FREIGHT LOGISTICS SERVICES IN INTERNATIO
FREIGHT LOGISTICS SERVICES IN INTERNATIONAL TRADE
AND ENTREPRENEURIAL OPPORTUNITIES
S.D. Ebidunmi, HND, PGD, MBA
1.0 INTRODUCTION
On the surface, international trade is understood as a simple activity of
buying and selling goods where the geographical scope of such trade
extends beyond the borders of one country. This notion is as true as the
complexity of the multiplicity of services required and involved in facilitating
the process of conveying internationally traded goods between their
remotest points of origin and destination. These services can be referred to
as freight logistics services.
This article is intended to give readers a non-bogus but yet comprehensive
understanding of the meaning of freight logistics services, the need for such
services, the organizational arrangements available for the provision of these
services, the different elements or aspects of these services, and the
entrepreneurial opportunities available in this sub-sector of shipping
business.
2.0 MEANING OF FREIGHT LOGISTICS SERVICES
The meaning of freight logistics services will surface with understanding of
the individual meanings of its three composing words in the context of their
specific usage in maritime and international trade circles. Merriam-Webster
Dictionary (2016) defines freight in three contexts as: goods that are carried
by ships, trains, trucks, or airplanes; the system by which goods are carried
from one place to another; and the amount of money paid for carrying goods.
The first context is obviously the relevant one as it directly relates to the
movement of goods traded internationally. Similarly, the U.S. Department of
Transportation (2016) further confirms that freight refers to either cargoes
carried or the charges assessed for carriage of cargoes. These definitions
indicate that the term “freight” means goods that are transported at a charge
by any formal means of transportation.
Logistics on the other hand has been defined as a process involving the
activities related to the movement and storage of materials or information
from a particular point of origin to another destination point (Rushton,
Croucher, & Baker, 2010; DHL, 2015). Applying this definition to international
trading of goods between origin and destination points in different countries,
1
logistics in this context would literally involve all arrangements and efforts
directed at facilitating flow and storage of goods towards executing an
international trade contract.
A service is an intangible product created by the performance of certain
operations by a service provider for a service user who benefits, enjoys or
undergoes a desired experience as a result of the operations performed. A
service is basically differentiated from goods in the sense that unlike goods,
they cannot be seen, touched or felt in the physical sense.
To further understand what is meant by freight logistics services,
appreciation of the syntactic relationship between these words would be of
great help. As implied in the phrase, “services” is a plural noun. “Logistics” is
an adjective describing the type of “services”. “Freight” functions as an
adverbial qualification of the scope and application of the logistics services.
Putting the three words together in the context of international trade, freight
logistics services could be succinctly defined as “any of the operations
performed to facilitate the movement and storage of internationally traded
goods prior to, during, or after carriage by any formal means of transport”.
Having arrived at this definition which provides a broad understanding of the
subject of this article, some prime questions will follow to elicit further
understanding. Who are the users of freight logistics services in international
trade? What are the different freight logistics services they need? Who are
the service providers? The subsequent sections of this article will not only
address these questions, but would further explore the entrepreneurial
opportunities present in this sub-sector of shipping.
3.0
NEED FOR FREIGHT LOGISTICS SERVICES IN INTERNATIONAL
TRADE
The need for freight logistics services in international trade would become
clear upon understanding the specific requirements of the parties who trade
internationally, the nature of goods that are traded, the statutory
requirements to that must be complied with, and the nature of operational
and economic influences affecting the success of their businesses. These
factors would also suggest the types as well as justification for the specific
freight logistics services relevant in international trade.
International trading is carried out by business organizations, non-profit
making organizations, government establishments and individuals importing
2
or exporting goods. However, majority of these importers and exporters are
businesses which are either involved in the buying and selling of production
inputs or finished products for ultimate sale to final consumers, ninety
percent of which are carried by sea (Organization for Economic Cooperation
and Development, 2016) either as full ship loads (liquid and dry bulk cargoes)
or as general cargo (containers, ro-ro, break-bulk) on liner vessels.
Charterers who ship liquid and dry bulk cargoes in ship-loads require less
freight logistics services because they call at specialized ports and terminals
equipped with the necessary facilities for their already streamlined methods
and procedures for cargo movements and storage associated with precarriage (transportation of consignment from inland point of origin to the
loading seaport), on-carriage (transportation of consignment from port of
discharge to inland point of final destination), and statutory inspections. For
these category of international traders, inspections are less cumbersome as
samples are simply taken from the entire ship load and tested. Similarly,
documentation and statutory compliance are simple and albeit routine for
bulk shipments.
However, shippers of containerized, break-bulk and ro-ro cargoes on liner
vessels require several freight logistics services because of the complexity
of operational and economic factors that liner trades involve. Some of these
factors include the diverse range of cargo types and attendant packing
involved, the different transport mode combination options that may be
adopted for on-carriage and pre-carriage, the different contracts that may be
executed with different carriers and service providers, the different
documents required for processing a single consignment, and the high level
of statutory compliance and inspections required among others. Each of
these factors which require a different set of knowledge and skills to
effectively and efficiently address combine to make it difficult, irrespective of
the nature of an importer or exporter’s business, to achieve their prime
objectives of satisfying their customers and making reasonable returns on
their investments. As such they require effective and efficient logistics
services to enable them achieve their business goals of timely delivery of the
right products, with the right quality, in the right quantity, in good and
merchantable condition, and at a reasonable price.
