Is Technology the Solution to Logistics’ Rate Benchmarking Problem?

Shippers face constant uncertainty about how competitive their freight rates really are because cost benchmarking is so difficult.

There are a lot of reasons benchmarking rates is hard. The most obvious is that rate contracts are confidential between shippers and carriers, so the information is not publicly available. Plus, no two companies ship in the same lanes and with similar volume, which are the biggest factors that determine freight rates.

But the bottom line remains that there’s no way for a company to know their logistics costs are optimized without the ability to benchmark against market pricing.

This point hits home particularly hard for logistics folks because negotiating the best possible rate is a source of great pride for most. And, in the end, logistics cost management is how most are judged (even more so than on service, but that’s another discussion).

Greater availability of data has made benchmarking easier than ever, and logistics technology companies are providing more and better options for companies looking to benchmark their freight costs.

For large ocean shippers, the most innovative technology on the market right now is Xeneta, who has built a streamlined interface that let’s shippers compare contracted ocean container rates against their own large database.

Other solutions available to shippers include modules within many TMS applications, such as Lean Logistics’ LeanDex Freight Rate Index. These types of solutions allow users on the platform to opt-in by allowing their rates to become part of the index in exchange for access to the aggregated results. Customers using Cass for freight payment can opt-in in a similar way. And DAT, the ubiquitous load board provides cost data which is an aggregation of actual rates brokers are paying carriers.

For all the solutions, the details of what data points are available and the costs to access it of course depend on what you are looking for. While each of these solutions provide valuable and insightful information, in the end it’s still really only a live RFQ event that can give you a certain view of how your rates stack up.

#Purchasing #Benchmarking #KPI


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