What shippers need to know about how carriers price freight with historic, peer and market data

Adam RobinsonFreight Market Blog

price freight

A certain level of fees and freight rating expenses are standard in shipping and transportation. They are expected and should be anticipated – with laser-precision if possible. However, the sheer amount of fees applied in the process to price freight for a load can amount to quite a hefty sum. 

But knowing what’s happening based on historic, peer and market data can help shippers figure out how carriers price freight loads. And as reported by Transportation Impact, “Deploying data analytics for strategic planning can lower the risks of investing in storage and fleet capacity; consider seasonal factors and emerging freight-flow trends; generate market intelligence segmented by industry, region and product category; reveal supply chain risks and provide resilience against disruption; among other benefits.” This means knowing how a carrier or shipper approaches freight pricing. Moreover, market monitoring comes in handy when working alongside segments of all sizes. Here are a few things managers need to keep in mind when working with real-time freight data for pricing purposes. 

Contract freight may not equate to guaranteed capacity

The fact remains that within freight transportation protocol, trucking capacity is finite. Even if a carrier commits to a contract, issues may still arise with terms and rates when the carrier prices freight. Available drivers will not always be accessible to handle loads, affecting freight pricing rates and fees when special capacity considerations are needed.

Shippers need to prepare for this uncertainty and plan by using historic, peer and market data from across the network. They need to move freight to the spot freight market to move what gets left behind with contractual assignments. The focus remains to get the best rate per load from a carrier or broker. Sometimes spot rates end up offering the best rates for contract loads. And for shippers, that means keeping costs under control and minimizing the rates. Of course, it all depends on the ability to stay strategic. 

Carriers have a vested interest in maximizing profitability per load

Regardless of the loads shipped and carrier type, the goal must remain to maximize profitability per load with maximum capacity rates. This factor plays into net revenue per truck per week as well. How a carrier decides to price freight will significantly impact whether a shipper chooses to move assets now or delay a load. With the ever-changing needs and demands of the supply chain, carriers need to maintain clarity. A focus on freight KPIs can help ensure the best freight rates get quoted with all proposals. For instance, here are a few KPIs that go into the overall strategy for how carriers price transportation:

  • MILES PER TRUCK PER WEEK (MILTR) – Every driver in the fleet will come under scrutiny at some point. This focus is needed to ensure that a load earns a rate that is higher than expenses incurred with managing the process of how they price freight.
  • REVENUE PER DRIVER PER WEEK (DRVREV) – The profits earned per truck each week remains a crucial piece of data for fleet management. This revenue insight cannot remain overlooked or ignored.
  • DRIVER TO NON-DRIVER RATIO (DRRAT) – This focus allows carriers to manage freight processes better day by day. This KPI helps establish a clearer view of the number of active drivers that stay in the fleet.  

Shippers may not track this data independently. Still, if they view the overall averages within FreightWaves SONAR, it’s much easier to navigate the freight market, and they can effectively know how carrier profitability is trending. In turn, that amounts to offering more competitive rates to move freight and avoid unexpected rises in costs.

Tracking carrier performance increases shippers’ leverage during annual contract negotiations

Versatility and adaptability are essential to continued growth and expansion. Failure to plan for deviations in the trucking market and a lack of planning regarding freight pricing strategies can have a disastrous impact on freight pricing strategies. Successful management of fees and expenses, including freight load rates, starts with the RFPs.  Trucking RFP standards have grown to embrace many key analytics points for 2021 contracts. The volatility on the markets in 2020 highlighted the supply chain’s vulnerability to deviations and disruptions.  A confident, data-driven trucking RFP can make a big difference in the process of establishing freight pricing tiers. And by knowing what to expect, shippers can work to negotiate terms with carriers and avoid the feeling of being at the mercy of carriers.  

Keeping cost per load in check as a shipper means knowing what to expect and carrier freight pricing strategies

Predictive freight rate forecasts shed valuable insight into trucking rates, fees and expenses. Using extensive data analytics makes it easy to aggregate data, make informed predictions and follow the decisions that will offer the best outcome. When added costs spring up unexpectedly, knowing the fundamentals of how a carrier prices freight can quickly become overwhelming. But again, those with data are in the best position to overcome the uncertainty and get things back on track. Request a FreightWaves SONAR demo by clicking the button below to get started.