If logistics professionals have learned anything in the past year and a half, it’s that global supply chains have been deeply affected and changed forever by the pandemic. This fact makes one of the findings from a recent survey that Loadsmart co-sponsored with FreightWaves all the more interesting. In it, an overwhelming majority of shippers (75%) indicated they rely on their historical rates as benchmarks for measuring their present and future transportation spend.
(You can watch a video summary and analysis of the survey here: Driving Blind: Shippers Make Decisions Informed By The Wrong Data)
The obvious problem with doing so is that today’s market conditions are unlike any existing in the past. And, as is argued in the video analysis, what we’re dealing with today is simply an acceleration of where things were already heading. In other words, there is no going back to the way things were for the logistics industry in any sense.
This is especially true for shipping rates. It’s a clear signal that looking to the past to benchmark rates is a mistake. And, with shipping costs climbing at a rate of 50+% year-over-year, reliance on costs from a vastly different period (even if it was just a year or two ago) can do more harm than good.
So without its own data as an obvious and trustworthy way to benchmark, but a universal agreement that benchmarking has value (another finding from the survey), what’s a shipper to do? Companies cannot fly blind when it comes to managing their costs in the long term. Even when market conditions are tight like they are now, managing costs is still a necessity.
We also learned from the survey a few other ways that companies are attempting to benchmark their rates as this chart illustrates.
A common thread within all of these data sources is that they rely on information from the past. Or they do not come with the assurance of capacity. Taken all together, it is understandable that companies will be skeptical of the value of benchmarking if their available options do not come with the guarantee of capacity or the feeling they’ll be able to procure better rates.
The clear goal for companies is to find reliable carriers at competitive market rates when they’re needed. Knowing what’s competitive by looking back doesn’t work. The companies thriving right now (they are out there) have figured out the only reliable benchmark is knowing what the cost is for capacity that is available now. That’s not as hard to do as it may seem. This type of visibility comes from moving past the mindset of doing things the ‘old way’ – such as benchmarking against last year’s rates, running annual RFPs, or using a static routing guide.
None of these methods work today. Progressive shippers are finding success with new tactics, such as establishing TMS integrations with other technologies that provide dynamic pricing integrations, which connect to real-time market rates backed with guaranteed capacity.
The most useful data sources help shippers find trucks and allow them to benchmark for the assurance their logistics costs are being well-managed. Click here to learn more about how Loadsmart’s Dynamic Pricing can connect to your TMS and improve the efficiency of your shipping operation.
About Loadsmart
We are industry veterans and data-scientists using innovative technology to fearlessly reinvent the future of freight. As the ‘nerds of logistics’, we seek intelligence in data to solve deep-rooted inefficiencies in the industry. We give shippers, brokers and carriers access to our data connections (linking supply and demand) and suite of award-winning solutions to strike the perfect balance of cost and service. We’re creating a more efficient and environmentally responsible way to move more with less. For more information, please visit: https://loadsmart.com