Irrespective of whether they are organizations or individuals, most shippers
do not have the high level of expertise required to arrange the numerous
services required for facilitating and processing imports and exports. This is
3
because these shippers usually have their other areas of business
operations or professions. As such it is highly beneficial for them to enter into
contracts with companies or firms which specialize in the provision of freight
logistics services.
4.0
ORGANIZATIONAL ARRANGEMENTS FOR FREIGHT LOGISTICS
SERVICES
Freight logistics services can be arranged either in-house or contracted out
to other companies.
If freight logistics services are to be arranged in-house by the international
trader or shipper’s organization, it would involve having a well-staffed and
adequately equipped shipping division or department and obtaining the
necessary licenses and authorization to operate. The cost of setting up and
running such a robust section within a shipper’s organization may be
colossal, such that the shipper’s organization and scale of operations need
to be equally huge in order for it to be economically justified and sustainable.
Alternatively and which is the case for most mid-range and small shippers,
part or all of their freight logistics requirements may be contracted to other
specialized freight logistics service providers. The companies offering these
specialized services are called third party logistics service (3PL) companies.
Interestingly, some very big shippers with extensive operations cutting
across several business areas and regions may contract different freight
logistics services to several 3PLs and further contract the management of all
or some of their 3PLs to another non-asset owning company. The non-asset
company saddled with the responsibility of managing the 3PLs is known as
a fourth party logistics service provider (4PL).
5.0 ELEMENTS/ASPECTS OF FREIGHT LOGISTICS SERVICES
Freight logistics services facilitate the movement of goods right from the
hinterland premises of the seller in one country, to the final destination which
is usually the inland premises of the buyer in another country. Apart from this
direct trade flow path, there may be other instances such as transshipment
where goods destined for a particular country may arrive at and be
temporarily accommodated in a different country before it is subsequently
moved to its final destination. In a nutshell, freight logistics services in
international trade include the core transportation services offered by ocean
liners, air liners, road haulers and rail companies among others, and other
ancillary services which facilitate these core services.
4
5.1 Core Transportation Services
Cargoes traded internationally are transported at one point or the other by
one or any combinations of sea, air, road and rail, even though sea transport
may be the most dominant in most cases. Several road and rail freighters
abound with domestic and regional influences in different parts of the world.
However, there are certain notable shipping companies and air cargo
companies which dominate international sea and air freight. Sea freight is
dominated by the ten biggest shippers namely and in descending order, A.P.
Møller-Maersk, Mediterranean Shipping Company, CMA CGM, American
President Lines, Hapag-Lloyd, Evergreen Lines, COSCO Container Lines,
China Shipping Container Lines, Hanjin Shipping Company, and Mitsui
O.S.K. Lines (Ship-Technology.com, 2015). Similarly, the ten biggest air
cargo freighters in the world in descending order include FedEx, Emirates,
UPS Airlines, Cathay Pacific Airways, Korean Air Lines, Lufthansa,
Singapore Airlines, Qatar Airways, Cargolux, and China Airlines (Airlines
Box, 2016).
5.2 Ancillary Freight Logistics Services
Apart from the core transportation services offered by ocean liners, air liners,
road haulers and rail companies among others, ancillary freight logistics
services relevant to international trade are rendered by freight forwarders.
Freight forwarding involves processing full container load (FCL) and less
than container load (LCL), break-bulk cargoes, ro-ro cargoes and specialized
project cargoes for international transportation by sea, air and other available
modes. There are several freight forwarding establishments operating at
different levels. The ten biggest global freight forwarding companies by
revenue are DHL Supply Chain & Global Forwarding, Kuehne + Nagel, DB
Schenker Logistics, UPS Supply Chain Solutions, Kintetsu World Express,
Panalpina, Expeditors, Nippon Express, SDV (Bolloré Group), and Hellmann
Worldwide Logistics (Hornblass, 2015).
There are several activities involved in freight forwarding for exports and for
imports. For exports, specific services will include arranging and advising the
shipper on how products should be packed for transport, booking cargo
space on board liner ships, advising shippers on routing decisions for precarriage and arranging for trucks, rail or inland waterways transportation of
the goods from the shippers premises to the ports, arranging for warehousing
of the products where required, and arranging for export documentation
among others. For imports, freight forwarding activities would include liaison
5
with the shipping company for the documentary arrangements necessary to
ensure the release of cargoes, liaison with customs and other regulatory
agencies of government to ensure inspection and release of cargoes,
making arrangements for any warehousing requirements, and advising the
importer on routing decisions and choice of carriers for on-carriage.
