Getting your goods to market

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Getting your goods to market cost-effectively requires understanding your freight or delivery options, and the roles and services of freight forwarders, customs brokers, transport companies, couriers, air express companies, airlines, shipping companies and others in the freight industry. This knowledge is an important part of calculating the costs of getting the goods to market and pricing.

Selecting mode of shipment

During the preliminary discussions with your customer, an important issue which must be considered is the mode(s) of transport to be used for delivering your consignment of goods. The mode of transport chosen will affect the effectiveness (i.e. quality, quantity and time aspects) as well as the efficiency (i.e. the cost aspect) of physical distribution. There may be many options (land, air, sea, rail) available, each with its advantages, disadvantages and limitations.

  • Road: Mostly for regional trade, road transport is fast, flexible and appropriate for reasonably sized consignments.
  • Rail: Rail is less flexible, but good for long distances and bulk consignments.
  • Sea: Sea is often the most affordable mode of transport; even the smallest of parcels can be transported by sea.
  • Air: Air is the fastest, but often the most expensive mode of transport.
  • Multi-modal: Multi-modal transport implies that goods are moved by means of more than one type of mode – sea, road, rail and air.

You and the buyer must arrive at your final decision after careful consideration of all these and also the factors that you consider relevant and important for your particular products and requirements. There are a number of key factors to consider before making a choice:

  • Nature of the goods (perishable, delicate, heavy, bulky, hazardous, etc.)
  • Distance of shipment (damage to goods, deterioration of perishable goods, freight rates, etc.)
  • Quantity of goods (the larger the quantity, the lower the freight rates)
  • Costs (what is the cost of transport compared to the cost of manufacturing the goods? How much is the customer willing to pay for transport?)
  • Transport time (how important is quick delivery? How does it affect the goods?)
  • Risk (risk of deterioration, loss, breakage, theft, etc. are different depending on the mode of transport)
  • Company strategy (reputation? Low cost/prices? Quality of goods? Timely delivery?)


Sea freight

Sea freight is the most economical form of transportation by which goods move from their point of manufacture to their final destination. Other advantages to using sea freight to transport goods are that it:

  • allows the transport of hazardous, heavy, and bulky goods;
  • enables the transport of large quantities of goods in one shipment; and
  • avoids damage to goods that could arise from poor road or rail systems.

Sea freight is not always a viable option however. Some disadvantages include:

  • slowness - may not be appropriate when quick delivery time is essential; and
  • shipping delays - repeated delays in delivery of goods can have a negative effect on clientele and reputation.

When considering sea freight, a company should find out the following from the shipping line:

  • The frequency of sailing (when the next vessel is available should you not meet the dates of the intended vessel).
  • The cost of the freight.
  • The actual sailing time between the port of loading and the port of discharge.
  • The stack dates (the dates by which your cargo needs to be load-ready at the port of loading).
  • The directness of route (will the vessel be sailing directly to the port of discharge, or will it tranship the cargo at another port where a second vessel will carry the cargo to its final destination? This could expose the cargo to additional handling and risks).
  • Whether the sailing is an inducement sailing or not (in an inducement sailing, the vessel will only call the port of discharge if there is sufficient cargo to discharge).

Containerization

The use of containers for transporting cargo, known as containerization, has become a worldwide phenomenon. More than 75% of world trade is transported in containers. The advantages of containerization include:

  • increased efficiency;
  • greater security;
  • less risk of damage from weather elements; and
  • lower shipping costs.

Companies that do not have sufficient cargo to fill a 6 or 12 metre container can also make use of this sea freight option. Due to the increase in cargo moving by sea, a number of groupage or consolidation operators have developed. Companies with smaller quantities of goods can rely on the consolidator to pack their cargo with those of other companies into a 6 or 12 metre container. This offers a company the benefit of only having to pay for the space it utilises in the container, resulting in a much cheaper alternative to shipping cargo by air freight.

Companies that have sufficient cargo to fill a full container can book one with a freight forwarder or shipping line. It is essential, however, that the company have the facilities to pack a container at its premises. If this is not the case, a freight forwarder must be relied upon to pack the company’s cargo. This could end up being expensive.

Calculating sea freight

The freight currency for sea freight is the US dollar, which is quoted globally. The amount of freight due is either paid:

  • at the port of loading in exchange for the original bills of lading, or
  • at the port of discharge in exchange for release of the cargo from the shipping company’s custody.

