Freight Logistics 101: The Essentials To Master Smooth Shipping

Did you know that freight logistics is considered the backbone of global trade?

According to SeaRates, the United States alone spends over $1.5 trillion dollars on freight logistics. The value alone shows how critical of a role it serves to a country.

But, like every backbone as a support pillar, it has to be strong enough to support what it’s tasked to do, and there’s a ton of complicated red tape to go through in order to ensure it doesn’t crumble.

Sounds like a tall order for success? Fret not. In this guide, we reveal the necessary details that you will need to master as a beginner or even as a seasoned supply chain professional looking for a refresher!

So, sit back and read on to gain some serious freight logistics expertise!

What is freight logistics

Freight logistics is defined as the process of planning, organizing, and executing the movement of goods from origin to destination. It encompasses everything from selecting the most suitable transportation mode to ensuring safe delivery and managing customs clearance (for international shipments).

Why an efficient freight logistics is important for business

Efficient freight logistics is essentially what keeps your supply chain moving smoothly. Hence, it’s a key process that can make or break a business. An optimized freight logistics process can positively impact your business in several ways:

Reduced costs: By choosing the right mode of shipping and optimizing routes, cost savings can significantly increase by a huge margin.

Improved customer satisfaction: In today's competitive landscape, fast and reliable shipments are paramount for customer satisfaction. Freight logistics ensures your products reach customers on time and in good condition. Delays, damage during transport, or missed deliveries can severely impact customer experience and loyalty..

Inventory optimization: Efficient freight logistics helps businesses maintain optimal inventory levels. By streamlining transportation and delivery times, you can avoid stock outs that disrupt sales and lead to lost revenue. Conversely, it can also help prevent overstocking, which ties up capital in unsold products and increases storage costs.

Increased efficiency: One of the core foundations of a well-managed freight logistics consists of streamlined processes across the board. This allows businesses to be more efficient and focus on developing core competencies like product development, marketing, and customer service.

Who are the key players in freight logistics

The world of freight logistics is a vast one! In this entire network, it involves several players, each with a specific role in ensuring goods move smoothly from origin to destination. Here's a breakdown of the key players:

Shippers: These are the businesses or individuals who need to transport goods. They can be manufacturers, wholesalers, retailers, or even individuals sending personal belongings. Shippers are responsible for packaging their goods properly, preparing necessary documentation, and selecting a logistics provider.

Carriers: These are the companies that are responsible for moving the goods from the origin to the destination.

Freight Forwarders: These companies mainly act as intermediaries between shippers and carriers. They can assist in handling tasks such as:

• Consolidation: Combining smaller shipments from multiple shippers into one larger shipment for cost-efficiency.
• Cargo insurance: Arranging insurance coverage for the goods during transportation. Handle complex customs clearance: Ensuring all necessary documentation is accurate and complete, classifying goods correctly, calculating duties and taxes, and facilitating communication with customs officials.
• Manage import/export documents: Preparing and submitting required documents such as commercial invoices, packing lists, certificates of origin, and bills of lading.
• Negotiate with international carriers: Securing competitive rates and booking space on vessels or airplanes.

Third-Party Logistics Providers (3PLs): 3PLs offer comprehensive logistics services beyond just transportation and can serve as reliable partners for shippers who are looking to outsource many aspects of their logistics process. Some of the services include:

• Inventory management: These consist of storage solutions and expertise to manage your inventory safely. Some even provide advanced warehouse management systems for better tracking.
• Cost-effective delivery: 3PLs have extensive transportation networks and can deliver products on-time using the most cost-effective methods via various modes of freight (trucks, sea, air).
• Route planning: Selecting the most efficient and cost-effective routes for the shipment.

What are the different shipping modes in freight logistics

Understanding the types of shipping options available is critical in freight logistics. Each of them presents their own advantages and disadvantages when it comes to considering key factors such as shipping cost, speed, reliability, and efficiency.

Here's a comprehensive breakdown of the most common shipping modes to help you understand them better and choose the right one for your needs:

Truck freight: This freight mode is essentially carried out by cargo trucks of different sizes to transport goods over land. It offers flexibility for a wide range of shipment sizes and can be used for both short and long distances. Compared to other modes of transport, truck freight can be faster for regional deliveries but may be more expensive for long distances or large volumes. Truck freight is usually often classified in these two modes:

• Full truckload (FTL): Essentially a freight mode for cargo that fills an entire truck container. It’s most ideal for large shipments, offers faster transit times and potentially lower per-unit costs for bulk quantities. However, FTLs tend to be less cost-effective for smaller shipments.
• Less than truckload (LTL): For shipments that are not as cost-effective for an FTL freight, shippers usually look at Less than truckload (LTL) freight as an alternative. LTL freight is more suitable for shippers with smaller shipments and are willing to share space on a truck with other consignments. However, transit times may be longer due to additional pick-up and delivery stops for other LTL shipments along the route.