Freight forwarding is the blanket term used to refer to the rendering of
ancillary freight logistics services for international trade. While some freight
forwarding companies may render holistic freight logistics services, others
may specialize in the provision of only one or a few aspects of freight logistics
services. Some of the specific aspects of freight logistics services which
facilitate international trade include multimodal services, customs brokerage,
documentation and statutory compliance facilitation services, cargo
insurance, warehousing and distribution, and container freight station and
bonded services among others. These services, depending on the specific
circumstances, may be interrelated and interdependent with respect to
import or export operations. It is worth noting at this point that in addition to
or in isolation of offering these services, some freight forwarders go beyond
their traditional functions to act as Non-Vessel /Vehicle Operating Carriers
(NVOC). Those who assume this status usually book space on board
vessels/vehicles of some actual transportation companies and sublet these
spaces to shippers, issuing them with transport documents in their name.
5.2.1 Multimodal Services
Multimodal transport services are offered by some freight logistics service
providers for specific trade routes that are deliberately designed to cater for
transit needs, cost budgets and delivery deadlines as required by certain
clients. These service providers arrange for the most optimal combination of
road, rail, air, and sea routes for consignment from the clients’ desired point
of origin to their desired place of destination. To achieve a streamlined
process with effective communication, multimodal transport operators who
may be either asset owning or non-asset owning make use of hi-tech tracking
technology. They rely heavily on their in-house experts and external
business partners to ensure that multimodal shipments, despite their
complex nature, are delivered timely as per clients’ expectations.
5.2.2 Customs Brokerage and Statutory Compliance Services
Customs processing and clearance procedures are sometimes so complex
that it requires not only precise knowledge but also experience and tact to
achieve hitch free processing of exports and imports. Apart from Customs,
6
there are other regulations enforced by other government agencies which
certain shipments must precisely comply with. Freight logistics service
providers who offer customs brokerage or and these other statutory
compliance services must ensure proper documentation of shipments and
professional coordination of every other customs brokerage and licensing
requirement. This function is necessary in order to mitigate risks and forestall
the unnecessary additional costs that may arise in form of fines for noncompliance, and demurrage and utility value loss for delays.
5.2.3 Warehousing and Distribution
Freight logistics service companies which render warehouse services
usually involve in the provision of expert analysis of the specific requirements
of clients such as periodic demand forecasts and production levels required,
inventory requirements, supply lead times and distribution channel
effectiveness among others. These analyses usually assists them in offering
appropriate advice to clients on the most befitting warehousing services to
procure which will yield optimal efficiency and cost-effectiveness, and which
would complement already existing processes and procedures. In addition
to core warehouse provision for clients’ goods, other value added services
that can be offered to enhance quality in this area include vendor managed
inventory services, purchase-order management, order fulfillment, kitting,
pick-and-pack, rework, and light manufacturing among others (Freight
Logistics, 2016).
5.2.4 Cargo Insurance
Different types of shipment such as industrial raw materials, agricultural
products and consumer manufactures require different types and levels of
cargo insurance to match the different liabilities specific to each commodity.
Irrespective of the mode of transportation, freight logistics service providers
in this regard must safeguard the value of each shipment not only by advising
clients of the different insurance options available, but also by making
arrangements for actualizing the chosen policy (ies) and doing so at the
appropriate time.
5.2.5 Container Freight Station and Bonded Facility Services.
Container freight stations (CFS) are strategically located to serve as cargo
processing and marshalling centers where consolidation as well as hub and
gateway operations for air and ocean freight are carried out (Freight
Logistics, 2016). To operate a CFS, Logistics service operators must obtain
licenses from Customs and or any other relevant government approving
7
agency (ies). Container freight stations can also be used as bonded facilities
for temporary storage and accommodation of imports prior to, and for
customs inspection and clearance. This helps to decongest busy ports.
6.0
ENTREPRENEURIAL OPPORTUNITIES IN FREIGHT LOGISTICS
SERVICES
The most valued asset of most freight logistics service providers is their
expertise and know-how which the shippers, save for those big enough to
operate a sustainable in-house shipping section, may not have. As such
expertise through knowledge and experience are the major requirements for
entrepreneurial success in freight logistics service provision in international
trade. Put differently, with no or few physical assets, knowledgeable and
experienced individuals can partner and set up viable organizations that can
render effective and efficient freight logistics services.
The knowledge required to perform freight logistics service functions include
but are not limited to thorough understanding of the following main fields:
transport modes and geography: know how in all modes of transport,
requirements for packing, handling, stowage and carriage of different
cargo types, information technology and transport geography;
statutory compliance: know how in dangerous goods, export/import
practice and customs procedures;
risk management: know-how and advice on transport risks, transport
insurance, exchange rates and traffic hindrances;
finance and payment: know how in terms of payment, accuracy in all
documentary and financial transactions, and ability to calculate and to
quote
cross-functional integration and supply chain management: ability to
ensure cross functional integration, and good knowledge of the basics
of supply chain and logistics management.
Formal theoretical knowledge of transport and shipping business can be
acquired by either attending academic institutions such as the Maritime
Academy of Nigeria to obtain diplomas and degrees at various levels, or by
undertaking professional coaching offered by recognized professional
bodies like the chartered institute of logistics and transport, institute of
chartered shipbrokers, and other professional bodies in supply chain and
logistics.
