Exporting goods via airfreight Essay Example | Topics and Well Written Essays - 500 words

Exporting goods via airfreight - Essay Example The higher of the two rates is the class rate, which is the standard rate for all commodities moving from one destination to another. On the other hand is the commodity rate, sometimes referred to as a special rate because shippers receive it from carriers as a reward for either large-quality shipment or regular use. Recently, another rate known as a contract or negotiated rate has emerged. This rate is favorable to small businesses, which do not have the shipping volume required for the above two rates. Under contract rates, a carrier and shipper negotiate a rate for a specific service where the two parties finalize the terms of the service, rate and other variables in a contract. Exporting goods by means of airfreight has a substantial effect on international business. A range of cost components may reduce the high cost of goods associated with airfreight. Cost components refer to groupings of cost elements such as process costs, direct labor, materials among others. Different users define these cost components to match needs in their organizations. In other words, cost components vary from one location to another. People also select cost components as containing variable (proportional) and/or fixed costs (Sedgley & Jackiw, 2007). These cost components include inventory-holding costs, infrastructure costs, theft and damage costs, congestion costs and Speed and time costs. The business dictionary defines inventory cost as the cost that one incurs by holding goods in stock. This cost includes depreciation, warehousing, insurance, capital, taxation, shrinkage and obsolescence cost. It is usually expressed as a percentage of the inventory value, which is the determination of the cost of inventory that has not been sold at the ending of an accounting period. As one holds goods, their value may depreciate leading to losses. He would also be paying for their storage in a warehouse. The goods also need to be insured