Making sense out of Freight
Highest : By Air, By Ship, By Rail, and By Truck
where costs of insurance, taxes
Will affect the decisions you make based on your profit margin
Also transport carriers need to recover their investments
Where present moment, the type of cargo is not determinent of the charges
Where the cost factor is flat based on cargo size and container size
This cannot go on as transport owners will have a thin margin and not able to recover their ROI
The market will consolidate based on these factors where;
a) The highest prized goods will have the highest priority and the profit margin will determine the mode of transport used
b) Time is of the essence. The shortest path utilised to reach your destination will also cost the most where it is most expensive by air compared to by rail or by ship
c) Refer to a)Likewise insurance of the highest prized goods will cost higher but if the shorter route by air is used will cost lower compared to by ship as the time frame is longer and the risk is higher
d) Taxes. There are so many different countries with their needs it is almost impossible to break down, unless the tax system is standardised with FTA which will take away the complexity of trade
As such, market forces will reorganise when they realised it is impossible to meet the demands of transport and freight charges with insurance at the present system due to margins almost at costs now. Competition will decide when countries want to give economies of scale and direction of trade routes to better give carriers and consumers a better deal based a portion of their profits where the highest prized goods will be charged higher rather than a flat rate.
At first freight charges may increase slightly, but eventually due to competition, equilibrium will be found. There is a limit to reform and changes, and if the costs increase is more than 10% compared to present, a lot of people may not accept it, as the costs will then be passed on to the consumer, as such the maximum increase of cost of freight for the highest prized goods should not exceed 10%. This reform is necessary to bring back the heartbeat of the global economy of trading.
– Contributed by Oogle