Logistics are still often considered a necessary evil. The result: this field doesn’t get the attention it deserves. The processes - often managed by several people - are fragmented, which makes it difficult to see how important the logistics chain is. However, effective organisation of your logistics can generate a competitive advantage, particularly in an international context. It will enable you to reduce your costs while ensuring optimal service.
Here are the main modes of international freight transport that we have identified, along with an overview of the factors likely to influence your choice. We conclude by discussing the 4 factors that determine the cost and efficiency of your logistics process, in addition to the choice of transport.
The 7 international modes of transport
Road transport can be an attractive option within the EU. Heavy trucks don’t have to stop at border crossings and many companies have loading docks, which speeds up handling. On the other hand, road transport is a costly solution: if you don’t have your own fleet, you will have to pay a carrier, fuel and any additional fees including insurance and tolls.
Transport between EU Member States and other countries is subject to different laws and regulations and, therefore, often involves a number of customs formalities and special transport documents. Find out ahead of time from export experts.
COURIER AND POSTAL SERVICES
Door-to-door delivery with courier and postal services provides real added value for exports to European destinations. The suitability of this solution for your purposes will depend on a number of factors including volume, weight, the type of merchandise, distance, the delivery deadline and any additional costs (e.g. overnight stays and tolls).
Given the high cost of this mode of transport, freight trains are primarily used to transport heavy merchandise over long distances. In addition to the cost of rail transport, the transport before and after the rail shipment must be taken into account because few companies have a rail loading dock. It should be noted, however, that this is the most environmentally-friendly form of transport for long distances.
Over 90,000 container ships around the world are used to transport goods. The largest ones can carry up to 20,000 containers per journey. Over 90% of the products in our shops have been imported to our country by ship. Many Belgian exporters prefer this shipment method. The ports of Antwerp, Zeebrugge, Ghent and Ostend can be used to ship large quantities to many different destinations at a relatively low cost.
River navigation enables the shipment of large quantities of merchandise at a lower cost. This solution is also very environmentally-friendly. However, the downside is that you are restricted to the navigable network and will nearly always need additional transport upstream and downstream. River transport is also known to be slow.
Although the aeroplane is the most expensive option, it is the fastest way to ship your products to distant locations. Air transport is primarily preferred by entrepreneurs who promise very short delivery times to their foreign customers, sell perishable or seasonal products, or export to regions which are difficult to access.
In practice, exporters often use several modes of transport for a given journey. This is called multimodal transport. Given that it’s impossible to transport goods by lorry from Brussels to Mexico or Japan, loads are often sent by ship or aeroplane then transported to the final destination by road or rail.
What is the best mode of transport for you?
Although the context is different for each exporter, the factors which will determine your choice of transport are applicable to everyone:
- available budget
- delivery speed
- type of products
- volume shipped
- the modes of transport at your disposal
- your customer's accessibility and infrastructure
- delivery conditions
Know your Incoterms !
The Incoterm (acronym for the International Commercial Terms created by the International Chamber of Commerce) selected will also have an impact on the choice of mode of transport. It determines the rights and obligations of the buyer and of the seller for each type of transport, including liability for any damage and administrative procedures.
There are 13 Incoterms between two extremes:
- EXW: minimal seller liability
- SSP: maximum seller liability
The golden rule is: the longer you are liable for the transport, the higher the transport costs you will have to include in the final sales price.
You can choose from a wide array of modes of transport for your international goods transport needs. We describe the main ones in this overview.
Tip: conduct an in-depth analysis of the different modes of transport – even if some appear uninteresting at first glance – by listing the benefits and drawbacks of each option.
Loading and unloading
Don’t forget the activities required before and after the transport. Your choice will depend to a large extent on the volumes handled and the infrastructure in place.
Tip: transfer costs increase when you combine several modes of transport, such as piggybacking. Always select the most cost-effective route for your merchandise.
Take into account the damage and losses which occur during transport. Unforeseen circumstances can also increase the transport time.
Tip: use outside carriers, agree to precise transport times and negotiate compensation in the event of delayed delivery.
If you have to keep an inventory, evaluate the cost (warehouses, risks, etc.) based on the level of service you want to offer your international customers.
Tip: consider acquiring inventory management software to have an exact, real-time view on the availability of your products and spare parts.
Internal operation of the company
These are all the direct and indirect costs (e.g. staff, digital tools, financing) related to the organisation and tracking of your logistics processes.
Tip: reduce your salary costs, your processing times and risk of human errors by implementing advanced automation. Robotic Process Automation (RPA) will enable you to make significant productivity gains.