Control over trucking freight rating remains a blip for many carriers, particularly owner-operators and those trying to manage the chaos of a pandemic-stressed industry. The complexity of global trade means that all carriers regardless of mode are struggling to maximize profits. Yes, freight rates have increased throughout the pandemic, but those increases were originally intended as temporary fixes.
Now, the industry is changing yet again. And those increases are likely to remain forever. But why? Quite simply, freight rating challenges are not a problem limited to trucking carriers. According to Maritime Executive, “Eight international carriers split into three different alliances control 80% of the market today. Up until the end of 2019, more than half of the carriers were unprofitable. Due to the previous surge of China as the world’s factory over the last two decades, much of the global carriers’ business has revolved around transporting cargo between the U.S. and Asia and Europe and Asia, and carriers have had to plan for, allocate and optimize their networks to support the growth of global shipping along these trade lanes.” Problems with rating practices will always surround the global flow of goods. And that’s why it’s important for carriers to apply data and enable predictive freight rating through these five requirements.
1. Know how your freight rating practices measure against the market
Maximizing trucking rates and asset utilization are critical goals for all carriers. Carriers simply need to know where to send trucks and the proper freight rating or pricing strategies to use. Even with that information, there is still room for improvement. And it exists in the form of carrier benchmarking. Benchmarking allows carriers to compare the health of their business to others in the industry and identify how their operating ratios are doing at any given point.
2. Recognize that not all loads are as lucrative as meets the eye, letting data do the talking
Benchmarking may be the first step, but the next focuses on identifying the less-lucrative loads. Initial demand on the industry will likely generate a stronger ROI for trucking carriers through higher trucking spot rates. Unfortunately, that is not enough to guarantee and maximize profitability. The trucking market is subject to macro and micro economic influences, including the pandemic, consumer buying behaviors and more. And recognizing those factors’ influence on load profitability is essential to boost profitability. Of course, it is also critical to apply data across all activities to identify which loads are ripe for the taking.
3. Leverage industry relationships and data to support freight rating changes
Another critical factor in effective rating practices for carriers goes back to leveraging existing and new industry relationships. Carriers have a finite amount of capacity. And there will be times when capacity constraints require increased rates and even outsourcing of some loads. Of course, outsourcing does eat away at profit margins, so trucking carriers need to apply data to support all possible rate changes that occur as a result of outsourcing to transportation brokers and 3PLs. That will go a long way in reducing operating ratios and increasing fleet utilization. Furthermore, data-driven trucking RFP processes with potential outsourcing partners is another use of predictive freight rate data to keep outsourcing costs under control.
4. Lower attrition rates with data collection and analysis across all movements
Carrier profitability attrition rates are often the result of highly profitable loads subsidizing lower profit activities. There will always be instances when sound business decisions may require moving a less-profitable load. However, that should be the exception and not the rule. Therefore, trucking carriers need access to additional data resources and analytics insights to identify and act on those less profitable business relationships. And past uses of freight data to cut less-profitable partnerships and loads have led to 11% decreases across operating ratios, explained John Kingston of FreightWaves.
5. Make data accessible and actionable
The best-laid plans for improved carrier freight rating efficiency will fail without accessible and actionable data. Remember that raw freight data in its original form is meaningless and almost incomprehensible. And that doesn’t even begin to explain the severe headache that may arise from combing through mountains of data manually. Carriers need an advanced dashboard that puts the information front and center, creating an intuitive pricing process. It can be that simple.
Do it all in one step with carrier predictive freight rating tools
Regardless of the size or current stressors within your trucking company, now is the time to innovate and implement data-driven pricing methodologies. And it begins with capturing data within an industry-leading freight forecasting platform like FreightWaves SONAR. Request a FreightWaves SONAR demo by clicking the button below to get started.