Freight Management Definition and How It Works

Spread the love

The transportation sector is having a tough year, just like many other industries. Trucking volumes jumped by 30% during the onset of the pandemic due to panic buying, fell by 70%, and have only recently begun to rise again.

Deliveries through rail, ocean and last-mile are all down at least 20%. These peculiar times already impact operations, including increasing labour expenses and falling freight prices, a desire for faster shipment with fewer orders, and increased carrier profits.

Freight Management Definition and How It Works

Here, we’ll want to discuss contemporary methods of managing freight as well as how shippers and merchants can use technology to save expenses, improve customer service, and provide connectivity inside your trade network.

Freight Management Definition

The process of monitoring and controlling the delivery of products is known as freight management. Any business, large or small, that deals with the transfer of goods must decide how they will deliver cargo promptly to the appropriate location while paying the least amount of money.

Even if they hire outside parties to ship their goods, these businesses are known as shippers in the transportation process.

Logistics companies are third-party fulfilment providers (also known as a 3PL) that offer order processing and services such as packing, warehousing, shipping, and picking.

Logistic shipping companies receive, process, and store inventory from merchants.

The logistics process, which includes everything from warehousing to supplier relationships and inventory control, consists of the freight management tool as one of its many components. As a shipper, you can manage every step yourself or contract out some of it, such as the freight management process.

Carrier selection: You must choose the best third-party carrier, defining tariffs, conditions, and expectations.

Route improvement: Locate the most practical route, select the transport management modes, assign cars and drivers, and balance the load. For the owned fleet, this is crucial because your carrier will pick the ideal routes for you.

Management of regulations and documentation includes putting together the necessary paperwork, managing insurance, and ensuring that goods and transportation comply with all applicable laws.

Tracking and tracing of deliveries: This entails assuring transparency and visibility of the freight. Although you can follow each box and container separately, a carrier typically offers vehicle tracking.

Analytics and data gathering: Obtain knowledge from the data gathered and enhance the shipping procedure.

The Route, Load, and Transport Optimization

Running half-empty containers or sitting in traffic for hours costs money, regardless of whether a shipper utilizes a broker, 3PL, or a private fleet. To operate more efficiently, transporters and shippers must address three primary issues.

• Route and schedule optimization

Businesses frequently find solutions to a few vehicle routing issues. You can use algorithms to create routes for quicker delivery based on your unique limits, the kinds of destinations, vehicle restrictions, and even traffic.

Freight management software for routings, such as MapQuest or Google Optimization Tools, can be incorporated into your TMS via an API and covers many applications.

• Load planning

Load planning aims to move the most cargo with the fewest available vehicles, trailers, and containers. Because you want to create the best hierarchy of items to discharge more quickly, it goes hand in hand with route optimization.

The appropriate truckload should also be computed depending on factors like size, weight, class, warehouse, etc., and the route. Typically, load planning solutions directly integrated into TMSs allow you to access this data.

Naturally, many of these restrictions apply specifically to less-than-truckload (LTL) shipment, in which carriers aggregate items from many shippers to fill a trailer.

• Multimodal and intermodal optimization

Even within the same nation, multimodal shipping, or combining two or more modes of transportation, is frequently quicker and less expensive.

Since the movements remain centralized and are managed by the same vendor, shippers who utilize third-party carriers can also compare it to single-mode transportation.

Intermodal transportation is an additional possibility when shippers select various carriers for each leg of the trip based on factors such as cost, transit times, or even sustainability.

Naturally, this places an extra burden on the shippers themselves, who would also need to manage several contracts and organize delays.

How Freight Management Works

You can handle global freight management operations in various ways, depending on your objectives and abilities.

Use a personal carriage: Some businesses determine that purchasing their fleet and hiring their drivers is the most affordable or reliable way to convey their goods.

This is especially important for brands with enormous product volumes or uncommon final destinations. Although giant firms may own ships or aircraft, this model focuses primarily on on-road transportation.

Using external carriers: To complete their transport operations, many businesses turn to 3PLs. These could be a contract or common carriers. The general people can use the transportation services offered by carriers like FedEx, DHL, or UPS.

Conversely, contract carriers exclusively operate with particular shippers according to the contract. In this increasingly common approach, also known as Dedicated Contract Carriage (DCC), you pay a set charge per day and vehicle. You can ship products whenever or regularly.

Freight brokers and freight management consultants are additional intermediaries you might use to coordinate the shipment and establish connections with carriers.

Freight brokers do not handle goods; instead, they connect shippers with carriers and find the best bargains. On the other hand, freight forwarders play a more active role, as they can perform packaging, warehousing, and paperwork preparation.

They occasionally possess a fleet of containers and ship using their bills of lading. Unlike other freight management expert brokers, they frequently handle international cargo. Brokers and forwarders in the United States must be licensed by the Federal Motor Carrier Safety Administration (FMCSA).

Relationships with carriers, brokers, and forwarders are typically managed through the use of a freight transportation management system (TMS) – a software tool for planning and executing transportation operations that are linked to an ERP on the inside and connected to a carrier’s or 3PL’s system on the outside.

Here’s an example of a typical scenario on how it works.

  • When you have a delivery order, the system generates a pickup request. Some requests are scheduled in advance, while others are handled on an as-needed basis.
  • The freight management system then generates a list of acceptable and available carriers based on the parameters entered. You can then select the airline manually or let the machine choose the cheapest or best-performing choice. If you use a freight broker, they will do it for you similarly.
  • A broker, TMS, or shipper can determine whether the carrier is available and plan the load and pickup time.
  • A shipper/broker receives information regarding the load distribution, driver assignment, and vehicle, confirms it, and the driver signs the (digital) bill of lading.
  • A shipper can track and trace the shipment as it travels and share this information with the customer.
  • The carrier gets invoiced for its freight management services after the consignee accepts the shipment.

Leave a Reply

Your email address will not be published. Required fields are marked *