Benchmarking freight rates is one exercise that can not only save you money but can provide valuable insight into your business.
Freight rate benchmarking – what is it and how does it work?
In simplest terms, comparing the price you are paying for your shipment vs. what your competitors are paying for a similar shipment is freight rate benchmarking. The key to executing this is having access to precise and reliable market rates which help you identify the best opportunities for your freight decision-making process.
Reviewing your freight rate history along with the carriers used, with current market rates for the bothersome trade lanes, will help you understand the direction in which the freight market is moving, foresee the peaks and troughs and evaluate your position.
Freight rate benchmarking benefits:
Better negotiate freight rates
Rates tend to vary to a great extent even within the same shipping lane. Lack of visibility often invites hidden, unnecessary charges which begin to deteriorate your profit. However, when you have access to benchmarked rates, you are in a prime position to negotiate freights for your freight forwarder or carrier. This helps ensure that you aren’t being duped into overpaying for your shipment.
Thorough analysis equals insight
Patterns emerge when you begin to benchmark your freight rates and document the findings. These patterns offer a thorough analysis of both spot rates as well as long-term contracts. A comprehensive review of all average rates leads to a deeper understanding of how competitive your carrier’s rates are against the actual freight rates of the market.
More control over costs
The more you understand the way in which your freight costs are incurred, the better you can manage to a competitive market rate. Knowing the average rates for each lane and being aware of current prices negates unnecessary surcharges. Competitive rates not only serves your profits but also can be extended to your customers for cost savings.