Managing freight and logistics costs

Understanding and managing freight and logistics costs are critical to enhancing competitiveness in global markets and increasing your profitability. Key areas that you will need to understand when it comes to managing your freight and logistics include: 

  • Incoterms® 2010
  • Trade terminology explained
  • Common freight costs
  • Choosing the right freight forwarder
  • Marine insurance for air and sea cargo
  • The supply chain as a Unique Value Proposition (UVP)

Terminology explained:

Incoterms® 2010: ICC’s Incoterms® rules are regularly incorporated into sales contracts worldwide and all importers and exporters should understand how they work to avoid costly misunderstandings by clearly defining the responsibilities of sellers and buyers for the delivery of goods.

  • What are the Incoterms® rules and what can they do for me?
  • How do I reference Incoterms® 2010 in a contract of sale, insurance or payment?
  • What are the main differences between Incoterms® 2000 and Incoterms® 2010?
  • What is the most efficient rule for which mode of transport?

Trade terminology explained: There are hundreds of different abbreviations and acronyms used in commerce and International Trade as well as shipping, insurance and commercial terms. 

Common freight costs: We all know that when we receive a quote from a freight forwarder it can be a bit “double dutch”. See our Top Tips below. 

Choosing the right freight forwarder: Choosing the right service provider is vital for any company and sometimes you need to shop around to find one that provides a quality service. Selecting a freight forwarder just on pricing may not be the best solution for your company. See out Top Tips below.

Marine insurance for air and sea cargo: Why you need marine insurance, types of policy should you be using, and how can you obtain marine insurance.

The supply chain as a Unique Value Proposition: How a carefully considered supply chain can maximise your bottom line.

The ECA runs a one day workshop on getting the documentation right and managing your international freight risks.






Top Tips

UNDERSTANDING and managing freight and logistics costs are critical to enhancing competitiveness in global markets – yet are too often ignored, or put in the “too hard basket” by many companies. 

1. Know your product
  • Many companies waste money on additional charges that could have been avoided by doing their “homework” up front.
  • Do you know your Harmonised Tariff Code?
  • Are your products classified Dangerous Goods? If so, what is the code?
  • Do your goods require an import permit and/or government inspections at origin or destination?
2. Packaging
  • Don’t use worn or old cardboard boxes, use proper inner packing, do not over pack and re-inforce your boxes.
  • Use standard size pallets and stacking sizes. Ensure boxes are secured on the pallet and don’t exceed the pallet edges.
  • Calculate your weights and dimensions correctly and know the gross cargo weight of each item
3. Clear and Accurate Labelling 
  • Ensure the shipper, consignee, origin, destination and shipping marks/goods description are clearly marked on the “packaging labels” and secured to the goods for travel.
4. What is the most cost efficient shipping method?
  • Typically transporting by ocean is cheaper than air but this is not necessarily always the case.
  • To make the best decision, it is important to know how carriers charge for international shipping.
  • Airlines bill by what is called a chargeable weight which is calculated from a combination of the weight and size of a shipment.
  • Ocean carriers charge per container rates for shipping in standard containers (FCL). If you are shipping less than a container load (LCL), your price is often determined by cubic metre or volumetric weight.
  • Working out the most cost effective shipping method (i.e. FCL/LCL/Air) should also take into consideration the following:
  • Transit/shipping time
  • Budget
  • Characteristics of cargo i.e. Perishable, DG, fragile
5. Are you insured and do you have the correct policy? 
  • It can happen to you so shop around for Marine Cargo insurance for the loss and /or damage of goods while in transit.
  • Check your coverage is adequate, especially if shipping to volatile regions.
6. How will you pay for your freight costs?
  • Consider your payment options and terms for goods and freight/clearance.
  • Consider currency of payment, security of payment method and exchange rate margins/fees charged by banking institutions.
7. Hidden Fees
  • Custom duties and taxes alone can represent as much as 30 percent of the total shipping fees, so it’s important to understand the terms and hidden fees involved.
  • Take advantage of FTAs!
8. Using cross docking versus container delivery
  • It is often cheaper to use a load/unload facility at port for packing/unpacking FCL containers rather than your own facility or factory.
9. Demurrage/storage and detention
  • The key is to ensure your goods are cleared and ready for release prior to the vessel/goods arrival.
  • Make sure port slots are booked for the “first available day” by your transport provider.
10. Choosing a service provider
  • The biggest mistake that you can make in choosing a freight service provider is to hire the first company that comes along.
  • No one freight forwarder can be a specialist on every trade route or freight category so shop around to find a specialist with competitive pricing. Remember the best “headline” price is not always the most cost effective option.
Questions you should be asking of new service providers include:
  • Do they have experience with your product/commodity type?
  • Do they have experience in shipping to/from your country/region of interest?
  • Can they provide references from companies that have used their services?


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Ed Serrano
Managing Director,
VEKTA Advanced Automation
Member of the ECA

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