Whether you are a business retailer, wholesaler, or manufacturer, freight charges are one of the primary costs of running a successful business. You have to move goods from one location to another, ship products to customers, import products for sale, etc., and all that doesn’t come cheap, especially if you are shipping overseas. The more the cargo and the longer the distance, the higher the freight costs.
The challenging part is that freight costs are often uncertain. You may not know the exact shipping costs for your goods until your carrier sends the invoice days later. Freight costs depend on many economic circumstances and other factors. Here’s a more profound look into them.
The cost of land and maritime transport is directly related to fuel costs. When fuel prices fall, it becomes cheaper to transport cargo. The uncertainty is that fuel costs are volatile and keep changing, so you never know when transportation costs will be higher or lower. Factors that influence fuel costs can be political; for instance, when there is a crisis such as war threats in oil-producing countries, fuel prices can highly fluctuate in days. The savings or losses are passed on directly to the consumers, including your business.
Demand for freight is also another factor that can influence the freight costs of your business. Just as the freight costs depend on the underlying costs, so does it depend on the volumes the operators are shipping. The carriers may be forced to charge limited shipping slots at a premium when shipping slots are limited. But if the shipping business is slow, a courier may provide more competitive rates, at least in the short term.
Government regulations also impact the shipping industry and costs. For instance, many countries often have limitations on the maximum driving hours a day for commercial operators. That affects land transportation. Also, where curfews have been imposed during the covid 19 pandemic, the freight industry is impacted due to the limited working hours.
If your business involves shipping goods, you have to select your mode of transportation: land, sea, or air. However, you have to consider two primary things here: the transit time and the costs of the transportation mode you choose. To minimize your transit time, which is the time taken to deliver the products, you have to select faster modes of transport such as air, increasing your shipping costs. So the transportation mode you choose impacts your freight costs and your business as well.
Depending on the goods you are shipping, insurance is of utmost importance to secure your costs. No matter how careful the operators are, you can never rule out the risks of damages, losses, or even theft during loading, transit, and unloading. That is why it is beneficial to ensure your goods. In some cases, you have to arrange for security which increases your shipping costs.
As you can see, many factors influence your freight costs. Your carrier takes into consideration all the factors mentioned above when determining your freight charges. But if you are loyal to a particular courier, they may offer preferential rates even when freight costs are high.