Freight vs. Cargo: Essential Insights for Business Owners

As a business owner, teaming up with a third-party logistics (3PL) provider like All Points can significantly streamline your operations. However, to make the most of this partnership, it's crucial to understand the key logistics terms, such as cargo and freight. These terms, though often used interchangeably, have distinct meanings that can impact your logistics strategy. Understanding the difference will help you communicate more effectively with your 3PL partner and ensure a smoother supply chain process. Let's delve into why mastering these terms is vital for your business success.

What Is Freight, Exactly?

Freight, in the logistics and shipping industry, refers to the entire process and the service of transporting bulk goods from one place to another. It encompasses everything from the logistics planning stages to the actual movement of the goods and includes the transportation cost of these services. While freight can be both Less Than Truckload (LTL) and Full Truckload (FTL), it's commonly associated with large quantities of goods that require meticulous handling and coordination. 

But the word freight refers to the goods transported as well, IF they're moved by land transport. It may be helpful to remember that we call specific vehicles freight trucks and freight trains to make the difference between cargo and freight easier. But this is a more colloquial use, so it's fine if you just remember that the services are called freight and that the vehicles carry cargo.

Businesses across various sectors rely heavily on freight transport to move their products. Manufacturers often need to ship raw materials to factories and finished products to wholesalers or retailers. Retailers utilize freight services to stock their stores with inventory. E-commerce companies, especially those that deal in large or numerous products, also rely on freight services to fulfill customer orders. Additionally, industries such as automotive, pharmaceuticals, and electronics often depend on freight logistics due to the bulk and value of their shipments.

OK, So What Is Cargo?

Cargo refers to the goods or products that are transported, especially by commercial vehicles such as ships, airplanes, trucks, or trains. Within the logistics and shipping industries, cargo encompasses everything from raw materials and bulk commodities to finished products ready for retail distribution. These items are typically packaged and labeled for transport, ensuring they reach their destination safely and efficiently. Again, when it comes to goods, you'll see cargo and freight used interchangeably.

When delving into the world of cargo, it's essential to understand that it forms the backbone of global trade and commerce. Different types of businesses rely heavily on shipping their inventory as cargo to ensure they meet customer demand and maintain their supply chain. 

According to industry standards, cargo is systematically categorized based on the nature of the goods, their packaging, and handling requirements. This ensures that each shipment is managed appropriately.

• Manufacturing Companies: These businesses often ship raw materials to production plants and finished goods to distributors.
• Retailers: From small boutique stores to major chain retailers, ensuring inventory levels are met requires regular cargo shipments.
• Technology Firms: Companies producing electronics and gadgets often rely on shipping components and finished products efficiently as cargo.
• Pharmaceuticals: Ensuring the timely and safe arrival of medical products and drugs is critical, making careful handling of cargo imperative.
• Automotive Industry: Shipping parts, vehicles, and machinery makes up a significant portion of cargo moving around the world.

Where Does a Freight Forwarder Come In?

Domestic and international freight forwarders manage the shipments of goods that need transporting. They're essentially logistics specialists for just transportation services. They can help you find a carrier, which is the business doing the transporting, and see that your commercial goods shipped are handled correctly and efficiently.

The only problem with working with freight forwarders is that they're a pretty limited player in the transportation industry. Modern businesses often need specialists to help with far more than moving commercial items from one location to another, and that means you'll need multiple providers if you work with a freight forwarder. A 3PL, on the other hand, offers freight forwarding as a service, along with a long list of other services that help your business manage your goods more effectively from shipping to fulfillment.

The Difference Between Cargo and Freight

While both terms, cargo and freight, are often used interchangeably, there are distinct differences between the two that business owners need to understand. (There's also some confusion when figuring out if you're dealing with traditional or contemporary definitions of freight and cargo, but we'll try to keep it focused on how you'll hear these words used now.) Knowing these differences will help in making informed decisions when collaborating with a logistics or fulfillment partner like All Points. 

Definition & Scope: Cargo typically refers to goods transported via air or sea, encompassing a broad range of items including commercial goods, personal items, and even mail. Freight, on the other hand, can be more specific to goods transported overland, usually by truck or train, and involves both the commercial goods and the associated transportation costs. 

You'll see this subtle difference between cargo and freight reflected in language, like:

• Cargo planes are planes that carry cargo, but air freight is the service of moving cargo by air. (And, yes, you'll also see people say or write the term freight planes.)
• Cargo ships are ships that carry cargo, but you may also see a cargo ship called a freight ship, and the service may be referred to as sea freight. (Neither of these is to be confused with the term ocean carriers, which refers to the industry professionals transporting cargo this way.)

Usage Context: In practical terms, cargo is usually discussed in scenarios involving international or long-distance transportation. Freight is often referred to in the context of domestic shipping, where logistics revolve around land transportation methods and routes. As you might imagine, this distance translates to cost differences and it's important to hear the distance tacitly included in each term to understand what partnerships with logistics companies mean for your bottom line.

Commercial Aspect: When discussing charges and costs, 'freight' commonly implies the total cost of transportation, including packaging, handling, and other related services. The term cargo focuses more on the goods themselves, irrespective of the transportation mode or the associated fees. 

Understanding these nuances is essential for business owners because it influences the choice of logistics partners, the mode of transportation, and ultimately the costs involved in shipping goods. Working with a 3PL like All Points becomes more efficient when you can clearly articulate your shipping needs, select the appropriate services, and budget accurately for these costs. Being conversant with these terms enables smoother communication, better planning, and more effective logistics management.

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What Do You Book a 3PL For?

When you're considering partnering with a 3PL, there are several important concepts beyond just understanding freight and cargo. 

First, it's crucial to grasp freight management. This involves the strategic planning, optimization, and coordination of your shipments. A competent 3PL will handle everything from routing and carrier selection to tracking and ensuring timely deliveries. Essentially, they act as an intermediary to negotiate the best possible rates and service terms with carriers. This can save your business both time and money by streamlining your logistics operations if you're transporting goods. 

Inventory management is another key concept. A 3PL can help you maintain just the right amount of stock on hand, ensuring you meet customer demand without overstocking. They use advanced warehousing and inventory tracking systems to provide real-time visibility to your stock levels, minimizing storage costs and reducing the risk of stockouts. Financial aspects of inventory management affect the amount and frequency of your cargo transported.

Additionally, you should be aware of intermodal transportation. This refers to the use of multiple modes of transportation—such as trucks, trains, and ships—to move goods efficiently. A 3PL can manage these complex logistics to ensure seamless and cost-effective transportation of your cargo. 

Lastly, consider the importance of customs brokerage if your business involves international shipping. A 3PL with expertise in customs regulations can help you navigate the complexities of import/export compliance, tariffs, and international documentation, ensuring your goods move smoothly across borders. It's an under-discussed but important part of dealing with freight and cargo.

Understanding these concepts will empower you to work more effectively with a 3PL, enhancing your logistical efficiency and, ultimately, your bottom line.

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