Why Would Anyone Ship Freight by Air?

Bob called again.

“I've got a problem. My customer needs the product sooner than expected. The next ocean shipment won't get here in time. My supplier says we could ship it by air – but it's going to cost a lot more...”

The conversation led to this question: “If ocean freight is so much cheaper, why would anyone ever ship a container by air?”

The cost of transportation is only one part of the decision. So, what should a company consider when deciding on the mode of transportation?

Ocean freight translates into lower transportation cost and longer transit time. Airfreight means higher transportation cost and much shorter transit time. Questions to consider should be:

• How urgently does the company need the product?

• What happens if the company runs out of product?

• How much inventory will be tied up while the product is in transit?

• How much does speed matter to the business?

  
  

Bob normally imports from Taiwan by ocean because his company plans well in advance. But this time, a customer unexpectedly places a large order and Bob doesn't have enough inventory.

Bob thinks out loud: “Is paying more for airfreight cheaper overall than running out of product?”

The decision isn't simply about the freight rate. A company also has to consider the value of time, inventory tied up in transit, and what happens if the product doesn't arrive when needed.

“Are you saying I shouldn’t ask what mode of transport is cheaper?”, Bob asked.

I would ask which option has the lowest total cost for your business. The cheapest transportation option isn't necessarily the lowest-cost business decision.