8
Having theoretical knowledge of the aforementioned is as relevant as having
practical understanding of how they apply in real situations. Aspiring
entrepreneurs in freight logistics services must strive to acquire substantial
practical experience in the specific aspects which they intend to venture into.
Such experience can be gained through students’ industrial work experience
schemes (SIWES), industrial training programmes, and full time, part time or
freelance jobs in transport and logistics establishments.
Armed with ample expertise in terms of knowledge and experience,
entrepreneurship in freight logistics business can be either focused on
rendering services directly to shippers or directed at providing business
development services for already established core transportation companies
and ancillary freight logistics service providers. More specifically, business
areas offering entrepreneurial opportunities within the freight logistics
services sub-sector include but are not limited to those highlighted in the
subsequent parts of this section.
6.1 Export Trade Consultancy
This involves identifying export markets for local products, advising local
producers on international marketing, and subsequently handling trade
negotiations and shipping arrangements for local producers. This service
can be rendered to local producers of exportable industrial and agro products
in remote areas of the country who have no idea on how to expand their
businesses to international markets.
6.2 Liaison with Shipping Lines
Services in this area include advising shippers/through transport service
providers on the most suitable ocean freight services to use, booking cargo
space and handling documentation for exports, and liaising with shipping
companies for documentation and procedures for release of imports. This
service can be offered to both shippers in deep hinterland areas, and also to
shipping companies offering door-to-door multimodal services.
6.3 Inland Transport Services
This will involve advising shippers/multimodal service providers on the
optimal route for conveying exports to the port, and imports from port to final
hinterland destinations; advising on inland carrier choices and arranging
actual transport for pre-carriage and on-carriage.
9
6.4 Cargo Insurance Services
These services will entail advising shippers on the most suitable insurance
covers for imports and exports, arranging and handling documentations for
effecting insurance contracts, and in the event of the occurrence of losses,
liaising with the insurers with respect to redeeming claims. These services
can be rendered either directly to shippers or by acting as agent to insurance
companies.
6.5 Marketing Liner Services
Considering the import dependent nature of the Nigerian economy, most
liner vessels calling at Nigerian ports return either in ballast or with only few
cargoes. Such liner companies and their agents would welcome the
marketing of their services to potential exporters for a handsome reward.
6.6 Customs Brokerage and Statutory Compliance
Although this requires obtaining licenses and meeting certain requirements,
entrepreneurs could provide consultancy services by using their knowledge
and experience to advise and handle documentation and other procedures
for established shippers who have the capacity to obtain the necessary
licenses and requirements.
If handled effectively, this consultancy
arrangement may ultimately lead to contractual outsourcing of personnel for
shipping services.
6.7 Employee Recruitment and Selection Services
Transportation companies and other established freight logistics companies
usually seek the services of various levels of skilled and semi-skilled
manpower. Entrepreneurs with sound knowledge and experience in
transport and logistics are in a good position to handle recruitment and
selection exercises for such companies either exclusively or as consultants
to their human resources departments.
6.8 Corporate Training Services
With the continuous improvements in systems, processes and procedures in
international trade logistics, any organization that does not engage in
continuous training and retraining of its employees would definitely be forced
out of business due to the obsolete knowledge and skill base that will result
to its workforce. As such a big entrepreneurial opportunity exists for
rendering training services for operational staff of freight logistics companies.
10
7.0 CONCLUSION
Even with the dominance of the freight logistics services industry by large
multinationals which offer global freight forwarding services, it can be seen
so far that entrepreneurial opportunities abound in this sub-sector for those
who are knowledgeable and experienced in transport and shipping business.
In a nutshell, knowledgeable and experienced individuals can partner by
pooling their different competencies together to achieve rewarding synergies
in rendering various services to both shippers and bigger companies alike.
In this regard, fresh graduates of shipping, logistics or transport studies from
academic institutions have ample capacity to collaborate with others who
have acquired some reasonable level of experience in the industry.
Specific steps towards starting up businesses in this field would involve
thorough market analysis leading to the identification of service needs that
can be profitably fulfilled, or the creation of new services which can improve
existing practices, processes or procedures. With this achieved, the
business plan follows with all other routine requirements for the setting up of
a small business having its members and their knowledge and skills as the
major assets. For entrepreneurial strides in this sub-sector of shipping, the
potentials for growth and expansion cannot be over emphasized as most
existing multinational companies in shipping and transport today have
histories of been conceived as mere ideas in the minds of their founders.
11
REFERENCES
Airlines Box. (2016, February 04). Top 10 Cargo Airlines 2016. Retrieved from AirlinesBox.com:
http://www.airlinesbox.com/cargo-airlines-in-the-world/
DHL. (2015). Definition of distribution logistics. DHL Logbook - in cooperation withTechnical University
Darmstadt.
Freight Logistics. (2016, May 22). Freight Management. Retrieved from FreightLogistics.com:
http://www.freightlogistics.com/freight-management/
Hornblass, J. J. (2015, June 02). Power 25: Forwarders 1 to 10. Retrieved from Air Cargo World Website:
http://aircargoworld.com/power-25-forwarders-1-to-10/
Merriam-Webster Dictionary. (2016, May 20). Freight. Retrieved from Merriam-Webster.com:
http://www.merriam-webster.com/dictionary/freight
Organization for Economic Cooperation and Development. (2016, May 20). Trade Costs. Retrieved from
OECD Website: http://www.oecd.org/tad/benefitlib/trade-costs.htm
Rushton, A., Croucher, P., & Baker, P. (2010). The Handbook of Logistics & Distribution Management,
Fourth Edition. London: Kogan Page Limited.
