Business Valuation Increased with Air Freight Transportation
Updated: Jun 16
Originally Written by Carol Frachon (2017), Updated by Leah Barrier and Dylan Nguyen (2020)
One of the biggest revolutions in the retail and manufacturing industry has been fast shipping. Knowing that a company can provide expedited services is a big plus. Expedited freight can move either over land or in the air. Trucks have long been the backbone of the supply chain, but if time is of the essence, there is none to waste on trucks making multiple delivery stops along inefficient routes. Usually, the products that are being shipped need to get to their destinations quickly and would not last over long truck routes. If you want to get something somewhere rapidly and reliably, air freight is the answer.
Air freight is an integral part of the global trade system. Many companies require long-distance and expedited shipping to maintain their profits and they rely on air freight to fulfill their time-sensitive needs. Being able to provide air freight and expedited delivery services are vital to becoming a competitive company in today’s modern economy.
Why Air Freight?
The express shipping options provided by air freight make it a valuable option for delivering time sensitive shipments across the globe. Smaller and mid-size companies can benefit from this, since it allows them to participate in international trade in an effective way. In a world of instant gratification, air freight service is one of the most popular services your business can offer.
Usually, shipping by air freight costs more than land or sea freight. While air freight may require an initial increase in overhead, the money saved and gained long term can greatly increase a company’s bottom line. Air freight can help eliminate unnecessary costs. For example, due to transportation time for air cargo being comparatively shorter than land or sea, the insurance premium is lower. Even if air freight can be expensive, you can save some money with lower insurance costs. Air shipments also usually require less packaging compared to other shipping alternatives. Thus, you can offset the air freight costs by reducing packaging services and warehousing as well as insurance costs.
As a service-oriented business of any kind, the ability to move inventory in an urgent and streamlined manner is vital to competitive growth and scalability. Accurate forecasting is an integral part to the business development and planning phases. The cost of expedited freight can quickly be justified in times when production and availability become disrupted. Slight deviations, over or under, in any capacity can greatly alter projected profitability. Air freight allows items to be delivered very quickly. As a result, you do not need to keep high volumes of items in stock as a safety measure against delayed deliveries. With fewer backstock in your warehouse, there is less risk of items depreciating, becoming irrelevant or damaged. This helps effectively balance costs and profits.
As Carol Frachon wrote in the original post of this blog:
“Demand forecasting is crucial to the success of a business. Some industries experience forecasting challenges. Retail merchants are particularly at risk since they carry seasonal items. Too low supply of goods on hand can mean a loss in sales, while an overage of goods can drive a liquidation of sales and a loss in profit. Considering shipping costs of the inventory is prudent in forecasting to build the cost of shipping into the sales price. Air freight can often be the most effective and flexibly way to adjust for shipping needs.”
The first thing is determining the weight and dimensions of your shipment. When it comes to air freight shipping, weight and volume are key factors.
Air carriers will charge by either volumetric weight (also known as dimensional weight) or actual weight. Beyond the air freight shipping, price will also likely include:
· Container freight station/terminal handling charges
· Airport transfers
· Customs brokerage
Outsourcing Air Freight
The benefits of outsourcing your expedited shipping needs out way the costs. When an expedited freight company is dealing with your delivery needs, you can refocus your attention to other core aspects of your business. Many companies also waste time with shipping logistics without realizing that it is taking away resources from other aspects of the business. Delayed shipments, missing products, or mishandled inventory do no good for any company trying to be competitive. Therefore, it is important to integrate air freight shipping into the business structure to mitigate any future problems and give you peace of mind.
Customs Brokerage Firms
Customs brokerage firms facilitate the shipment and delivery of goods across international borders for individuals and companies. Customs brokerage firms can help you determine the most cost-effective way to utilize air freight. When participating in any international shipping, you should be prepared for customs procedures and documents. Customs Brokers ensure that your shipments enter a country in compliance with an ever-changing set of rules, regulations, laws, and trade agreements. If done incorrectly you could face fines and lose the ability to ship, there entirely. By working with a customs broker, you ensure that all aspects of your freight management are handled properly
If your goods need to be moved quickly, air freight is the best solution. However, there are some drawbacks compared to ocean or land transportation, such as air costs and limits of cargo types, sizes, and weights. Despite these drawbacks, there are more advantages to air freight than disadvantages. Like almost every decision in the supply chain, choosing your preferred shipping method depends on a trade-off. Consider the urgency of your shipments and what your budget is to determine if air freighting is right for your shipment. If fast and reliable delivery are your priority the benefits of air freight clearly out way the costs.
To learn more about the International customs, expedited air cargo, or the importance of an advanced air freight network in general, or if you have any unanswered questions and would like to schedule a brief consultation, please reach out to us at 704.357.0474 or email us HERE.
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