Freight’s importance to business is growing exponentially every year. This transportation system influences profits and prices worldwide.
Freight will continue to be a vital element of global logistics, so it’s important to understand all its varieties and nuances.
What is freight in logistics?
Freight is, simply put, payment for the transportation of cargo, provided to the carrier or owner of a leased vehicle. Therefore, it is essentially the cost of transportation.
Freight is a complex process that includes not only delivery to the destination but also an agreement on the terms of transportation, unloading, loading, storage, etc.
What is included in freight:
- Freight charges;
- Fuel surcharges;
- Port/terminal charges;
- Forwarding expenses;
- Insurance (sometimes separately);
- Loading and unloading;
- Additional logistics services.
Depending on the context, freight can also refer to a contract for delivery or the transportation process itself.
Types of Freight
Freight can be domestic, interregional, or international. It’s not necessary to charter an entire vessel or vehicle; it can be just a part of it or a space in a container.
Container freight is the most popular option among other types of this transportation system. For large consignments of goods, it is the cheapest and fastest method of delivery.
What are the differences between truck, sea, and air freight?
Although the term is most often used in and associated with maritime transport, freight is actually used for other modes of transport as well.
Truck freight is the rental of a truck or part of a truck for transportation under a contract. A full truck load is called FTL (Full Truck Load), and a partial truck load is called LTL (Less Than Truck Load). Truck delivery is what makes door-to-door service possible.
Rail freight is the monetary compensation paid to a carrier for the use of its rolling stock to transport large consignments of cargo. It is most often calculated on a per-car basis and per-ton-kilometer basis.
Air freight also exists, which is useful for urgent deliveries and expensive items.
Sea freight has additional subtypes:
- voyage charter – a charter for a specific cargo or voyage;
- time charter – a vessel with a crew;
- voyage charter – a vessel for a single voyage;
- bare-broke charter (demise) – a vessel without a crew;
- slot charter – a charter of only a space (slot) on a container ship;
- daily charter – a charter with payment per day of use.
Ship charter can be carried out on a one-time (charter) or regular (liner) basis.
Advantages and Disadvantages
There is no perfect delivery method in logistics, so it’s important to clearly understand your priorities and specific goals.
Advantages of freight:
- Low cost for large shipments (especially ocean freight);
- Wide choice of transport;
- High level of security;
- Stability thanks to long-term contracts.
While freight offers versatility and speed, this delivery system also has certain disadvantages.
Disadvantages:
- Delivery times may be extended;
- Costs are significantly affected by fuel prices and seasonality;
- Understanding logistical and legal nuances is essential;
- Rate fluctuations;
- Possible surcharges and surcharges.
Freight charges may be a fixed freight rate or calculated per unit, ton, cubic meter, etc. However, they may change during delivery, resulting in overruns.
Possible additional charges with freight:
- BAF – if fuel prices change;
- CAF – compensation for losses due to exchange rate fluctuations;
- DOCS – payment for processing transport documents at the port;
- cargo insurance;
- warehousing costs.
Direct freight – one vehicle for one shipment – is also more expensive. However, you can use the consolidated cargo option – small shipments from different customers are combined in a single vehicle.
Advantages of direct freight:
- faster transit time;
- no need to reload and unload goods at intermediate points;
- less risk of product damage;
- lower cost for large shipments;
- better conditions for large volumes.
Direct freight allows greater influence over logistics and direct communication with the carrier, which is often important for manufacturers, FMCG, and e-commerce.
What is included in the freight cost and what factors does it depend on?
In global trade, changes in freight rates can significantly impact commodity prices. Some companies even conduct their own rate analytics to predict costs and risks.
Factors that influence freight costs:
- Transportation geography;
- Type of vehicle;
- Weight, volume, and quantity of contents to be transported;
- Characteristics and type of cargo (bulk, liquid, hazardous, oversized, refrigerated);
- Seasonality and demand;
- Additional services for packaging, loading, and unloading.
The seller does not always pay the shipping costs. These terms are usually specified in the agreement.
ding to Incoterms – the internationally recognized rules for global trade.
Examples of Incoterms:
- DPU – the seller delivers and unloads the goods;
- DDP – the seller bears maximum obligations, including payment of duty;
- FOB – the seller loads the goods on board the vessel, after which the risk passes to the buyer, who charters them.
These rules are essential for understanding at what stage responsibility for the integrity and delivery of the goods passes.
What documents are needed for freight processing?
There are universal and basic documents required for any type of freight. These include the packing list, invoice, and waybill. Other documents are specific and depend on the type of transport.
What documents are needed:
- for vessel chartering: bill of lading, freight contract, port documents, and vessel operating time calculation;
- for road transport: freight forwarding agreement and CMR waybill (mandatory);
- For air freight, an Air Waybill (AWB) is key;
- for rail freight: a CIM or SMGS consignment note (depending on the country of departure).
The list of documents becomes much longer if the cargo is classified as hazardous. In this case, a number of licenses, permits, and approvals are required.
Why is it beneficial for businesses to book freight through a logistics company?
Organizing freight is a complex process for inexperienced cargo owners. Mistakes can easily be made even during the paperwork stage, communicating with freight forwarders and owners of vessels and other vehicles.
International freight requires control over the logistics process, which is a problem for many businesses, as it takes time and requires personnel. This is why most businesses prefer to free themselves from the need to manage each stage of delivery, entrusting this to transport and logistics companies. Professionals always know what documents are required and which routes are the fastest and cheapest.
What functions do logisticians perform on behalf of the client:
- negotiating;
- reserving space;
- managing document flow;
- Cargo monitoring;
- Loading and unloading supervision;
- Customs clearance (if necessary).
The list of responsibilities of logistics companies is long. In short, the client receives a turnkey service with minimal intervention. They receive only the delivered goods – safely, reliably, on time, and even faster.
