Freight expenses often comprise some of the largest numbers on company budgets. Not only are you factoring in the cost of manufacturing and labor – you have to dedicate a solid amount of your annual budget to simply move the cargo from point A to point B.
When your customers are located overseas, it make this expense even larger. Depending on where you are shipping to in the world, freight costs can get incredibly high. That’s why U.S. – based importers and exporters are always looking for the most cost-effective solution for moving cargo abroad. This most frequently gets boiled down to the discussion between international air vs. ocean shipping costs.
International Shipping: Is Air Transport Ever Cheaper than Ocean Transport?
The short answer to the question is – yes; depending on a variety of factors, it is likely that you will encounter a time in which air transport is cheaper than ocean transport. However, this probably won’t come to be the truth in the same way you might expect.
We often think of transportation expenses as a single bill – a line item on a long list of outstanding invoices. However, shipping holds significance over company costs in more ways than one; and it’s this very fact that often makes air transportation cheaper than ocean transportation. Here are a few reasons this may be the case:
Reputation with a Customer
If you’ve been looking at the sum total of freight spend as the dollar amount listed on the bill you receive from your freight forwarder, you’re grandly missing the point. Shipping has just as much weight in a customer’s perception of your brand’s excellence and reputation as the quality of your product does. In other words, poor shipping experiences make customers way less likely to return.
Air freight is a much more risk-free method of shipping; at least from a timeline perspective. Since air freight travels in a matter of days from beginning of the booking process to final delivery (vs. ocean which may take weeks or months), you are guaranteeing your customer a much smoother experience overall. This will aid in customer retention which is, almost always, a much better way of saving money and increasing margins than reducing your freight bill by a couple hundreds dollars with traditional, and slow, ocean shipping methods.
Freight costs are all about options. One ocean vessel departing for Hong Kong will have different pricing-per-TEU than another vessel leaving from a different port (or even the same port). The season is also frequently responsible for volatility in shipping costs. Said differently – the more options you have, the greater opportunity you’ll have to snatch low-costing shipping.
While air transportation is commonly more expensive than ocean freight, this may not always be the case – especially with TSA Known Shipper. The TSA Known Shipper program provides U.S.-based shippers with the opportunity of shipping air cargo via passenger aircraft. This has several benefits, but the greatest of all is: options.
Unlike traditional cargo-aircraft shipping which presents one options per day (or every few days) to shippers, there are several passenger aircraft departures each day. Depending on how booked a flight is, where a flight is headed to, the time of year, external factors, and ocean port statuses, U.S.-based shippers may find times at which air shipping via passenger aircrafts proves cheaper than ocean shipping options. This is a great reason to inquire with Interlog USA about your company’s Known Shipper status!
Product Replacement Costs
In the shipping industry, you know all-to-well that “damage” is synonymous with “buying it twice”. If your cargo gets destroyed or lost during transit, you’re responsible to pay for another unit and ship it out. This costs you money through negative customer experiences as well as the fact that you literally had to pay for cargo and the entire shipping process twice.
Of course, the actual cost of purchasing the cargo again could be covered through simple preventative measure of insuring your cargo, but that doesn’t eliminate all issues. Cargo damage give a bad impression with customers leading to lower customer retention and negative impacts on your bottom line.
How does this all relate to air cargo?
Air shipping usually has a significantly lower number of cargo casualties than ocean shipping for a simple reason. With ocean shipping, your cargo is finger-printed a number of times. This is especially the case with LCL freight – your cargo is touched at the warehouse, loaded into a trailer, sent to a CFS for consolidation with other cargo, put on a drayman’s truck, sent to the port, loaded on an ocean vessel, shipped across seas, and the entire deconsolidation process is repeated at destination.
It’s a nightmare.
With air freight, your cargo is touched less, transported smoother, and you have less risk for paying for your product twice.
Reducing freight costs isn’t always a straight-forward, linear answer. Air freight will almost always present a higher dollar amount on a transportation bill from your freight forwarder than ocean shipping. However, the amount you end up paying/losing in the end is dependent on way more factors than freight pricing. Bad shipping impressions due to missed ocean vessels or cargo damage in LCL transport can cost you WAY more money than the couple hundred dollars extra you would’ve paid for air freight. (Keep in mind that damaged cargo means your business is paying for it twice.)
Also, air freight gives you way more options, especially if you are a TSA Known Shipper. Depending on the season, international transportation port, and available options, it wouldn’t be too uncommon for passenger aircraft cargo pricing to stretch below traditional ocean shipping costs.
If you are unsure as to whether or not air freight is right for your next shipping project, or are wondering if you can actually save money by shipping via air freight, reach out to one of our team members! We’re highly experienced with both ocean and air transportation and would be happy to help answer your questions!