Transportation mode is an integral part of international trade, and it’s planning. It is essential that cargo to be transported through international boundaries in an import-export transaction is cost effective as well as methodical. The transportation of goods usually occurs by the four modes of transport when it comes to international trade, i.e., rail, road, air, and sea.
The most optimal mode of transport for an export-import operation depends on a multitude of factors such as the size, weight, value and type of goods to be transported, the country of destination and laws pertaining in it, the time period within which the goods should reach the destination and any other special requirements involving transportation of sensitive items. Once decided upon, the importer or the exporter themselves can handle the logistics or carried through with the help of a freight forwarder.
Different modes of transport
The different modes of transportation in the import-export trade are the ocean, air, and land. Each mode of transport has its drawbacks and its benefits, and it is completely on the discretion of the parties involved to select the mode, which helps to maintain a balance between cost, time, and service. Often more than one mode of transport, i.e., multimodal transport is used to deliver the consignment to its destination hub finally.
When the consignment is carried through a network of roads to reach the destination, it is considered to be a part of road transport. Thus, goods can be transported by road transport through borders with lesser custom documentation. It does have limited reachability in terms of size and weight carrying capacity. Other factors, which cause problems in road transit are the traffic on roads, the poor conditions of the roads and the weather disturbances.
Benefits of road transport
• Doorstep delivery
• Also, easily traceable
Goods to be carried through medium to long distances can be transported through the rail. They are optimal to carry large quantities of goods that are bulky such as cement, coal, fertilizers, iron ore, etc. They involve a lesser time period than shipping cargoes through ocean route.
Key advantages of rail transport include:
- Safe and reliable
- Dependable transit time
- Also, ideal for carrying large volumes and heavy consignment of goods
- Can cover long distances
- Well within time deliveries at economical cost
A few rail-road transportation companies around the world are:
- Norfolk Southern
- Union Pacific Corporation
- Canadian National Railway
- DB Cargo
- DB Schenker
The oldest mode of transporting cargoes from one country to another, they are rated to be the least expensive mode of transportation. They are considered ideal to carry large volumes of consignments over long distances but the transit time is much longer than any other mode of transport. Whereas a cargo transited by air may take up to 3-7 days, shipped through ocean route it may be get delivered in 1 to 50 days.
Sea transport accounts for almost 90% of the global trade and is used to carry commodities in bulk such as agricultural commodities, iron ore, petroleum, crude oil, engines or propellers, minerals, metals, etc.
It operates through a limited network of sea routes and once the consignment reaches the last port, goods are further transported to the destination through land transport. Sea transport does face limitations in the form of unforeseen perils owing to natural environmental disturbances, which are more or less covered under cargo insurance.
Appraisal of the beneficial aspects of ocean transportation:
- Multifarious options in carriers
- Extensive network around the world
- Most reasonably priced mode of transport
- Ideal for almost any range of products in large volumes
- Also, optimal for products with long lead time
Some biggest shipping companies in the world:
A.P. Moller –Maersk Group
Mediterranean Shipping Company
CMA CGM S.A.
COSCO Shipping Corporation Ltd.
Evergreen Marine Corporation
Yang Ming Marine Transport Corporation
MOL [Mitsui O.S.K. Lines Ltd.]
NYK Line [Nippon Yusen Kabushiki Kaisha]
It is the newest mode of transportation to be introduced in the international trade, and it has been forecasted that the world air transport should rise 4.2% per year, owing to a growth in the world’s GDP in the next fifteen years.
Air Transport is the safest and the quickest mode of transport, ideal for goods that need to be delivered within a short span of time. It is extensively used by the retail industry to fulfill the inventory gap, as and when required.
They are an expensive mode of transport involving airport taxes and high airfares yet are being used by a large number of exporters and importers for goods that are most safe when transited through the air such as fragile items or perishable items involving food, flowers, and pharmaceutical items.
Air transport does witness limitations in the way of being one of the most costly means, and not ideal for large-sized goods and heavyweight products. Once the goods reach the destination airport, another mode of transport take it to its final place of delivery.
Pivotal benefits of air transportation:
- Speediest mode of transit
- On time arrivals and departures
- Safe and ensured cargo delivery
- Also, involvement of lesser documentation and formalities in comparison to other modes
Some top-notch airfreight companies:
- FedEx Express
- UPS Airlines
- DHL Express Group
- Emirates Skycargo
- Cathay Group
- Qatar Airways
- Lufthansa Group
- Air France- KLM
- Korean Air
- Cargolux Group
- ABX Air
Multimodal transport is a balanced and effective combination of more than one means of transportation to ensure the doorstep delivery of the consignment. It can be a combination of rail-road transport or sea-air modes to enable the importers and exporters quick, reliable and cost-effective transit of goods.
Indispensable benefits of multimodal transport:
- By using a combination of modes of transport goods will reach right to the hands of the importer.
- One document can handle all transport means
- Also, hassle-free delivery and timely delivery
Factors affecting the choice of mode of transport
There are various modes of transporting goods in international trade thus one can select can only after working on the requirements related to the size, weight, transit time involved and transportation cost of the mode.
Transportation cost depends on the size and volume of the cargo other than the distance factor. To transport large volumes of cargo over a long distance at cost effective prices, sea transport is the most appropriate mode. Air transport is best for light and quick delivery of products.
Reliability and safety
A critical factor in deciding the mode of transport is the reliability and regularity in their transit. Each mode of transport experiences certain setbacks in its course. Thus a buyer must make himself completely aware before taking a decision on the model that would be the most appropriate.
Protection of goods from damage, loss, and theft owing to man-made or natural occurring incidents or happenings can be insured by cargo insurance against damage and loss during the transit time by air, land or ocean. There are various types of cargo insurance that buyers consider to safeguard themselves from any unforeseen loss.
Sea transport covers 90% of the global trade. The shipment can either be transported through free on board [FOB] or by cost insurance and freight [CIF] as considered beneficial by the importer and exporter thus making a considerable difference to the appropriation of the type of mode to be undertaken.
Type of goods
This is one of the most vital considerations that a company must work on before determining the mode of transport in an import-export. Goods can be general, fragile, perishable, dangerous or sensitive. Thus, it is essential to consider the transport, which after complete information appears to be most optimal for the type of goods. It also depends on the norms one must comply with.
Sea transport is ideal for heavy and bulky goods in large volumes. On the other hand, air transport should be one’s mode of transport for perishable and fragile goods. Dangerous items such as transportation of animals have to undergo several formalities and rail transport can be the best option in such case.
Thus, there are numerous ways of transporting goods in international trade. It is only after working on the priorities, the pros, and cons of each mode and several other factors that one can choose the most efficient and effective means of shipment.