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Value is More Than Just a Base Rate

07/08/2019

Image: Jim Allen/FreightWaves

A true logistics partner will look for savings beyond the obvious.

If you are tasked with finding the best freight and logistics solutions, you know that only six underlying cost drivers truly influence the final price:

  1. Base Rate
  2. Distance/lane
  3. Commodity type/freight class
  4. Average weight per shipment
  5. Fuel surcharges
  6. Accessorial charges

Don’t let a seemingly competitive base rate overshadow the remaining five cost drivers. Leverage real-time analytics and data collection to save you and your customers money across categories.

Tech-Forward Mindset
Technology can play a critical role in helping supply chain managers assess the challenging world of logistics. A valuable partner should be able to do the following:

  • Navigate advanced management software
  • Determine accurate KPIs with the right tracking and management system
  • Analyze processes to intimately understand your business’ inner workings
  • Dive into standard operating procedures to leverage improvement opportunities
  • Identify all factors that influence freight costs, like route, weight class and lead times

A customized approach will expose savings opportunities that a big box logistics provider is either not going to reveal or take the time to uncover for you. But digging into the details is imperative, because things like inventory purchasing, contracts with vendors and billing clarity can all impact your bottom line.

Nothing but the Truth
Many logistics and freight providers extol the virtues of their customer-centric approach to business. However, as plenty of shipping managers can tell you, these claims do not stand up in the real world. You are not alone if your provider has suddenly blindsided you with hidden fees or was unreachable when you needed them most. First and foremost, look for a partner who operates a transparent business in an industry where rates are systemically used to mask margins structures. Demand suppliers show you how price is calculated and what options exist, because you don’t have to tolerate a solution that primarily benefits the freight provider.

Ask yourself, does my provider offer 24/7 visibility and reporting? Does my provider’s system come with dedicated IT integration support, and can it seamlessly coordinate with all major shopping carts, payment processes and order management systems? If you answered “yes” to the previous questions, you are likely already working with the right partner. If you answered “no”, well, maybe it’s time to look for alternative options.

Good, Better, Best
To understand how smart supply chain strategy works in the real world, consider one large e-commerce retailer who had been choosing carriers based on geography, not on any other detail, such as weight, carrier footprint or access to real-time data. Finally, the retailer engaged with Visible in hopes that its robust technology and strong relationships with multiple carriers could save the e-commerce company more.

In the end, if Visible had simply utilized the same carriers and same base rate by optimizing routing, our customer would have saved about 10 percent. Not bad. If we had used our standard base rate, our customer would have saved 18.4 percent. Not bad at all. HOWEVER, we went even further and optimized the entire scenario by utilizing advanced technology to marry both site-specific pricing and the best routing to save the customer 22.8 percent.

Customized Savings
Your transportation manager may think that a particular carrier is optimal, but a strategic supply chain partner will truly know the best options based on a host of thoughtful criteria. Experts like Visible also have more technology at their disposal, enabling them to rate shop multiple carriers and give you more insight into, and control over, the selection process.

A Good Partnership is Priceless
When you’re with a true supply chain partner, you get more than a lower overall freight spend. You enjoy tailored service and better overall efficiency and productivity so you can devote more energy to other important business functions.

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