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What is the role of logistics in international trade ?
Introduction ⬇️
Logistics is a fundamental part of international trade, ensuring that products reach their destination efficiently, quickly and cost-effectively. In an increasingly globalized world, where international trade is constantly increasing, understanding the role of logistics becomes crucial for any logistics company wishing to get involved in this sector. This article looks at the different facets of logistics, moving and transportation, as well as the importance of the shipping process, transportation methods, and the challenges that logistics companies face.
Everything you need to know about logistics, moving and transport
Logistics and transportation encompasses all the processes necessary to ensure the efficient movement of goods, services and information from the point of origin to the point of consumption. This includes transportation, warehousing, inventory management, order management, product handling and packaging.
Moving and transport
Moving, in a commercial context, concerns the transfer of goods between different sites or countries. This can involve a range of services, from collection of goods to their final delivery. Transportation is the central element of this supply chain, connecting the manufacturer, supplier, retailer and, ultimately, the customer. The challenges associated with this process, such as planning routes and complying with international regulations, require expertise and careful coordination.
Among the different modes of transport, maritime transport stands out as the pillar of international trade. It represents around 80% of global trade by volume and 70% by value, making it the preferred method for bulky and heavy goods. In 2023, around 11 billion tonnes of goods were transported by sea, highlighting the crucial importance of this method in supporting global trade.
Example :
A 20-foot standard container (TEU) can transport approximately 30,000 kg of goods. The average cost to ship a 20-foot container from Asia to Europe increased from $1,500 in 2020 to around $10,000 during the pandemic, demonstrating how global crises can impact shipping.
Importance of the shipping process
The shipping process is the phase where goods are prepared for transportation. This involves several steps, including preparing shipping documents, packaging, loading and tracking shipments.
Document management and tracking
Document management is crucial, as it ensures regulatory compliance and facilitates customs clearance. Effective tracking helps locate goods at every stage of their transit, minimizing uncertainty and improving customer communication.
Efficient shipping not only contributes to customer satisfaction, but it can also reduce operational costs. Delays or errors in this process can result in additional costs, penalties or even loss of customers. Therefore, optimizing the shipping process is a priority for any logistics company wishing to sustain itself in the international market.
Although maritime transport dominates in terms of volume, it is important not to neglect the importance of air transport, which, despite its small share in volume (around 1% of global trade), represents around 35% in value. This is because goods transported by air are often high-value goods, such as electronics, medicines, or perishable goods requiring rapid transportation.
Example :
In 2021, around 66 million tonnes of goods were transported by air around the world. Although the cost of air shipping is typically 5-10 times higher than shipping, it is preferred for urgent or time-sensitive shipments.
Different transportation methods and why suppliers choose certain shipping methods
There are several transportation methods that suppliers can choose from, including:
- Sea transport: Ideal for large shipments. Although it is slower, it is often more economical for heavy cargo, making it a preferred choice for container shipping.
- Air transport: Fast but expensive. It is the best option for perishable or time-sensitive goods, allowing for minimal delivery times.
- Road transport: Flexible and ideal for national and regional deliveries. It allows direct access to customers, thus facilitating “last mile” deliveries.
- Rail transport: Environmentally friendly and cost-effective for mass shipments, but can be limited by infrastructure. This mode is often used to transport heavy goods over long distances.
In addition to these methods, rail transport is particularly popular for long distances and large volumes, particularly for the transport of raw materials such as coal, iron ore, and agricultural products.
Example :
In 2021, China shipped around 1.46 million tonnes of goods by train to Europe via the New Silk Roads. This mode of transport is increasingly popular thanks to its 50% lower cost compared to air transport and shorter delivery times than sea transport (around 15 to 20 days, compared to 30 to 40 days by sea).
Road transport, meanwhile, remains a crucial method for short-haul and “last mile” deliveries. In Europe, around 75% of goods are transported by truck. This mode offers great flexibility, particularly for regional and local deliveries.
Example :
In 2022, European road hauliers transported around 17 billion tonnes of goods. However, rising fuel prices and driver shortages have caused costs to rise, ranging from 7 to 15 percent in some areas.
Finally, the impact of delays and costs in logistics cannot be underestimated. Delays in the supply chain can have a massive financial impact. One study showed that a one-day delay in international shipping can lead to a 6% drop in sales in some time-sensitive industries, like fashion or electronics.
Example :
In 2021, disruptions at ports, including blockages in the Suez Canal, caused delays and additional logistics costs estimated at USD 9.6 billion per day. These disruptions have led to shortages and soaring prices in several sectors.
Choice of shipping method
The choice of shipping method depends on various factors, such as the type of goods, distance, costs and transit time. Businesses should evaluate these criteria to choose the most appropriate method for their shipments. In addition, e-commerce carriers play a key role in choosing the shipping method, offering solutions tailored to the specific needs of businesses, particularly in terms of speed and cost.
Importance of logistics in international trade
Logistics plays a crucial role in international trade, as it directly influences a logistics company’s ability to operate on a global scale. Here are a few points that highlight its importance:
Competitiveness in the market
Efficient logistics allows businesses to reduce costs and optimize operations, giving them an edge over their competitors. By streamlining logistics processes, companies can also offer more competitive rates, thereby attracting a wider customer base.
Customer satisfaction
Effective shipping and delivery management contributes to customer satisfaction, which is essential for customer loyalty. Today’s consumers expect fast and reliable deliveries. Companies that manage to meet these expectations stand out in the market.
Access to markets
Well-managed logistics allows companies to access new markets by making it easier to transport goods abroad. Efficient supply chains open the door to international partnerships, increasing the commercial reach of companies.
Dispute resolution
Disputes during shipping service can arise for a variety of reasons, such as delivery delays, damaged goods, or errors in shipping documents. Proactive and transparent communication with customers is essential to resolving these issues. Listening to customer concerns and analyzing shipping information helps you better understand the situation and provide appropriate solutions, such as refunds or replacements.
Preparation of multiple cargoes
It is possible to prepare different freights for multiple goods. This requires careful planning to ensure that each type of merchandise is handled according to its specific packaging, transportation and documentation needs. This can involve coordinating multiple carriers and managing different customs requirements, further reinforcing the importance of a well-organized logistics business.
Customer background checks
Checking customer backgrounds can be a wise practice to avoid problems during the shipping process. This helps identify potentially problematic customers, such as those with a history of frequent disputes or late payments. By performing proper checks, logistics companies can better manage the risks associated with international transactions and ensure a smoother shipping experience.
Cost of shipping
The cost of shipping can vary significantly depending on several factors. These factors include the transportation method chosen, the distance traveled, the type of goods and the volume or weight of the shipments. E-commerce carriers play a key role in estimating these costs by offering solutions adapted to the needs of businesses, thus making it possible to establish precise and competitive quotes.
Conclusion ⬇️
Logistics plays a vital role in international trade, facilitating the efficient movement of goods across the world. By understanding the importance of the shipping process, available transportation methods, and associated challenges, logistics companies can optimize their operations and improve their competitiveness in the international market. Additionally, by developing strong practices for resolving disputes and managing customers, businesses can ensure their shipping operations are both efficient and profitable.
By investing in robust logistics systems, businesses are better prepared to navigate the complex landscape of international trade, where logistics and transportation are more important than ever. A proactive and knowledgeable approach in logistics management not only improves customer satisfaction but also boosts business growth in the global market.
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