Freight transport is the circulatory system of commerce at any level. It’s always been relevant to our society and economies—no matter how it’s been ‘carried out’ over the centuries and millennia. However, the significance has surged in the past few hundred years, going through several evolutions—the last of which has been the digitalization of systems.
And equally significant are the changes that have made time and efficiency the equivalents of money and gold. In this brief guide, we’ll break down what freight transport entails, including its critical role in the supply chain, different types of transport, and some ins and outs of pricing. So buckle up, and let’s jump right in.
What is freight transport?
Freight transport is the coordinated movement of goods in bulk from one location to another, whether it's across the street or across continents. But don't let the simplicity of that definition deceive you.
The mechanics of this undertaking involve a complex orchestration of storage, scheduling, and the right equipment, products, and personnel coordinating toward one goal—getting things from one place to another as efficiently and safely (supposedly) as possible.
Shippers, carriers, and receivers
There are a few key terms you should know that will frame your knowledge of what’s happening in the world of freight. First, we have the shippers, technically known as consignors, who are the originators of the goods that need transportation.
Next are the carriers, responsible for physically moving the goods from one place to another. Finally, you have the receivers, technically known as consignees, who are the end-users receiving the transported goods, effectively closing the shipping loop.
FTL, LTL, Intermodal
Also, you'll commonly encounter a few freight classification terms, like Full Truckload (FTL), Less-than-Truckload (LTL), and intermodal or multimodal transport. FTL denotes shipments that take up an entire truck, ideal for large quantities. Conversely, LTL caters to smaller shipments that share space with other consignments on the same truck - like most delivery or distribution-style loads. Intermodal involves strategically using multiple transportation methods—like rail, sea, and road—to complete a single shipment.
Want to learn more about cloud-based Freight Management Systems?
Importance of freight transportation to society and supply chains
The freight sector ensures that products move seamlessly from point A to point B, but its influence is far-reaching and foundational to the global economy. At its essence, freight transmits crucial resources from manufacturers to distributors and consumers.
Starting with supply chains, efficient and reliable freight systems are non-negotiable. Consider how an unexpected delay in shipping auto parts to a manufacturer can domino into production halts, layoffs, and increased vehicle prices for consumers.
Each player in a supply chain relies on the predictability and efficiency of freight services. Any hiccup can derail operations and cause financial losses, not just for a single entity but for interconnected businesses and potentially even entire sectors.
But the relevance extends into the very fabric of society. Think about the last time you visited a grocery store, pharmacy, or any retail space. The products on the shelves, the fuel in the pumps, and even the construction materials used to build the establishment were brought to you because of varied and carefully coordinated freight services.
This unassuming yet intricate network of trucks, ships, and planes allows us to maintain our standard of living, advance technology, and facilitate global trade. Freight transportation isn't just a commercial activity; it's a societal cornerstone.
Types of freight transport
Freight transport isn't a one-size-fits-all operation. It's a nuanced landscape with several transport categories (or types) that meet specific supply chain needs. There are four principal types: bulk, containerized, break-bulk, and project cargo.
Bulk freight involves shipping commodities like oil, grain, or coal, which are generally transported in large quantities and directly poured into ship holds, tankers, or railcars. The method of transport varies, commonly using specialized trucks, railroads, and vessels.
Containerized shipping is likely what springs to mind when you think of global trade. Here, goods are packed into standardized containers, which are then easily transferred between different modes of transportation—such as trucks, trains, and ships—without unloading and reloading the cargo. You often see this portrayed in movies as the large port with cranes stacking containers onto massive ships.
Break-bulk shipping refers to goods that can't be containerized because of their size or shape but aren't loose like bulk commodities. Items like machinery or timber are often moved using this method, traditionally requiring more labor-intensive handling.
Project cargo is for the extra-large, often complex shipments that don't fit into the previous categories. Think wind turbines, factory components, or heavy machinery, which often require a combination of road, rail, and sea transport.
Today’s supply chain movers and shakers are using Advanced Order Management systems to empower their warehouse planning.
Each type aligns with various modes of transportation, highlighting the vast and adaptable network that makes up the world of freight.
Pricing mechanics in freight transport
Understanding the financial mechanics during freight procurement is important for optimizing budgets and mitigating risks. Let's unpack the two primary pricing models you'll encounter: spot rates and contract rates, along with other cost-driving factors.
Spot rates are essentially the market rates at the time of booking. They can fluctuate dramatically due to various circumstances, such as fuel prices, demand surges, or seasonal trends. While they may offer cost savings during low-demand periods, they are highly volatile and provide less predictability. To get the best spot market rates, use spot bidding systems that allow you to review every shipper/carrier negotiation easily.
In contrast, contract rates are negotiated between shippers and carriers for an extended period, generally ranging from a few months to a year. This pricing model offers stability but might not always be the most cost-effective, especially when market rates fall below the contracted price.
Several other factors contribute to the overall cost. Fuel surcharges, accessorial charges for additional services like loading or unloading, and lane imbalances—where demand and supply are unequal in a particular route—can also impact the final price you pay.
Analyzing these elements within your specific operational context is crucial to identifying which pricing strategy aligns most effectively with your business objectives and risk tolerance. By doing so, you’ve quickly surpassed the notion of simply moving goods—and now you’re optimizing the entire system.
GoRamp is the go-to solution for freight management
When it comes to effective freight management in the European and North American markets, GoRamp is a one-stop, go-to SaaS software for those moving their systems to the cloud.
With an integrated platform designed to streamline the entire freight process, GoRamp simplifies what is traditionally a complex system. A unique selling point is their spot bidding feature, which democratizes the process of freight cost negotiation. Shippers and carriers can directly negotiate spot rates, creating a real-time, competitive marketplace that fosters cost-efficiency and transparency.
The practical implications are enormous. Clients can optimize their logistics expenditures and gain greater control and insight into their supply chains. In a marketplace that demands agility and responsiveness, deploying GoRamp in your supply chain isn’t a decision—it’s a strategy.
Don't just move goods—optimize your operations and realize the full potential of your supply chain. Let GoRamp be your next strategic move. Book a demo today and see yourself what GoRamp can do for you.