Ship-Technology.com. (2015, February 24). Mega shippers - the world’s 10 biggest shipping companies.
Retrieved from Ship-Technology.com: http://www.ship-technology.com/features/featuremegashippers---the-worlds-10-biggest-shipping-companies-4518689/
U.S. Department of Transportation. (2016, May 20). Glossary of Shipping Terms. Retrieved from
BusinessUSA: http://business.usa.gov/sites/default/files/Glossary_final.pdf
12
AND ENTREPRENEURIAL OPPORTUNITIES
S.D. Ebidunmi, HND, PGD, MBA
1.0 INTRODUCTION
On the surface, international trade is understood as a simple activity of
buying and selling goods where the geographical scope of such trade
extends beyond the borders of one country. This notion is as true as the
complexity of the multiplicity of services required and involved in facilitating
the process of conveying internationally traded goods between their
remotest points of origin and destination. These services can be referred to
as freight logistics services.
This article is intended to give readers a non-bogus but yet comprehensive
understanding of the meaning of freight logistics services, the need for such
services, the organizational arrangements available for the provision of these
services, the different elements or aspects of these services, and the
entrepreneurial opportunities available in this sub-sector of shipping
business.
2.0 MEANING OF FREIGHT LOGISTICS SERVICES
The meaning of freight logistics services will surface with understanding of
the individual meanings of its three composing words in the context of their
specific usage in maritime and international trade circles. Merriam-Webster
Dictionary (2016) defines freight in three contexts as: goods that are carried
by ships, trains, trucks, or airplanes; the system by which goods are carried
from one place to another; and the amount of money paid for carrying goods.
The first context is obviously the relevant one as it directly relates to the
movement of goods traded internationally. Similarly, the U.S. Department of
Transportation (2016) further confirms that freight refers to either cargoes
carried or the charges assessed for carriage of cargoes. These definitions
indicate that the term “freight” means goods that are transported at a charge
by any formal means of transportation.
Logistics on the other hand has been defined as a process involving the
activities related to the movement and storage of materials or information
from a particular point of origin to another destination point (Rushton,
Croucher, & Baker, 2010; DHL, 2015). Applying this definition to international
trading of goods between origin and destination points in different countries,
1
logistics in this context would literally involve all arrangements and efforts
directed at facilitating flow and storage of goods towards executing an
international trade contract.
A service is an intangible product created by the performance of certain
operations by a service provider for a service user who benefits, enjoys or
undergoes a desired experience as a result of the operations performed. A
service is basically differentiated from goods in the sense that unlike goods,
they cannot be seen, touched or felt in the physical sense.
To further understand what is meant by freight logistics services,
appreciation of the syntactic relationship between these words would be of
great help. As implied in the phrase, “services” is a plural noun. “Logistics” is
an adjective describing the type of “services”. “Freight” functions as an
adverbial qualification of the scope and application of the logistics services.
Putting the three words together in the context of international trade, freight
logistics services could be succinctly defined as “any of the operations
performed to facilitate the movement and storage of internationally traded
goods prior to, during, or after carriage by any formal means of transport”.
Having arrived at this definition which provides a broad understanding of the
subject of this article, some prime questions will follow to elicit further
understanding. Who are the users of freight logistics services in international
trade? What are the different freight logistics services they need? Who are
the service providers? The subsequent sections of this article will not only
address these questions, but would further explore the entrepreneurial
opportunities present in this sub-sector of shipping.
3.0
NEED FOR FREIGHT LOGISTICS SERVICES IN INTERNATIONAL
TRADE
The need for freight logistics services in international trade would become
clear upon understanding the specific requirements of the parties who trade
internationally, the nature of goods that are traded, the statutory
requirements to that must be complied with, and the nature of operational
and economic influences affecting the success of their businesses. These
factors would also suggest the types as well as justification for the specific
freight logistics services relevant in international trade.
International trading is carried out by business organizations, non-profit
making organizations, government establishments and individuals importing
2
or exporting goods. However, majority of these importers and exporters are
businesses which are either involved in the buying and selling of production
inputs or finished products for ultimate sale to final consumers, ninety
percent of which are carried by sea (Organization for Economic Cooperation
and Development, 2016) either as full ship loads (liquid and dry bulk cargoes)
or as general cargo (containers, ro-ro, break-bulk) on liner vessels.
Charterers who ship liquid and dry bulk cargoes in ship-loads require less
freight logistics services because they call at specialized ports and terminals
equipped with the necessary facilities for their already streamlined methods
and procedures for cargo movements and storage associated with precarriage (transportation of consignment from inland point of origin to the
loading seaport), on-carriage (transportation of consignment from port of
discharge to inland point of final destination), and statutory inspections. For
these category of international traders, inspections are less cumbersome as
samples are simply taken from the entire ship load and tested. Similarly,
documentation and statutory compliance are simple and albeit routine for
bulk shipments.
