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:
- Inspect the carrier for cleanliness, dryness, ventilation, and cargo separation to be sure the vessel is appropriate for its designated cargo.
- Report on markings, type of packing (bulk, cartons/drums, etc.) and a count of goods.
- 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.
- Verify that units match those listed on the order description.
- Check packages and labels for correct dates and batch numbers as well as supplier certificates.
- Document when and where product was loaded, and the processes used to do it.
- 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.