Deciding whether to ship via ocean or air can make or break a business. It is a significant cost that goes to the heart of international trade. There are certain businesses that have no option but to choose one or the other. For example; those who deal in highly perishable goods such as decorative fresh flowers or fruit might find that the time spent on ocean vessels is just not practical for their business. Likewise; those that send very bulky goods such as cars and boats may find that the practicalities of using air freight are just outside their capabilities. This article examines some of the critical factors that you might consider when making a decision.
You need to think about how reliable an option is before selecting it. Reliability can come from the sector as a whole and also from the individual company that you are dealing with. You need to be able to make a clear distinction between these two types of reliability, or you may end up turning down an option that might have worked for you very well. We all want to deal with people, products, businesses and service providers that are reliable because this is a world that requires certainty amidst the ongoing uncertainty about economic issues. The best approach is to do a comparative analysis of ocean and air freight in order to work out how they stack up to one another.
Interestingly; the freight business started with ocean liners but it is the air vessels that have won the battle of reliability. Although weather and other unexpected factors tend to come into play, airlines try very hard to keep up with their schedules; not least because the tickets are very short term when it comes to booking and using them. By contrast, ocean liners have acquired a bad reputation for consistent delays and being off schedule. Although businesses may be able to tolerate a few days’ worth of delays; a longer period of delay can be disastrous. Flights have the advantage of having daily return flights so that the customer has other options in case one particular scheduled flight is delayed. Ocean liners have a much longer turnaround that is measured in many days or even weeks. This means that if you miss one, you may have to wait a long time before getting another.
Costs are a critical business concern and rational entrepreneurs tend to take steps to ensure that their costs are as low as possible; certainly lower than their income. The budget that the business has will have an impact on whether they choose an ocean liner or a flight. Typically; there will be a transport budget that is incorporated into the modelling of the business idea. The default position has been that ocean liners are much cheaper than flights when it comes to transporting goods and people. However, a closer examination may indicate that this stereotype does not always hold true.
You need to be able to calculate both the unit and aggregate costs because they can significantly affect your decision. Airlines tend to use a chargeable weight formula. This arises out of the size of the shipment as well as its weight. On the other hand; shippers will charge based on the rate of the container. The two standard formats are 20s and 40s but you can get other alternatives upon request. Although there are cases where the weight of the cargo will be a material concern, most of the charges for ocean liners are based on the size or bulkiness of the shipment.
Those customers that are going to ship content that is less than a full container are likely to be charged using a cubic meter measure. That means that if you have large and heavy shipments, the sea is your friend. However; as your shipments get smaller, you will find that the margin price differentials keep reducing. There may come a time when a flight is the cheaper option.
It is also important to think about the destination charges. For example; you may be subjected to customs and destination fees that were not originally within your budget. Those that are using ocean liners need to consider the costs of warehousing fees which are typically charged at the seaport. These fees can outstrip anything that the airport will charge.
It is a given that an airplane is going to move much faster than a ship, so the debate on this one is about details. We operate in an international trade environment that is dependent upon the JIT (Just in Time) framework. Delays can cost you money as well as business relationships with your customers. A shipment will take more than a month to arrive to a destination where an airplane can make it in less than two days. If you are moving household items, you need to go to the destination country to prepare so that you are not held up by bureaucratic delays at a time when the shipment arrives. You may be required to have an agent that can represent you when you are not available.
That is not to say that ships are always going to be this slow. Technology is changing the landscape and it would not be entirely surprising if one day, the ships that we use are much faster than they presently are. The use of canals has also contributed to reducing the physical journey that must be travelled before getting to the destination. At the moment some ocean freight shipments can guarantee arrival in as little as 8 days.
4. Environmental Impact
The environment has become a critical issue for many businesses and the shipping industry is no exception. In the pursuit of convenience and profits, it might become easy to forget about the costs of environmental degradation. The “polluter pays” principle means that those businesses that consistently engage in environmentally unsustainable practice will end up having to pay for their actions. This is a dent in the bottom line of the company.
At the moment the ships are winning the battle for environmental responsibility. Their CO2 emissions are much lower if you take into consideration the amount of cargo that they can carry at a given time. Nevertheless, environmentalists are taking stock of the oil spills that have been associated with the shipping industry. These are pollutants that seep into the ecosystem, causing long term damage.
5. Charges for Goods
The ultimate decision-maker for a business is the costs that they are dishing out when they make a decision. If the revenues significantly exceed the cost, then it is a prime opportunity. That means that marginal, average and total costs will be important indicators as to whether air freight is better than using ocean liners.