However, shippers of containerized, break-bulk and ro-ro cargoes on liner
vessels require several freight logistics services because of the complexity
of operational and economic factors that liner trades involve. Some of these
factors include the diverse range of cargo types and attendant packing
involved, the different transport mode combination options that may be
adopted for on-carriage and pre-carriage, the different contracts that may be
executed with different carriers and service providers, the different
documents required for processing a single consignment, and the high level
of statutory compliance and inspections required among others. Each of
these factors which require a different set of knowledge and skills to
effectively and efficiently address combine to make it difficult, irrespective of
the nature of an importer or exporter’s business, to achieve their prime
objectives of satisfying their customers and making reasonable returns on
their investments. As such they require effective and efficient logistics
services to enable them achieve their business goals of timely delivery of the
right products, with the right quality, in the right quantity, in good and
merchantable condition, and at a reasonable price.
Irrespective of whether they are organizations or individuals, most shippers
do not have the high level of expertise required to arrange the numerous
services required for facilitating and processing imports and exports. This is
3
because these shippers usually have their other areas of business
operations or professions. As such it is highly beneficial for them to enter into
contracts with companies or firms which specialize in the provision of freight
logistics services.
4.0
ORGANIZATIONAL ARRANGEMENTS FOR FREIGHT LOGISTICS
SERVICES
Freight logistics services can be arranged either in-house or contracted out
to other companies.
If freight logistics services are to be arranged in-house by the international
trader or shipper’s organization, it would involve having a well-staffed and
adequately equipped shipping division or department and obtaining the
necessary licenses and authorization to operate. The cost of setting up and
running such a robust section within a shipper’s organization may be
colossal, such that the shipper’s organization and scale of operations need
to be equally huge in order for it to be economically justified and sustainable.
Alternatively and which is the case for most mid-range and small shippers,
part or all of their freight logistics requirements may be contracted to other
specialized freight logistics service providers. The companies offering these
specialized services are called third party logistics service (3PL) companies.
Interestingly, some very big shippers with extensive operations cutting
across several business areas and regions may contract different freight
logistics services to several 3PLs and further contract the management of all
or some of their 3PLs to another non-asset owning company. The non-asset
company saddled with the responsibility of managing the 3PLs is known as
a fourth party logistics service provider (4PL).
5.0 ELEMENTS/ASPECTS OF FREIGHT LOGISTICS SERVICES
Freight logistics services facilitate the movement of goods right from the
hinterland premises of the seller in one country, to the final destination which
is usually the inland premises of the buyer in another country. Apart from this
direct trade flow path, there may be other instances such as transshipment
where goods destined for a particular country may arrive at and be
temporarily accommodated in a different country before it is subsequently
moved to its final destination. In a nutshell, freight logistics services in
international trade include the core transportation services offered by ocean
liners, air liners, road haulers and rail companies among others, and other
ancillary services which facilitate these core services.
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5.1 Core Transportation Services
Cargoes traded internationally are transported at one point or the other by
one or any combinations of sea, air, road and rail, even though sea transport
may be the most dominant in most cases. Several road and rail freighters
abound with domestic and regional influences in different parts of the world.
However, there are certain notable shipping companies and air cargo
companies which dominate international sea and air freight. Sea freight is
dominated by the ten biggest shippers namely and in descending order, A.P.
Møller-Maersk, Mediterranean Shipping Company, CMA CGM, American
President Lines, Hapag-Lloyd, Evergreen Lines, COSCO Container Lines,
China Shipping Container Lines, Hanjin Shipping Company, and Mitsui
O.S.K. Lines (Ship-Technology.com, 2015). Similarly, the ten biggest air
cargo freighters in the world in descending order include FedEx, Emirates,
UPS Airlines, Cathay Pacific Airways, Korean Air Lines, Lufthansa,
Singapore Airlines, Qatar Airways, Cargolux, and China Airlines (Airlines
Box, 2016).
5.2 Ancillary Freight Logistics Services
Apart from the core transportation services offered by ocean liners, air liners,
road haulers and rail companies among others, ancillary freight logistics
services relevant to international trade are rendered by freight forwarders.
Freight forwarding involves processing full container load (FCL) and less
than container load (LCL), break-bulk cargoes, ro-ro cargoes and specialized
project cargoes for international transportation by sea, air and other available
modes. There are several freight forwarding establishments operating at
different levels. The ten biggest global freight forwarding companies by
revenue are DHL Supply Chain & Global Forwarding, Kuehne + Nagel, DB
Schenker Logistics, UPS Supply Chain Solutions, Kintetsu World Express,
Panalpina, Expeditors, Nippon Express, SDV (Bolloré Group), and Hellmann
Worldwide Logistics (Hornblass, 2015).
