Transportation Costs: How Do You Know If Your Lane Rates Are Competitive?

In today's uncertain transportation climate, it's more important than ever to stay knowledgeable about market rates to ensure you're getting the best value for your transportation spend.

This, like many business strategies, can be more effective by leveraging trusted, external partners. As we are all learning, today's businesses are benefiting from integrating into connected communities that share ideas and assets. As business author and entrepreneur Seth Godin says, we are "leaving the industrial economy and entering the connection economy." 

As part of this connected economy, online freight exchange service DAT operates on a consortium of contributors to provide market rate information to carriers, service providers, and shippers. Both a contributor and subscriber, LeanCor Logistics leverages DAT, along with other partners and sources, to monitor market rates and provide competitive carrier pricing to our customers. 

After obtaining rate benchmarks, LeanCor uses them for historical comparison, spot freight distribution on our proprietary load board, and weekly continuous improvement on poor-performing lanes. If a lane is consistently expensive, we take counter-actions such as procuring a new carrier or adjusting the freight's characteristics to make it more attractive to haul.

When it comes to international rate benchmarking, partners like Xeneta provide another intelligent platform for air and ocean rates. LeanCor negotiates contracted ocean rates annually with freight forwarders, using Xeneta to ensure they're in-line with the market. 

The Right Rate Isn't Always the Cheapest: Balancing the Right Mix of Cost, Coverage, and Performance

Shippers should always be able to buy stability at contract market rates - or something close to them. Locking in year-round rates with your asset-based carriers on roughly 70% of shipments will help ensure 100% coverage and help keep seasonal cost spikes to a minimum.

The more freight given to brokers, the more severe coverage and costs will swing when markets change. Although tempting to move away from more expensive asset-based carriers and toward brokers in a soft market, it’s not recommended to move away from the 70/30 rule. When the market turns (and it always does) shippers that do this will pay more to brokers in order to build new relationships with asset-based carriers vs. maintaining their original ones.

On the other hand, an asset-based carrier may offer great service in a soft market, but if they “cut and run” for better-paying produce loads in the spring, it’s pointless to pay them more than a broker the other nine months out of the year.

 

Posted by LeanCor Logistics

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