Air Freight – To Consolidate or not?



SUPATH
International Air Freight Consultant

Introduction

Almost every importer has faced the situation, mentioned in the title, and many took a decision without thinking much about the term consolidation and/or how it functions.

Economy moves fast and every company needs to keep pace with its high-speed. As technology grows, so do the demands. Especially in the field of manufacturing, the supply of goods, be it machinery or machinery parts, be it packaging parts or tools for production, everything must be available within the shortest possible time.

Understanding Air Freight Price

Many companies do not even have a warehousing system, because goods in the warehouse  are considered dead capital. These companies wish their orders to be delivered “just in time” (that is how the process is called) ,directly to the production line. This way of  managing the figures may have its positive sides. However, there are innumerable factors that cannot be ascertained in advance. Unforeseeable points are the hidden risk here and they can really hurt.

Moving goods across the continents by sea is cheap. However, the strongest argument against this mode of transportation is the time taken.Ecologically speaking sea freight is a better solution. However, many companies cannot afford to wait that long to get their orders. Economy and Ecology become conflicting factors.

The air freight price is not a merely the question of weight . The volume of the consignment will be taken into consideration. The customer is paying for the amount of room the freight takes.  If the volume is greater than the total weight, the former will be used to calculate the air freight price. Cubic meter is the unit used in calculating volumes and the way to determine this is to multiply the  length, width and the height of the goods  (meters). The result is then multiplied by 166.6666 (it is better not to round off the figure) .

Example: if your consignment of 75 Kg  measures 1.2 x 0.8 x 0.80 meters, the volume = 1.2 x 0.8 x 0.8 = 0.768 cubic meters.  0.768 x 166.666=  127.99. As per the IATA (International Air Transport Association) rules, the figure will be rounded up to the next 500 gm, resulting in 128. This is the volume weight of your consignment. Between the gross weight and the volume weight, the higher figure will be used for calculating the air freight price. Assuming the consignment had a total gross weight of 130 Kg, the price will be based on 130 Kg.

Understanding Direct Consignments

A direct consignment is one that is addressed directly to the consignee and the air freight agent (freight forwarder) forwarding the goods is not involved directly with the consignee. The company from which you bought your product becomes the consignor (also called shipper) and you are mentioned on the air way bill as the consignee.The freight is tendered to the airline, immediately after the final export customs clearance is through.  The air way bill which accompanies the consignment is called an IATA air way bill. The freight forwarder is the authorised identity entrusted with flying the cargo.  He will  tender the consignment to the airline after the final export customs clearance and his task ends there. The consignee has to find a broker to interact with the airline to get the freight cleared.

Understanding Consolidation

Consignments going to the same destination but from various shippers are booked under one master air way bill and each Shipper is provided with  a house air way bill. The freight forwarder can negotiate a better air freight rate, which will give each shipper or the consignee the opportunity go enjoy a better and cheaper price in comparison to direct consignments. The cost of the air freight is distributed over several consignments, which results in keeping the rate down.  Consolidations are usually booked to leave on the weekends. Depending on the amount of business, a freight forwarder will set up bookings for the middle of the week.

Deconsolidation

The master air way bill is almost always addressed to a freight forwarder at the airport of destination. It is his job to split the consolidated cargo into its individual units. This deconsolidation is carried out in a bonded warehouse at the airport of  arrival. Here again the handling charges at the airport is distributed over a large number of freight, thus effectively reducing individual prices. The  deconsolidation takes a bit of time and is not suitable for emergency freight.

Consolidate Or Not

Considering the above facts, one can say, if your consignment is not very urgent, a consolidation is advisable. It will save you a lot of money. However, please note, not every forwarder may fly a consolidation to the particular airport a customer has in mind.

 

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Author: surenpillai

Experienced freight forwarder. Managed freight movements across all the continents. Highlights were the technology roadshows (EMEA) and Trade Lane Management India. All the above combined with Customer Relationship Management, foreign agent management, dedicated key account management. Previous experience as a teacher of English. Member of the Queen's English Society