The Shipping Industry: How It Works

Shipping Industry

Amid the new challenges that come with the current health crisis, certain industries took a massive hit. It forced some businesses to stop operations. However, some industries cannot afford to fold considering the potential ramifications of their fall.

The shipping of goods is a perfect example. As people stayed at home, they bought clothes, furniture, computers, and other items. With an increase in product movement, the shipping industry is now facing different kinds of challenges.

Health situation or not, shipping companies play their role to sustain the supply chain. They need to step up to ensure continuous global trade.

Behind these challenging times, did you ever wonder how the products find their way from one part of the world to another? Continue reading below for a breakdown of how the shipping industry works.

The Transport Methods of the Shipping Industry

When breaking down how the global shipping industry works, one of the best areas to start is with the different transport methods. Interestingly, the shipping industry features four transport methods: marine, air, rail, and freight.

Marine shipping involves bulk carriers, container ships, general cargo ships, and tankers. Companies that use bulk carriers generally ship commodities in large amounts. These include coal, grain, forest products, and iron ore, to name a few.

On the other hand, container ships carry stacks of steel containers. Inside the containers are different kinds of goods and materials. Meanwhile, general cargo ships carry various items. Unlike container ships that use steel containers, cargo ships use pallets.

Lastly, tankers carry chemicals, crude and non-crude petroleum products, and other liquid cargo. Marine shipping can take several months before reaching its destination.

For air shipping, it involves the transport of goods that require a short transit time. The air shipping company flies the air cargo to a different destination. From there, they will send the items to the end-user or another trade channel.

Some of the most popular air shippers include DHL, FedEx, and UPS. These companies air-ship items across the globe.

Meanwhile, rail transport involves moving goods and commodities using regional and national rail networks. Interestingly, one-third of exports in the United States involve rail transport.

Last but not least is freight or trucking. This is the one in charge of moving goods from to and from ports.

The Key Players

Another important aspect is the key players that make the shipping industry tick. First are the carriers. These are the companies that own and manage the airplanes and ships for transporting.

They generally offer vessel bookings, which companies use to transport their goods. Next are the forwarders who serve as the “travel agents” for freight. They are the ones who often operate truck fleets.

Once the items reach the ports, the customs brokers will then enter the picture. Brokers file and clear the shipments.

They understand the ins and outs of the customs process. They also work to facilitate the smooth entry and release of the items on the ports.

Generally, it is the freight forwarders who deal with the customs brokers. After clearing the customs, the products will end up with third-party logistics providers. They handle the distribution and fulfillment requirements of the company.

Lastly, there are the shippers. These are the consumers who will coordinate with the freight companies to ship the items right to their doorsteps.

The Important Documents

Important documents are necessary for both local and international shipping processes. To simplify things, let us zoom in on the freight services. The first key document in the freight industry is the commercial invoice.

This document serves as proof of the sale of the items. This comes from the supplier, which he provides to the importer. This document is essential for the clearing of the items once they reach customs.

Another is the certificate of origin (COO). The supplier provides this document while coordinating with the chamber of commerce. This document tells the customs that the items are not illegal and are duty payable.

If the items involve hazardous materials, they need a material data safety sheet (MDSS). If you’re bringing in wood or other natural materials, you need a fumigation certificate.

To begin the shipping process, you also need the shipper’s letter of instruction (SLI). This document serves as your order form and the proof that you’re buying from the forwarder. You also need a booking confirmation, a bill of lading or an airway bill, and a packing list.

The Process

After completing all required documents, the shipping process can now begin. Let’s use toys as the product in our example. A toy manufacturing company unveils its new lineup of action figures.

From there, they take orders from distributors from different parts of the world. After collating the orders, the company coordinates with a freight forwarder. Thereafter, the forwarder will transport the toys from the factory for shipping.

In this case, the forwarder loads the items in a 40-foot container. Here, the manufacturer may use solutions like Portable Weighbridges to ensure the safety of the products while moving.

Read Also: Know About Shipping Labels

From there, it will transport the items to the port for shipping. Generally, the forwarder will coordinate with a container shipping line.

It’s the shipping line’s responsibility to provide the proper documentation to the government authorities. After loading the items in a container ship, the ship leaves and heads on to the port of destination.  

After getting clearance, the ship can now dock and unload the container vessels. It will then go through the customs officials for proper inspection. Upon clearing, a trucking and shipping company can now bring the items to the distribution center near the ports.

After a few days of sorting the containers, the toys can now make their way into the toy stores for retail.

Learn About Other Essential Industries

By understanding how the shipping industry works, you will have a better appreciation of its value, especially during these trying times. In case you wish to learn more about how other industries work, we encourage you to check our other articles.

Expand your knowledge by reading our blog post. We feature different industries and explain in layman’s terms how they function.

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