The shipping industry is crucial in today’s global economy. After all, a functioning economy based on international trade relies on the seamless movement of goods and commodities from country to country. Without this industry, intercontinental trade would quite simply not be possible. This means the mass import and export of affordable food, manufactured goods, and bulk raw materials we see today could not happen. Of course, in our world of fast fashion, next day delivery, and click and collect, it’s all too easy to overlook the importance of the shipping industry.
In this guide we outline exactly what the shipping industry actually is. To do this, we look at how important it is to the global economy and provide a basic guide to how the industry functions. We also specifically explore the areas of dry bulk shipping and ship broking.
What does shipping mean?
The term ‘shipping’ refers to the transport of cargo as a business. Despite the name, this term is used to describe the movement of goods from one place to another by any mode of transport, not simply through the use of ships. Indeed, there are four major modes of transportation that traditionally form the backbone of the shipping industry. These are:
- Marine - ships
- Air - aeroplanes
- Rail - freight trains
- Road - haulage lorries
A combination of the above modes of transportation facilitate both domestic and international trade. This is to say, they allow for the mass transportation and delivery of goods and commodities all over the world.
However, it’s important to note that marine-based shipping is by some distance the most common mode of commodity transportation. According to the UK Chamber of Shipping, in the UK more than 95% of all imports and exports are transported by ships. That’s because sea freight has a number of advantages. Firstly, unlike road and rail freight, ships can be used to transport goods overseas. Secondly, large scale cargo ships have the ability to carry significantly heavier loads than planes. They can also operate at a much more efficient cost, making it the most attractive form of shipping. This makes the marine shipping industry big business.
How big is the shipping industry?
The shipping industry is hugely significant in the UK. In fact, it makes up around 0.6% of total UK GDP. Indeed, according to the Office for National Statistics, sea freight contributes around £6 billion to the economy each year. On top of this, the industry generates £2.5 billion in tax annually. Finally, the industry is a substantial employer, responsible for over 240,000 jobs in the UK.
How does the shipping industry work?
With so many different types of cargo to consider, there is no one uniform way the shipping industry works. Instead, there are different processes based on factors such as the export/import locations, load type, and ship type. However, regardless of cargo and vessel type, each shipment will typically go through the different stages listed below. This supply chain process is the best way to think of the shipping industry in action.
- An order is placed
For example, a consumer electronics retailer in Germany orders 50,000 smartphones from the manufacturer in China.
- From factory to truck
A trucking company will be hired to collect the smartphones from the factory in China. The products will then be loaded onto a 40-foot container (along with other orders from different local manufacturers). The customs agent will arrange all import and export documentation to ensure there is no hold ups when leaving China or entering Germany.
- The container is loaded onto a ship
With help from a freight forwarder (such as Clarksons), the container will be taken to a port and loaded onto a container shipping vessel. The freight forwarding company will submit all relevant documentation about the shipment to government authorities. This will need to be done in both the exporting and importing countries.
- Transit
Loaded onto a ship, the container of consumer electronics starts its journey to its final destination.
- Arrival and offloading
Once the container ship arrives at its port destination (having received official clearance to dock), large cranes will be used to unload all containers due for delivery at this port.
- Customs checks
At this point, customs officials from the country the container is entering may choose to inspect the container. This is done at random. However, at the very least, each container's documentation is likely to be checked.
- From truck to distribution centre
After clearing customs, the container carrying the consumer electronics can be loaded onto a truck trailer. The products will then be taken to a distribution centre, usually located near the port.
- Delivery
Once the truck arrives at the distribution centre, items from the container are unloaded and sorted into specific shipment trucks. Once the shipment of electronic goods has been loaded onto the correct truck, it will be driven and delivered at its final destination in Germany.
As discussed above, this process can vary based on a range of factors. For example, smaller orders may be transported in general cargo ships, rather than container ships. These vessels ship pallets of items rather than whole containers and tend to use their own built-in cranes for loading and unloading. Similarly, tankers would be used if you are transporting liquids.
What is dry bulk shipping?
As the name suggests, dry bulk shipping refers to the process of transporting dry bulk commodities. These loads tend to be made up of large, unpackaged quantities of typically unprocessed items. These commodities include the likes of coal, iron ore, wheat, sugar and flour.
Dry bulk shipping is considered a specialist shipping service. Due to the fact this form of cargo is typically unpackaged, spillages and cases of load contamination are more common. For this reason, this sub-industry is highly regulated. Companies that deal in dry bulk shipping, such as Clarksons, therefore must be experts in factors such as temperature and lighting variances, specialist loading and unloading procedures, and onboard pest/contaminant control.
What is a ship broker?
A ship broker is simply a third party that facilitates a deal between potential shippers and potential carriers. That’s to say, they find available ship owners that have vessels capable of transporting specific goods across the sea for individuals and companies looking to transport goods from one location to another. It is the responsibility of the broker to strike an affordable deal for both parties and oversee the implementation of any shipment agreement. For this service, the broker is paid a brokerage fee.