A business’s reputation depends on its ability to transport products and meet customer demands in strict deadlines. A well-connected supply chain network with economical transportation helps a business meet customer demands. Ocean freight is among the most popular cargo transportation methods used by businesses worldwide. Understanding how this service works can allow businesses to use it efficiently.
What drives the demand of ocean freight services?
Businesses are finding new markets and customer bases regularly. This is often not restricted by location. As a result, businesses need to transport their products internationally to cater to this growing demand. This requires efficient, swift, and reliable transport of cargo. Furthermore, transportation must be economical to ensure businesses do not lose money when trying to cater to this new customer base. Ocean freight services meet this need. Technological advancements in ocean freight have increased the popularity of the service.
Any business that aims to transport cargo using ocean freight should first understand the ocean freight rates. Understanding the specifics behind the calculation of these rates allows the business to determine its profit margin and expenses.
Determinants of ocean freight rates
The freight rate also includes some other factors such as basic sea freight charges, documentation fees, inland haulage (if applicable), bunker adjustment factor, terminal handling charges, and currency adjustment factor. It is important to see whether it includes all of these factors or is charged separately when checking the freight rate.
What happens next?
The process of ocean freight starts with drawing up a shipping contract. The contract includes all the five charges listed above and the total sum that the business is expected to pay. The contract also includes international commercial terms, which are internationally recognized responsibilities that buyers, sellers, and freight services must abide by. Some common options that are included are as follows:
The final costs
As the five segments above have demonstrated, most of the shipment cost depends on the cargo’s size, quantity, and type. For example, delicate and high-value cargo such as glass products likely needs higher insurance, resulting in the shipment cost increasing.
The final ocean freight cost includes all of the five charges explained above. Therefore, the business should include both profit margin and shipping cost into their international shipping charges when accepting orders from customers. In the case of a large consignment, the overall cost of ocean freight can be divided by the number of units, and a small discount can be given to the customer.