When freight is paid in any other than the “tariff currency”, the amount due will be converted at the rate applicable on the date of shipment or another date agreed upon by the carrier.

Shipping lines generally quote freight costs:

  • per 6 or 12 metre container; or
  • per cubic metre or metric ton for small parcels.

Your freight forwarder can assist you with the calculation of these costs. Freight rates for containers are quoted per container regardless of how full or empty the container is. The only limiting factor is that you may not load more than 18 metric tons, or 21 cubic metres, into a 6 metre container.

The costs to load, secure and strap the container are called “Terminal Handling Charge” (or THC), and this is a separate amount payable, not included in the freight rate. The reverse procedure, also called THC, takes place at the port of destination, when the container is uplifted from the vessel and placed alongside the vessel at the port of discharge.

Airfreight

The movement of cargo by air is a highly specialised process, which is very different from moving cargo by sea or overland.

Due to the high security it provides, airfreight is most suited to cargo that is of a high value, but low volume (weight and measure). Computer equipment, cellular telephones and jewellery are excellent examples of cargo that lend themselves to being shipped by air.

Airfreight is also useful for the transport of perishable goods such as fresh cut flowers, fruits, vegetables, and fish which require fast transport. Although this type of cargo may be neither high value nor low volume, there may be no other option than to move the goods by airfreight due to the perishable nature of the cargo.

Some of the limiting factors that apply only to airfreight are:

  • air cargo has to be specially prepared or modified to enable the cargo to fit into an aircraft;
  • the space available on the upper and lower deck of the aircraft have to be taken into consideration;
  • pressure and temperature variations also have to be considered; and
  • it may not be permitted to transport cargo of a hazardous nature.

Airfreight is the most expensive means of moving cargo internationally. To facilitate quicker and safer loading of cargo, airline staff group air cargo into large units on pallets or containers. These are collectively known as a ULD (Unit Load Device). They play an important role in the loading and discharging of cargo and reduce theft and damage to the goods.

Calculating airfreight rates

Airlines that are members of the International Air Transport Association (IATA) are bound by their membership to comply with tariffs issued by IATA. However, higher volumes and frequency of cargo movement allow exporters/shippers to negotiate better freight rates.

Airline freight rates do not include:

  • collection of the cargo from the exporter’s premises;
  • delivery of the cargo from the airport of destination to the importer’s premises;
  • storage of cargo;
  • customs clearances and/or duties and other applicable taxes; or

Airfreight rates are based on a “chargeable weight” because the volume or weight that can be loaded into an aircraft is limited. The “chargeable weight” is either the actual gross mass of the cargo or the volumetric equivalent. Your freight forwarder or airline agent can help you calculate your cargo and convert the dimensions to a volumetric mass.

Road freight

Road haulage is often the only available method of transport for countries in Africa. Road hauliers offer the following services:

  • A door-to-door basis, where the road haulier collects a consignment of goods from an exporter’s premises and transports the goods to their final destination.
  • A depot-to-depot basis, where the cargo is delivered by the exporter from a depot in the country of export to a depot in the country of import.

Road permits

Road freight throughout Africa is strictly controlled with the issuance of road permits. Permits are not issued or renewed if a haulier is found to be overloading or operating sub-standard vehicles, or if the haulier is not abiding by the rules of the road. Irrespective of the cargo carried, road hauliers are required to obtain local permits for the purpose of transporting goods within a country (where the haulier is registered), as well as those countries through which the vehicle will travel.

In some African countries, the local road traffic authorities are reluctant to issue permits to hauliers that are not based or registered in that country. Without such a permit, the road haulier would have to re-load the cargo at the border onto another vehicle that is registered and that has the necessary permits. This can cause a number of problems such as delays, damage and theft. In order to overcome these problems, it is wise to choose a haulier that is registered in a number of countries, or one that has branch offices in countries where such restrictions are enforced. These branch offices facilitate more effective communication among the exporter, the freight forwarder and the importer in the foreign country.

Factors influencing the choice for road haulage

The decision to use a road haulier for all or part of the transit to a foreign destination is influenced by a number of factors, including:

Speed: The transit time for over-the-border cargo can be shorter by road than by rail. This is so because the road haulier controls the delivery of the goods right up to the final destination, whereas goods transported by rail can be delayed when rail trucks are handed over from one rail authority to another.