There are several activities involved in freight forwarding for exports and for
imports. For exports, specific services will include arranging and advising the
shipper on how products should be packed for transport, booking cargo
space on board liner ships, advising shippers on routing decisions for precarriage and arranging for trucks, rail or inland waterways transportation of
the goods from the shippers premises to the ports, arranging for warehousing
of the products where required, and arranging for export documentation
among others. For imports, freight forwarding activities would include liaison
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with the shipping company for the documentary arrangements necessary to
ensure the release of cargoes, liaison with customs and other regulatory
agencies of government to ensure inspection and release of cargoes,
making arrangements for any warehousing requirements, and advising the
importer on routing decisions and choice of carriers for on-carriage.
Freight forwarding is the blanket term used to refer to the rendering of
ancillary freight logistics services for international trade. While some freight
forwarding companies may render holistic freight logistics services, others
may specialize in the provision of only one or a few aspects of freight logistics
services. Some of the specific aspects of freight logistics services which
facilitate international trade include multimodal services, customs brokerage,
documentation and statutory compliance facilitation services, cargo
insurance, warehousing and distribution, and container freight station and
bonded services among others. These services, depending on the specific
circumstances, may be interrelated and interdependent with respect to
import or export operations. It is worth noting at this point that in addition to
or in isolation of offering these services, some freight forwarders go beyond
their traditional functions to act as Non-Vessel /Vehicle Operating Carriers
(NVOC). Those who assume this status usually book space on board
vessels/vehicles of some actual transportation companies and sublet these
spaces to shippers, issuing them with transport documents in their name.
5.2.1 Multimodal Services
Multimodal transport services are offered by some freight logistics service
providers for specific trade routes that are deliberately designed to cater for
transit needs, cost budgets and delivery deadlines as required by certain
clients. These service providers arrange for the most optimal combination of
road, rail, air, and sea routes for consignment from the clients’ desired point
of origin to their desired place of destination. To achieve a streamlined
process with effective communication, multimodal transport operators who
may be either asset owning or non-asset owning make use of hi-tech tracking
technology. They rely heavily on their in-house experts and external
business partners to ensure that multimodal shipments, despite their
complex nature, are delivered timely as per clients’ expectations.
5.2.2 Customs Brokerage and Statutory Compliance Services
Customs processing and clearance procedures are sometimes so complex
that it requires not only precise knowledge but also experience and tact to
achieve hitch free processing of exports and imports. Apart from Customs,
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there are other regulations enforced by other government agencies which
certain shipments must precisely comply with. Freight logistics service
providers who offer customs brokerage or and these other statutory
compliance services must ensure proper documentation of shipments and
professional coordination of every other customs brokerage and licensing
requirement. This function is necessary in order to mitigate risks and forestall
the unnecessary additional costs that may arise in form of fines for noncompliance, and demurrage and utility value loss for delays.
5.2.3 Warehousing and Distribution
Freight logistics service companies which render warehouse services
usually involve in the provision of expert analysis of the specific requirements
of clients such as periodic demand forecasts and production levels required,
inventory requirements, supply lead times and distribution channel
effectiveness among others. These analyses usually assists them in offering
appropriate advice to clients on the most befitting warehousing services to
procure which will yield optimal efficiency and cost-effectiveness, and which
would complement already existing processes and procedures. In addition
to core warehouse provision for clients’ goods, other value added services
that can be offered to enhance quality in this area include vendor managed
inventory services, purchase-order management, order fulfillment, kitting,
pick-and-pack, rework, and light manufacturing among others (Freight
Logistics, 2016).
5.2.4 Cargo Insurance
Different types of shipment such as industrial raw materials, agricultural
products and consumer manufactures require different types and levels of
cargo insurance to match the different liabilities specific to each commodity.
Irrespective of the mode of transportation, freight logistics service providers
in this regard must safeguard the value of each shipment not only by advising
clients of the different insurance options available, but also by making
arrangements for actualizing the chosen policy (ies) and doing so at the
appropriate time.
5.2.5 Container Freight Station and Bonded Facility Services.
Container freight stations (CFS) are strategically located to serve as cargo
processing and marshalling centers where consolidation as well as hub and
gateway operations for air and ocean freight are carried out (Freight
Logistics, 2016). To operate a CFS, Logistics service operators must obtain
licenses from Customs and or any other relevant government approving
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agency (ies). Container freight stations can also be used as bonded facilities
for temporary storage and accommodation of imports prior to, and for
customs inspection and clearance. This helps to decongest busy ports.
6.0
ENTREPRENEURIAL OPPORTUNITIES IN FREIGHT LOGISTICS
SERVICES
The most valued asset of most freight logistics service providers is their
expertise and know-how which the shippers, save for those big enough to
operate a sustainable in-house shipping section, may not have. As such
expertise through knowledge and experience are the major requirements for
entrepreneurial success in freight logistics service provision in international
trade. Put differently, with no or few physical assets, knowledgeable and
experienced individuals can partner and set up viable organizations that can
render effective and efficient freight logistics services.
The knowledge required to perform freight logistics service functions include
but are not limited to thorough understanding of the following main fields:
transport modes and geography: know how in all modes of transport,
requirements for packing, handling, stowage and carriage of different
cargo types, information technology and transport geography;
statutory compliance: know how in dangerous goods, export/import
practice and customs procedures;
risk management: know-how and advice on transport risks, transport
insurance, exchange rates and traffic hindrances;
finance and payment: know how in terms of payment, accuracy in all
documentary and financial transactions, and ability to calculate and to
quote
cross-functional integration and supply chain management: ability to
ensure cross functional integration, and good knowledge of the basics
of supply chain and logistics management.
