You need to take into account several factors when shipping your goods to customers. Things like distance, time, and cost are vital parameters that influence your decision-making regarding the best possible mode of transport. Even though ocean freight today accounts for around 90% of global trade, rail transport too can be a good solution because of its speed, cost-effectiveness, and environment-friendliness. However, it is important to understand all the factors that influence its effectiveness.
The transit times of cargo shipped by air, road, rail, and sea can vary greatly, and you will need to decide the optimum mode taking into account the delivery schedule and the nature of the goods. While the ocean route is the cheapest, it is also the slowest. It is also subject to factors like traffic congestion and piracy. Airfreight is the fastest and ideal for perishable and fragile goods and allows manufacturers faster order fulfillment and flexibility. However, it is significantly more expensive than ocean freight and not suitable for heavy cargo. Rail freight transit time falls between that of air and ocean and is ideal for long-distance transport.
Because it is the fastest mode of transport, air freight is also the most expensive. However, for certain kinds of time-sensitive cargo, and to serve destinations not connected by road and rail, rail is the sole way transporting goods. Averagely, railroad shipping rates are half that of air freight, but the destination needs to be connected by rail. While road freight can be cheaper for smaller distances, it is more expensive than rail for longer distances. In addition to the cost of transporting cargo, you also need to factor in additional expenses on account of port charges, customs fees, documentation fees, not to forget the cost of insurance and fees charged by freight forwarders to decide on the transportation mode.
Inventory Carrying Costs
Even though the cost of carrying inventory is significant, far too many manufacturers focus only on the manufacturing cost. Even though warehousing is the top cost component, you need to factor in the impact of transportation because the longer the goods are in transit, the greater the inventory carrying cost and lost opportunity cost. When you consider that rail transport is far faster than ocean transport, you can save a lot in inventory carrying costs without incurring the cost of air freight. In a rapidly changing market where obsolescence can be worrying, rail freight is far more effective. A single rail wagon can carry as much as 100 tons, according to Transport Geography. The impact on inventory carrying cost is easily appreciated.
In addition to the benefits of speed and cost over other modes of freight transport, the environment-friendliness of rail transport is something no business can ignore. Compared to other modes of transport, rail accounts for the least carbon dioxide emission. When calculated per unit of freight, rail consumes 90% less energy than road transport, says the IEC. Trains score over trucks and aircraft due to their higher capacity, which means that you need fewer trains to move the same volume of cargo and hence, consume less fuel.