Freight transport is the circulatory system of commerce at any level. It’s always been relevant to our society and economies—no matter how it’s been ‘carried out’ over the centuries and millennia. However, the significance has surged in the past few hundred years, going through several evolutions—the last of which has been the digitalization of systems.
And equally significant are the changes that have made time and efficiency the equivalents of money and gold. In this brief guide, we’ll break down what freight transport entails, including its critical role in the supply chain, different types of transport, and some ins and outs of pricing. So buckle up, and let’s jump right in.
What is freight shipping?
Freight shipping or freight transport is the coordinated movement of goods in bulk from one location to another, whether it's across the street or across continents. But don't let the simplicity of that definition deceive you.
The mechanics of this undertaking involve a complex orchestration of storage, scheduling, and the right equipment, products, and personnel coordinating toward one goal—getting things from one place to another as efficiently and safely (supposedly) as possible.
Shippers, carriers, and receivers
There are a few key terms you should know that will frame your knowledge of what’s happening in the world of freight. First, we have the shippers, technically known as consignors, who are the originators of the goods that need transportation.
Next are the carriers, responsible for physically moving the goods from one place to another. Finally, you have the receivers, technically known as consignees, who are the end-users receiving the transported goods, effectively closing the shipping loop.
FTL, LTL, Intermodal
Also, you'll commonly encounter a few freight classification terms, like Full Truckload (FTL), Less-than-Truckload (LTL), and intermodal transportation or multimodal transportation. FTL denotes shipments that take up an entire truck, ideal for large quantities. Conversely, LTL caters to smaller freight shipments that share space with other consignments on the same truck - like most delivery or distribution-style loads. Intermodal involves strategically using multiple transportation methods—like rail, sea, and road—to complete a single freight shipment.
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Importance of freight transportation to society and supply chains
The freight sector ensures that products move seamlessly from point A to point B, but its influence is far-reaching and foundational to the global economy. At its essence, freight transmits crucial resources from manufacturers to distributors and consumers.
Starting with supply chains, efficient and reliable freight systems are non-negotiable. Consider how an unexpected delay in shipping auto parts to a manufacturer can domino into production halts, layoffs, and increased vehicle prices for consumers.
Each player in a supply chain relies on the predictability and efficiency of freight shipping services. Any hiccup can derail operations and cause financial losses, not just for a single entity but for interconnected businesses and potentially even entire sectors.
But the relevance extends into the very fabric of society. Think about the last time you visited a grocery store, pharmacy, or any retail space. The products on the shelves, the fuel in the pumps, and even the construction materials used to build the establishment were brought to you because of varied and carefully coordinated transportation services.
This unassuming yet intricate network of global freight (trucks, ships, and planes) allows us to maintain our standard of living, advance technology, and facilitate global trade. Freight transportation isn't just a commercial activity; it's a societal cornerstone.
Types of freight transport
Freight transport isn't a one-size-fits-all operation. It's a nuanced landscape with several transport categories (or types) that meet specific supply chain needs. There are four principal types: bulk, containerized, break-bulk, and project cargo.
Bulk freight involves shipping commodities like oil, grain, or coal, which are generally transported in large quantities and directly poured into ship holds, tankers, or railcars. The method of transport varies, commonly using specialized trucks, railroads, and vessels.
Containerized shipping is likely what springs to mind when you think of global trade. Here, goods are packed into standardized containers, which are then easily transferred between different modes of transportation—such as air freight, rail freight, road transport and ocean freight—without unloading and reloading the cargo. You often see this portrayed in movies as the large port with cranes stacking containers onto massive ships.
Break-bulk shipping refers to goods that can't be containerized because of their size or shape but aren't loose like bulk commodities. Items like machinery or timber are often moved using this method, traditionally requiring more labor-intensive handling.
Project cargo is for the extra-large, often complex shipments that don't fit into the previous categories. Think wind turbines, factory components, or heavy machinery, which often require a combination of road, rail, and sea transport.
Today’s supply chain movers and shakers are using Advanced Order Management systems to empower their warehouse planning.
Each type aligns with various modes of transportation, highlighting the vast and adaptable network that makes up the world of freight.
