winstonc.haynes
Global Competitiveness Index Infrastructure Score, 2015-2016
Companies deciding where to locate their manufacturing activities, or whether to source their products in the United States or from overseas, should carefully consider the total costs of shipping. Shipping costs include both the direct and indirect costs of transporting products from their point of origin to their destination market. Expected gains from offshoring can often be erased by long shipping times, rising or fluctuating shipping costs, regulatory fees, and unexpected delays.
Shipping costs occur in both directions. They are a cost to U.S. firms that import, and they also are a cost to firms that purchase exported U.S. products. As this website emphasizes, firms worldwide must take into account numerous costs, including and in addition to shipping, when assessing where to produce or make their purchases. The resurgence in U.S. exports over the past several years provides strong evidence that many foreign customers recognize the value of products with the "Made in the U.S.A." label.
Freight Costs and Shipping Time
Most goods imported into the United States travel by land or sea – less than one percent of the total imports by weight arrive by air. This is due in large part to the substantial cost of air freight, which the World Bank estimates is 12 to 16 times more expensive than ocean freight. Whatever the mode of transportation shipping involves multiple costs, including container fees, packaging, terminal handling, and broker fees. In order to get a complete picture of shipping costs, each of these factors should be taken into account.
In addition to financial costs, shipping goods internationally takes time. For example, goods shipped from China, on average, take around 14 days to reach the West Coast or 30 days to reach the East Coast. If there are any problems with the final goods delivered to the United States, or if a fast resupply becomes necessary, it can be difficult or impossible to receive a new shipment in time.
In order to save on fuel costs, many ocean shipping lines use slow steaming on many of their routes. Pioneered by Maersk Line, slow steaming involves ships sailing at low speeds to reduce the amount of fuel consumed. This reduces costs for the shipping companies, but it increases the amount of time it takes to move goods from one place to another.
Slow steaming has quickly become the preferred method used by ocean shipping lines, both for economic and environmental reasons. A recent study published in the Journal of Maritime Economics and Logistics estimates that “extra slow steaming” is the most beneficial vessel speed, reducing costs for the transport company by 20 percent (which can pass those savings on to the manufacturers whose goods they carry) and reducing carbon dioxide emissions by 43 percent. However, extra slow steaming reduces speed by 25 to 40 percent from normal speeds. Slow steaming adds as many as ten extra days in shipping from China to the United States. While reduced shipping costs might be attractive, they come with a price—even longer shipping times.
Long shipping times also play a role in product returns. Any items that must be returned to the factory or point of origin must again travel the two to four weeks required to get there or be shipped by air, which is considerably more expensive than shipping by sea. If a customer requires a new or replacement item right away, this will almost always require costly air freight.
Infrastructure
Before being loaded on a freighter or airplane, goods must be secured in shipping boxes and traveled from the factory to the port. The overall quality of the foreign transportation infrastructure, which includes roads, railroads, ports, and air transportation networks, varies across countries and has a direct bearing on the total time and cost of shipping. To help gauge the relative differences in individual countries' infrastructure it is worthwhile to consult the World Economic Forum's latest Global Competitiveness Report. The report provides data on 144 countries.
Global Competitiveness Index Infrastructure Score, 2015-2016
Companies deciding where to locate their manufacturing activities, or whether to source their products in the United States or from overseas, should carefully consider the total costs of shipping. Shipping costs include both the direct and indirect costs of transporting products from their point of origin to their destination market. Expected gains from offshoring can often be erased by long shipping times, rising or fluctuating shipping costs, regulatory fees, and unexpected delays.
Shipping costs occur in both directions. They are a cost to U.S. firms that import, and they also are a cost to firms that purchase exported U.S. products. As this website emphasizes, firms worldwide must take into account numerous costs, including and in addition to shipping, when assessing where to produce or make their purchases. The resurgence in U.S. exports over the past several years provides strong evidence that many foreign customers recognize the value of products with the "Made in the U.S.A." label.
Freight Costs and Shipping Time
Most goods imported into the United States travel by land or sea – less than one percent of the total imports by weight arrive by air. This is due in large part to the substantial cost of air freight, which the World Bank estimates is 12 to 16 times more expensive than ocean freight. Whatever the mode of transportation shipping involves multiple costs, including container fees, packaging, terminal handling, and broker fees. In order to get a complete picture of shipping costs, each of these factors should be taken into account.
In addition to financial costs, shipping goods internationally takes time. For example, goods shipped from China, on average, take around 14 days to reach the West Coast or 30 days to reach the East Coast. If there are any problems with the final goods delivered to the United States, or if a fast resupply becomes necessary, it can be difficult or impossible to receive a new shipment in time.
In order to save on fuel costs, many ocean shipping lines use slow steaming on many of their routes. Pioneered by Maersk Line, slow steaming involves ships sailing at low speeds to reduce the amount of fuel consumed. This reduces costs for the shipping companies, but it increases the amount of time it takes to move goods from one place to another.
Slow steaming has quickly become the preferred method used by ocean shipping lines, both for economic and environmental reasons. A recent study published in the Journal of Maritime Economics and Logistics estimates that “extra slow steaming” is the most beneficial vessel speed, reducing costs for the transport company by 20 percent (which can pass those savings on to the manufacturers whose goods they carry) and reducing carbon dioxide emissions by 43 percent. However, extra slow steaming reduces speed by 25 to 40 percent from normal speeds. Slow steaming adds as many as ten extra days in shipping from China to the United States. While reduced shipping costs might be attractive, they come with a price—even longer shipping times.
Long shipping times also play a role in product returns. Any items that must be returned to the factory or point of origin must again travel the two to four weeks required to get there or be shipped by air, which is considerably more expensive than shipping by sea. If a customer requires a new or replacement item right away, this will almost always require costly air freight.
Infrastructure
Before being loaded on a freighter or airplane, goods must be secured in shipping boxes and traveled from the factory to the port. The overall quality of the foreign transportation infrastructure, which includes roads, railroads, ports, and air transportation networks, varies across countries and has a direct bearing on the total time and cost of shipping. To help gauge the relative differences in individual countries' infrastructure it is worthwhile to consult the World Economic Forum's latest Global Competitiveness Report. The report provides data on 144 countries.