Logistics Basics

Logistics Basics: Understanding the Shipping Industry and Transportation Methods

• 11 billion tons of goods are transported by ship each year, representing 1.5 tons per person.
• Shipping accounts for 80% of total exports and imports by volume and 50% by value for the European Union.
• The total value of the annual world shipping trade was over 14 trillion US dollars in 2019.
• Since COVID-19, supply chain challenges have included container shortages, lack of space on ships, the blocked Suez Canal, and COVID-19 outbreaks in large ports in China.
• Consequences of these challenges include skyrocketing prices and a lack of equipment and space.
• The shipping lines have realized customers are willing to pay five times more than before, so they may not stop increasing prices.
• Ocean freight remains the least expensive option for volumes above 1 cubic meter (CBM).
• There are two types of ocean freight loads: LCL (less than container load) and FCL (full container load).
• FCL starts being cost-effective at 15-20 CBM, and there are three main container types: 20 feet, 40 feet, and 40HQ or HC.
• Air freight is the fastest transportation method and is divided into two types: express and normal.
• Express air freight is interesting below 0.6 CBM or when the client wants the shipment asap, while normal air freight is more cost-effective than express starting at 0.6 CBM and better than sea freight below 1/1.2 CBM.
• The calculation for air freight varies based on the type, with express using a ratio of 1 CBM = 200 kgs while normal air freight uses actual weight or volumetric weight, whichever is higher.