Pricing mechanics in freight transport
Understanding the financial mechanics during freight procurement is important for optimizing budgets and mitigating risks. Let's unpack the two primary pricing models you'll encounter: spot rates and contract rates, along with other cost-driving factors.
Spot rates are essentially the market rates at the time of booking. They can fluctuate dramatically due to various circumstances, such as fuel prices, demand surges, or seasonal trends. While they may offer cost savings during low-demand periods, they are highly volatile and provide less predictability. To get the best spot market rates, use spot bidding systems that allow you to review every shipper/carrier negotiation easily.
In contrast, contract rates are negotiated between shippers and carriers for an extended period, generally ranging from a few months to a year. This pricing model offers stability but might not always be the most cost-effective, especially when market rates fall below the contracted price.
Several other factors contribute to the overall shipping cost. Fuel surcharges, accessorial charges for additional services like loading or unloading, and lane imbalances—where demand and supply are unequal in a particular route—can also impact the final price you pay.
Analyzing these elements within your specific operational context is crucial to identifying which pricing strategy aligns most effectively with your business objectives and risk tolerance. By doing so, you’ve quickly surpassed the notion of simply moving goods—and now you’re optimizing the entire system.
FAQs
What is freight transport?
Freight transport, also known as freight shipping, is the coordinated movement of goods in bulk from one location to another, whether it's across the street or across continents. It involves a complex orchestration of storage, scheduling, equipment, products, and personnel to ensure goods reach their final destination efficiently and safely.
Who are the key players in freight transport?
The key players in freight transport are:
- Shippers (Consignors): Originators of the transportation of goods.
- Carriers: Entities responsible for physically moving the goods.
- Receivers (Consignees): End-users who receive the transported goods at their final destination.
What are the different types of freight transport?
The main types of freight transport are:
- Full Truckload (FTL): Shipments that take up an entire truck.
- Less-than-Truckload (LTL freight): Smaller shipments that share space with other consignments, often utilizing pallets.
- Intermodal: Shipments using multiple transportation methods, such as rail transport, sea, and road.
Why is freight transportation important to society and supply chains?
Freight transportation is crucial because it ensures the seamless movement of products from manufacturers to distributors and consumers, supporting global trade and maintaining our standard of living. Efficient freight systems are vital for on-time deliveries, avoiding delays that can cause production halts, financial losses, and disruptions in the supply chain.
What are the different types of freight transport categories?
The principal types of freight transport categories are:
- Bulk Freight: Shipping commodities like oil, grain, or coal in large quantities.
- Containerized Shipping: Goods packed into standardized containers for easy transfer between transportation modes.
- Break-Bulk Shipping: Non-containerized goods that require labor-intensive handling, like machinery or timber.
- Project Cargo: Large and complex shipments, such as wind turbines or heavy machinery.
What are the main pricing models in freight transport?
The main pricing models in freight transport are:
- Spot Rates: Market rates at the time of booking, which are volatile but can offer cost savings during low-demand periods.
- Contract Rates: Negotiated rates between shippers and carriers for an extended period, offering stability but potentially higher costs if market rates fall.
What factors influence freight transport costs?
Several factors influence freight transport costs, including:
- Fuel Surcharges: Additional costs based on fluctuating fuel prices.
- Accessorial Charges: Fees for additional services like loading or unloading.
- Lane Imbalances: Costs due to unequal demand and supply on particular routes.
- Freight Class: Classification of goods based on weight, dimensions, and other factors affecting handling and transportation.
What is freight forwarding and how does it relate to freight transport?
Freight forwarding is a service that arranges the storage and shipping of merchandise on behalf of shippers. Freight forwarders provide a range of logistics services, including tracking on-time shipments, negotiating freight charges, and booking cargo space. They play a crucial role in ensuring goods are efficiently transported to their final destination.
How can GoRamp help with freight management?
GoRamp is a SaaS solution for freight management that streamlines the freight process through an integrated platform. Its spot bidding feature allows for real-time, competitive negotiations between shippers and carriers, fostering cost-efficiency and transparency. GoRamp helps clients optimize logistics expenditures, gain better control, and improve insight into their supply chains.
How can I get started with GoRamp?
To start optimizing your freight management with GoRamp, book a demo to see the platform's capabilities and understand how it can enhance your supply chain operations, including on-time deliveries and efficient freight forwarding.
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