It is possible for a major third-party logistics provider to form a 4PL organization within its existing structure.

The CSCMP definition is a “supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution”.

This means is that a 4PL company essentially deals with the planning, management, designing, and optimization of a supply chain from start to end, and does so by outsourcing required services to trusted partners.

3PL vs 4PL: Which Logistics Service Is Right for You?

Overall, third-party logistics and fourth-party logistics inherently operate the same way, but consist of different moving parts.

Because a 3PL company arranges freight carriers and warehousing by dealing directly with the service providers, the fewer parts in play may work perfect for your small business.

A 4PL company, on the other hand, may be a good fit if your business is more expansive. A 4PL provider will arrange the same services and employ companies such as 3PL companies, who leverage their warehousing and vast network of carriers.

In the end, the goal of both 4PL and 3PL companies is to provide a client with a comprehensive, end-to-end supply chain.

A Container Freight Station (CFS) refers to an area of a port where the loading and unloading of containerized cargo is completed.

This area, in most cases, is an extension of the port but still under the jurisdiction of the customs authority. Here is how CFS impacts logistics.

CFS Charges

One of the most commonly asked questions when it comes to matters of the logistics of importing and exporting goods is, “What are CFS charges?”

CFS charges refer to the fees that apply for each activity performed at a CFS, namely the import and export of goods through customs.

Various parameters determine these charges. In some cases, CFS charges can be uniform for a specified category of goods being handled.

CFS charges have a high impact on logistics when it comes to shipping goods into or out of a country. These charges can and will eat into a logistics budget if they happen to be higher than was expected.

If you are an exporter, it’s especially crucial that you understand what export CFS charges are. These are the charges that are involved when your containerized goods are packed onto the ship.

In some instances, the customs authority may liaise with customs authorities at the target destination so that they can charge an all-inclusive CFS fee that will cater for both countries, but this is uncommon.

This means that an exporter needs to always have the right information before exporting his or her goods.

How Does CFS Affect Logistics?

The smooth movement of your containers from one place to another is necessary for a logistics team to manage their products effectively.

This gives you both the peace of mind that is required to run a business and also allows you the confidence needed to make the right business decisions.

With CFS charges in play, a lot can change with regards to your logistics. This is how CFS affects logistics.

• Delays – A failure to negotiate CFS charges on time is one of the leading causes of delays that are experienced in the logistics industry. It is necessary to have an agreement in place to prevent these delays.
• Increased costs – CFS charges contribute largely to increased costs of logistics. For people thinking about getting into imports or exports, it is vital to partner with a firm that helps you with logistics to avoid these inflated costs.
• Deteriorating relationships – CFS charges are usually a bone of contention between custom authority officials and the importers and exporters. Many of the deteriorating relationships between their parties are caused by CFS charges and the failure to agree to a figure that appeals to both.

How Logistics Companies Help

1. Negotiate – Logistic companies help you negotiate CFS charges with customs authorities. This takes the stress off your plate, especially if you are not knowledgeable about matters of customs.
2. Streamline the logistics – Logistics, handled on an individual level, require that you keep track of each movement. This can be quite hectic. Logistics companies do this for you.

Final Thoughts: Dealing with CFS Charges

There’s no such thing as a way around them when it comes to CFS, customs, and charges that may apply to your goods. It’s essential as a business, to partner with firms and agents that help make this easier for you.