A New Approach for Logistic Freight Management

 

A New Approach to Reduce Freight Rates

M. Ravichandran, Asst professor, Department of Management Studies, Anna University of Technology Tiruchirappalli, Tiruchirappalli – 620024.

ABSTRACT

The Freight costs which is one of the most important factor of  consideration for any organisation nowadays has to be dealt in a careful mann ma nner er if no nott may lead lead to the redu reduct ctio ion n in the the rev even enue uess fo forr any any organisation. There are no attempts so far taken to reduce the freight costs which suits well and shows its effect immediately in to the organisation. The vari va riou ouss fact factor orss su such ch as el elev evat atin ing g fu fuel el pr pric ices es and and unst unstab able le ma mark rket et conditions threaten the organisations. Hence this paper attempts to depict the various ways for reducing the freight charges in any industry by way of freight analysis and understanding the logistical structures in general.

Key Ke y Wo Words rds:: Frei Freigh ghtt Co Cost sts, s, Lo Logi gist stic ical al Struc Structu ture re,, Fu Fuel el pr pric ice, e, Mark Market et conditions.

 

A New Approach for Logistic Freight Management

1. Introduction

The most important factor for any organisation operating overseas is the mana ma nage geme ment nt of it itss lo logi gist stic ical al ac acti tivi viti ties es incl includ udin ing g pr proc ocure ureme ment nt,, tran transp sport ort,, transhipment and storage of goods. This supply chain logistical costs amount to five to fifty percent of the total landed cost.

Some issues effecting logistics costs are the higher fuel prices and delays in transportation fees increasingly complex international trade laws and security measure mea suremen mentt th threat reaten en to len length gthen en del delive ivery ry times times and inc increas reasee wareho warehousi using ng costs. Hence the reduction of freight costs is a new area to be covered.

2. Methods of Evaluating Logistics Freight Rates:  

The freight rate on export goods is often based on weight or measure,

which uses comparative measure between volume and weight of cargo. A cargo that is large in relation to its weight and size is charged according to its total cube and gross weight.  

In gen general eral sea con consig signme nments nts are cha charge rged d based based on mea measure sure,, while while air 

consignments are charged on weight. The cost by means of weight or measure is used whichever gives the operator higher revenue is the rate that applies. The unit of ton being used in the freight cost vary between Metric Ton, Short Ton, or a long Ton. While the most widely used one is metric ton.

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Units of Weight or Measure Commonly Used: Legend:

 

MT

:

Metric Ton

Kg.

:

kilogram

lb.

:

pound

CBM

:

cubic meter  

Cu. Cms.

:

cubic centimetres

Cu. Ft.

:

cubic feet

Some freigh freightt carriers carriers may use tthe he lo long ng tton on (22 (2240 40 lb lbs) s) as weight weight or 40

cu. Ft. as measure in the freight cost calculation. In ocean freight, some freight carriers may use the terms U.S. shipping ton (40 cubic feet) f eet) and British shipping ton ton (42 (42 cu cubi bicc feet feet). ). Ot Othe herr un unit itss ma may y be used used in the the inla inland nd fr frei eigh ghtt co cost st calculation. In case of irregular shaped cargos the weight or measure applies, where the the me meas asure ure is de dete term rmin ined ed by taki taking ng th thee thre threee wi wide dest st dime dimens nsio ions ns whic which h describes the cargo well. Minimum Bill of landing:

In freight service a minimum minimum bill of landing is required where it adds up to 2 or 3 CBM, which may be specified in the terms of minimum requirement in dollar amount instead in CBM. Similarly in air freight a minimum of 1 kg is required it is economical to use air if the consignment used is small in size and shape. In case of road transport the minimum requirement varies from each and every carrier.

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Freight Adjustments: Currency Adjustment Factor:

The additional adjustment factor provided in order to cover instabilities in the currency movements is called as currency adjustment factor. Bunker Adjustment Factor:

The term bunker usually refers to the compartment that is meant for  carrying fuel in the ship, which is used to cover the unstable oil prices in the market. 3. Freight Cost Reduction

Freight costs and fuel surcharges can substantially cut profits, and most companies are looking for ways to save money in these areas. Our apprpach gives best ways to reduce the cost and has the effect immediately. We’ll start by conducting a freight analysis and audit evaluate shipment lanes, volumes, rates, fuel fuel su surch rchar arge ges, s, and and ca carri rrier erss to id iden enti tify fy are areas as where where yo your ur cost costss coul could d be lowered. 4. Tips for Reducing Freight costs

1. Understanding the true costs of sourcing overseas. Calculate freight, duty, brokerage, and inventory and carrying costs to support these lengthened supp supply ly ch chai ains ns.. Al Also so fact factor or in su such ch it item emss as the the co cost stss of engi engine neer erss flyi flying ng overseas. Once the true costs are understood the domestic buy may look better. 2. Th Thee mo more re va vari riab abil ilit ity y in th thee tr tran ansi sitt time timess ma may y lead lead to the the mo more re unce un cert rtai aint ntiies in the ord rder eriing of the pa pack ckag ages es wh whiich wi will ll lea ead d to the compensation for the uncertainties by ordering more. Hence the variability in it has to be decreased.

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3. Taking advantage of the classification of duty rates and eligibility for  special trade programs such as NAFTA. 4. Consolidation Consolidation of suppliers suppliers operating in the singl singlee country may lead to reduction in the transits. 5. Providing information about the logistics of your organisation to each and every customer will help in making informed decisions at each and every level. 6. The carrier insurance is merely a waste of money if the company’s self  insurance provides the covering for the carriers. 7. Automation of compliance processes by implanting software solutions may lead to decrease in cycle time which will ultimately help to reduce the costs. 8. When a company faces a supply chain issue it will get panicking and try to ship the entire goods in to single shipment in an express cargo. But consolidation of goods under emergency will save a lot of costs. 9. Among the available means of transport it is very much efficient to have the train transport since it is cost effective. 10. Being aware of non tariff barriers may help the organisations from falling in to unwanted liabilities and compliances. Hence the ten tips to save the logistical costs have been put down for the effective utilisation of logistical systems.

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5. Conclusion

The logistical costs which form the major burden for any organisation in any form may lead to reduction of profits if left unconcerned hence the above  proven tips to achieve reduction in costs as well as to have a hike in the profits for organisation of any form. 

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