5 reasons why routing guide stability hedges market volatility & improves service levels

Adam RobinsonFreight Market Blog

routing guide

Routing guides are a universal source of carrier freight tendering and action. They apply to all freight parties and are regularly updated to ensure that shippers can keep freight spend under control. For instance, both CVS and Academy both present their routing guides online for easy access. And the routing guide provides a single point of instruction that can be used to measure carrier and supplier compliance or performance, reports Supply Chain 24/7. However, the routing guides can be much more clearly defined by thinking about how they apply to overall shipper stability and why consideration of market volatility data and analytics are critical to understanding service levels. Let’s take a closer look at five reasons why this is the reality of today’s supply chains. 

1. Shippers can adjust rates to avoid overspend and higher-than-typical tender rejections

The ability to apply routing guide insights and market volatility is only as valuable as the level of granularity to which shippers can attain. In other words, a lack of insight into market-by-market and lane-by-lane analysis will amount to trouble in understanding what is going wrong and what is necessary to improve service levels. For that reason, shippers should look to routing guide stability and insights into freight market volatility to avoid overspend and higher-than-typical tender rejection rates. After all, paying above-market rates in environments that maintain a low degree of volatility could allude to overspending. Meanwhile, paying below-market rates in highly volatile markets will mean that carriers have an opportunity to make more money by rejecting freight in exchange for cargo that is at higher shipping rates per mile.

2. Shippers can make informed decisions about when to vet new carriers

Another facet to consider when assessing market volatility and routing guide stability goes back to knowing when to evaluate and vet new freight carriers. Even if carriers have proven their merits in the court of public opinion, it is essential to understand what rates to offer and what to push while at the negotiating table. This is especially true when entering many bids among new carriers or rebidding existing carrier contracts to account for market disruption.

3. Shippers may renegotiate with carriers through mini-bids

As already mentioned, renegotiating existing annual contracts can involve the level of many bid activities. By hedging market volatility and stability, shippers can point to carriers, identify which rates are out of reach, when to tap intermodal shipping and when to apply data to have more substantial bargaining power. Yes, there is the risk that a carrier may refute those requests. However, carriers also realize that an immense value and resource rests within more localized and regional carriers. Therefore, carriers are more likely to consider requests for more competitive rates when shippers can point to the data and prove why they are entering a new mini bid.

4. Market dynamics are incredibly subjective and may exhibit short-term periods of volatility in otherwise stable zones

Another factor as to why routing guide stability hedges market volatility to improve service levels involves the speed at which market dynamics occur. As seen in recent months and spring 2020, the market can shift in direct response to significant economic influences and other concerns. From the pandemic through winter weather, disruption can mean a complete halt to freight movements overnight. And there is a high incidence and risk that future disruptions will recur. As a result, routing guide stability depends on recognizing when these disruptions are on the horizon and account for them in everyday tendering processes. Yes, market dynamics are incredibly subjective and exhibit short-or long-term periods of volatility. Regardless, identifying stable versus volatile zones will go a long way in lowering overall transportation spend, boosting efficiency, and helping shippers stay both strategic and tactical in execution.

5. Alignment of rates with market stability grades reduces the risk of rejection and delays

Another critical concern is the ability to align freight rates with market stability grades to reduce the risk of rejection and delays. While shippers may wish to reenter freight bidding strategies are negotiations to account for disruptions, insight into market volatility can further prove valuable for managing everyday activities, including when moving freight to the spot market may be lucrative. Why? The answer to this question goes back to the ability to put customer service first and foremost and recognize what existing contract freight rates are within an individual lane or location and how to apply that data to make an informed decision. As a result, enterprise shippers can better apply actionable insights to reduce the risk of rejection and know where to start securing more capacity starting on day one and avoid additional unnecessary delays by counting for increased market volatility within tendered rates.

Increase routing guide stability by getting the right data resources in your tech stack

Maximizing routing guide stability and avoiding failures is tantamount to ensuring your organization can access the correct data for your tech stack’s resources. While your existing transportation management system (TMS) may offer some analytics capabilities and the ability to peer into market volatility, it is also essential to consider the market size and data share. In other words, a limited data set from within an individual TMS may help, but it is not nearly as expensive as an actual freight market volatility and stability measure. As a result, more organizations turn to outsourced entities, including FreightWaves SONAR, to gain insight into the predictive and day-to-day volatility or stability of freight lanes. Request a FreightWaves SONAR SCI Lane Acuity demo to get started or by clicking the button below.