Air freight: Probably the fastest option for urgent shipments, but also the most expensive. Ideal for high-value goods, perishables with short shelf lives, or situations where speed is paramount.

Ocean / Sea Freight: Arguably the most common shipping mode. Container ships transport volumes of cargo across extensive shipping routes worldwide at a fairly low cost and they can be often classified between these two modes:

• Full container load (FCL): Shippers opt to utilize an entire container for a single shipment, offering faster transit times and lower per-unit costs for large volumes. These are often selected for larger shipments which could justify the costs better.
• Less than container load (LCL): LCL is generally more suitable for smaller shipments as it requires sharing of container space with other shipments. It is also more cost-effective but might lead to potentially longer transit times due to longer consolidation and deconsolidation processes.

Rail freight: Rail transportation offers a compelling option for shippers that are looking to ship their goods at rates lower than truck freight. Due to the size of their carriages, it could also be a decent alternative to ship goods in bulk.

Each of these shipping modes have its own limitations. It's actually common to have more than one freight mode involved in many shipments as it can be more efficient and cost-effective at times. This is commonly known as multimodal/intermodal transportation.

The freight logistics process

Though the freight logistics process is linear from a broad perspective, there are many complications that can render it a challenge to ensure a shipment gets through successfully. Here’s an overview of how the process looks:

1. Freight planning and preparation

Whenever there’s a shipment to be shipped out, shippers will first need to understand and gather the important information for carriers or freight forwarders to transport them. These could include details such as the freight class, weight, dimensions, addresses, incoterms, and any special requirements for the cargo.

Shippers will usually reference these details and consider important factors such as cost, speed, reliability, and distance to help them determine the best shipping method for a particular shipment.

For example, if the shipment is not big in size and quantity, and has a long lead time to spare, a less than truckload shipping mode could be the most cost-effective option. However, if it’s an ad-hoc shipment with a crucial deadline for an important customer, air freight might be the best option to avoid losing a customer.

Once the most appropriate shipping mode has been decided, the shipper will start getting quotes from different carriers, freight forwarders or logistics providers based on the freight shipment details and requirements.

2. Packaging and labeling

While receiving quotes, the cargo is sent to be packaged securely with proper cushioning or protection. This is an important part of the process to reduce the risk of damaging the goods while transporting, which can be costly if it happens.

At the same time, labels with key information such as addresses and contact details will need to be attached to the goods for tracking, delivery, safety, and compliance. purposes. For international shipments, they may tend to also require additional labeling with information that meets customs regulations and requirements.

Shippers will also prepare documentation such as commercial invoices, and bills of lading (BOLs) which serve as a receipt for the shipment and a contract with the carrier.

3. Shipment execution

By this stage, a logistics service provider (LSP) should have been selected for shipping the freight over to the destination.

While transporting, it’s important to be able to track the shipments. Traditionally, many shippers have been tracking via emails, phone calls, or manual trackers, which are inefficient. Today, one of the best ways to track is through a real-time visibility tool with a communications platform which allows shippers to check the status of their shipments in the fastest way possible.

This will also come in handy especially when unforeseen circumstances such as delays, or custom hold-ups occurred. Such situations can then be easily reported and if a solution is required, it can be easily communicated to resolve the issues as well.

4. Completion

At this point in time, the shipment should already arrive at the destination and a confirmation of receipt from the recipient has to be sent to the shipper.

An invoice will then be issued by the LSP for the freight transportation service provided, including any additional charges incurred during the shipment execution stage. Once it’s received, the shipper will have to review the invoices and ensure accuracy of the charges based on the initial agreement.

As more companies are getting more stringent in an increasingly disruptive world, shippers are also looking for sophisticated freight analytics tools to measure their freight logistics performance. By analyzing the valuable insights generated by these tools, shippers can reliably refine their approach for future shipments, identify areas for improvement, and optimize cost reduction.

Conclusion

So, there you have it. We certainly hope you learnt a ton of freight logistics essentials to help you make informed decisions and ensure your shipments reach their destinations smoothly.

That being said, freight logistics is only going to be increasingly complicated to handle. This is why we develop Cargobase TMS, the leading transportation management system that has helped many supply chain professionals streamline their freight logistics processes easily to boost efficiency and maximize profits.

To find out more about how Cargobase TMS can help your company achieve the same success, be sure to contact us to find out more!