Convenience of distribution: When goods are being transported to neighbouring countries, a road haulier service may provide either a direct delivery to the importer’s premises or delivery to a convenient depot nearby.

Freight rates: Road freight rates are generally lower than airfreight rates but are more expensive than rail. The risk of transporting goods by road is much higher than with other modes of transport. It is for this reason that insurance cover for war, riots, strikes and civil commotion is not an option for cargo moving by road or rail. Most road freight movements are prepaid in full and the importer pays the exporter on delivery of the cargo.

Rail freight

Advantages of rail freight:

  • Large amounts of goods can be transported at the same time.
  • It is often very economical.
  • Remote areas that are not easily accessed by other modes of transport can be reached.
  • Almost any nature of goods can be carried – perishable, hazardous, breakable goods, etc.
  • Freight rates are usually low.

Disadvantages of rail freight:

  • It is limited to rail service network and cannot reach all countries and areas.
  • It is dependent upon the relationship between the rail authority and the neighbouring state.
  • Derailment, difficulties at border crossings, and other such events can seriously delay the delivery of goods.
  • Insurance usually does not protect the cargo from events such as war, strikes, riots, or civil commotion.

In the transportation of cargo by rail through Africa, the rolling stock or rail wagons move from one country to another and only the engines change at border points. Border crossing is probably the most limiting factor affecting rail transportation throughout Africa. Countries that have hostile relations or that have not signed trade agreements of co-operation might not allow rolling stock to pass through their country.

Rail freight rates

Rail freight rates are commodity based. This means that the rail authority categorises cargo into various categories and charges specific rates accordingly.

These categories include:

  • manufactured materials;
  • semi-manufactured materials; and
  • raw materials.

Manufactured goods call for higher freight rates than semi-manufactured goods or raw materials. Although the calculation of rail freight rates is based on the classification of the product, the weight and volume of the goods is also taken into consideration.

For more information on freight and warehousing, contact:

Courier Industry Association of Kenya (CIAK), P.O. Box 67577 Nairobi 00200, Tel: 020 531119
[Information provided: Express deliveries – courier industry]

Kenya International Freight and Warehousing Association (KIFWA), KPA Inland Container Depot, Embakasi, P.O. Box 57969 Nairobi 00200, Tel: 020 827704 / 0722 883953, Fax: 020 827854, Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
[Information provided: Clearing, freight forwarding, warehousing and logistics]

Kenya Ports Authority, KPA Headquarters, Kipevu, Mombasa, P.O. Box 95009 Mombasa GPO, Tel: 041 2312211 / 2221211, Fax: 041 2322867, Email: This email address is being protected from spambots. You need JavaScript enabled to view it., Website: www.kpa.co.ke
[Information provided: Port operations, maritime information, shipping guide]

Kenya Railways Corporation, Kenya Railways Headquarters, Haile Selassie Ave, P.O. Box 30121 Nairobi 00100, Tel: 020 221211, Fax: 020 340049 / 224156, Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
[Information provided: Rail transport]

Kenya Ships Agents Association, Missions to Seamen, next to TSS Grain Millers, Mogadishu Rd off Moi Ave, P.O. Box 80637 Mombasa, Tel 041 2223742 / 2230028 / 2223447, Fax: 041 2315886 / 2311250, Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
[Information provided: Shipping industry]

Kenya Transport Association, Seaview Plaza, Mama Ngina Drive, P.O. Box 88502 Mombasa, Tel: 041 2311958 / 2312015, Fax: 041 2312015, Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
[Information provided: Road haulage]


Freight forwarders

With international transport growing more and more complex and specialized, exporters increasingly look to freight forwarders to arrange and supervise the transport of goods. Freight forwarders specialize in every aspect of transportation, from the packing and marking of goods, insurance and documentation, to the transportation and tracking of the goods. Exporters rely on the expertise of the freight forwarder in order to ensure that the goods reach their final destination. Companies should use the services of reputable freight forwarders who have a network of international offices abroad. Use a freight forwarding company that offers the most reliable service rather than the company with the cheapest quote.

Freight forwarders can advise you on:

  • the cost of freight and all aspects relating to the movement of cargo, including the booking of your cargo;
  • documentary requirements – both local and international;
  • packing and labelling your cargo;
  • tracking and tracing your cargo; and
  • marine insurance for your cargo.
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