Formal theoretical knowledge of transport and shipping business can be
acquired by either attending academic institutions such as the Maritime
Academy of Nigeria to obtain diplomas and degrees at various levels, or by
undertaking professional coaching offered by recognized professional
bodies like the chartered institute of logistics and transport, institute of
chartered shipbrokers, and other professional bodies in supply chain and
logistics.
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Having theoretical knowledge of the aforementioned is as relevant as having
practical understanding of how they apply in real situations. Aspiring
entrepreneurs in freight logistics services must strive to acquire substantial
practical experience in the specific aspects which they intend to venture into.
Such experience can be gained through students’ industrial work experience
schemes (SIWES), industrial training programmes, and full time, part time or
freelance jobs in transport and logistics establishments.
Armed with ample expertise in terms of knowledge and experience,
entrepreneurship in freight logistics business can be either focused on
rendering services directly to shippers or directed at providing business
development services for already established core transportation companies
and ancillary freight logistics service providers. More specifically, business
areas offering entrepreneurial opportunities within the freight logistics
services sub-sector include but are not limited to those highlighted in the
subsequent parts of this section.
6.1 Export Trade Consultancy
This involves identifying export markets for local products, advising local
producers on international marketing, and subsequently handling trade
negotiations and shipping arrangements for local producers. This service
can be rendered to local producers of exportable industrial and agro products
in remote areas of the country who have no idea on how to expand their
businesses to international markets.
6.2 Liaison with Shipping Lines
Services in this area include advising shippers/through transport service
providers on the most suitable ocean freight services to use, booking cargo
space and handling documentation for exports, and liaising with shipping
companies for documentation and procedures for release of imports. This
service can be offered to both shippers in deep hinterland areas, and also to
shipping companies offering door-to-door multimodal services.
6.3 Inland Transport Services
This will involve advising shippers/multimodal service providers on the
optimal route for conveying exports to the port, and imports from port to final
hinterland destinations; advising on inland carrier choices and arranging
actual transport for pre-carriage and on-carriage.
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6.4 Cargo Insurance Services
These services will entail advising shippers on the most suitable insurance
covers for imports and exports, arranging and handling documentations for
effecting insurance contracts, and in the event of the occurrence of losses,
liaising with the insurers with respect to redeeming claims. These services
can be rendered either directly to shippers or by acting as agent to insurance
companies.
6.5 Marketing Liner Services
Considering the import dependent nature of the Nigerian economy, most
liner vessels calling at Nigerian ports return either in ballast or with only few
cargoes. Such liner companies and their agents would welcome the
marketing of their services to potential exporters for a handsome reward.
6.6 Customs Brokerage and Statutory Compliance
Although this requires obtaining licenses and meeting certain requirements,
entrepreneurs could provide consultancy services by using their knowledge
and experience to advise and handle documentation and other procedures
for established shippers who have the capacity to obtain the necessary
licenses and requirements.
If handled effectively, this consultancy
arrangement may ultimately lead to contractual outsourcing of personnel for
shipping services.
6.7 Employee Recruitment and Selection Services
Transportation companies and other established freight logistics companies
usually seek the services of various levels of skilled and semi-skilled
manpower. Entrepreneurs with sound knowledge and experience in
transport and logistics are in a good position to handle recruitment and
selection exercises for such companies either exclusively or as consultants
to their human resources departments.
6.8 Corporate Training Services
With the continuous improvements in systems, processes and procedures in
international trade logistics, any organization that does not engage in
continuous training and retraining of its employees would definitely be forced
out of business due to the obsolete knowledge and skill base that will result
to its workforce. As such a big entrepreneurial opportunity exists for
rendering training services for operational staff of freight logistics companies.
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7.0 CONCLUSION
Even with the dominance of the freight logistics services industry by large
multinationals which offer global freight forwarding services, it can be seen
so far that entrepreneurial opportunities abound in this sub-sector for those
who are knowledgeable and experienced in transport and shipping business.
In a nutshell, knowledgeable and experienced individuals can partner by
pooling their different competencies together to achieve rewarding synergies
in rendering various services to both shippers and bigger companies alike.
In this regard, fresh graduates of shipping, logistics or transport studies from
academic institutions have ample capacity to collaborate with others who
have acquired some reasonable level of experience in the industry.
Specific steps towards starting up businesses in this field would involve
thorough market analysis leading to the identification of service needs that
can be profitably fulfilled, or the creation of new services which can improve
existing practices, processes or procedures. With this achieved, the
business plan follows with all other routine requirements for the setting up of
a small business having its members and their knowledge and skills as the
major assets. For entrepreneurial strides in this sub-sector of shipping, the
potentials for growth and expansion cannot be over emphasized as most
existing multinational companies in shipping and transport today have
histories of been conceived as mere ideas in the minds of their founders.
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Hornblass, J. J. (2015, June 02). Power 25: Forwarders 1 to 10. Retrieved from Air Cargo World Website:
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