Accurate Benchmarks & Freight Data ComparisonsWritten by Neal Willis
Simply looking at the expense side of your freight budget can be misleading. Without detailed freight data, it’s very difficult to effectively assess any freight savings efforts; however, even the most detailed and extensive data sets are useless if you aren’t comparing apples to apples.
When comparing rates and services between carriers, instead of being concerned with true net cost comparisons, shippers often get caught up in the discount game and believe that bigger is better. When discounted from the same base rate/tariff, the higher percentage amount is better, all else equal, but the highest discount may not always be the best deal. There are numerous carrier base rates/tariffs in the market and, since all of them aren’t necessarily utilizing the same starting point (base rate), it’s impossible to determine the best option without running a least cost analysis for each individual lane.
Reduced or waived accessorial charges aren’t always in your best interest. Providers may sometimes reduce or waive certain accessorial fees, but they will raise the rates of your most common lanes to offset any potential revenue imbalance. Your freight costs can increase much more rapidly this way, especially if your common lanes constitute a higher percentage of your freight mix than shipments needing accessorial services performed.
Keep in mind that shipping patterns change over time. Just because your freight spend has risen doesn’t mean your rates have also. It may simply mean that you’re sending more shipments and, as a result, you are spending more on freight. A cost per pound ($/Lb.) report can be useful in this situation to help determine if freight costs are similar under both the higher and lower volumes.
On the other hand, just because you aren’t spending as much on freight as in the past doesn’t mean that you’ve successfully mitigated any rate increases or lowered your freight costs. Orders and shipment volume can be down along with freight spend and, again, a cost per pound ($/Lb.) report could be useful for charting any cost changes.
Cost per pound ($/Lb.) reports aren’t always the best indicator of changes in freight costs. Smaller orders (lighter weights) can translate into higher dollar per pound ($/Lb.) averages. A lighter weight order means the freight costs are being spread out across fewer pounds. A sudden change in your cost per pound ($/Lb.) could be an indicator that there’s been a shift in customer buying patterns and order sizes.
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