There is a scene in Curb Your Enthusiasm where Larry David, who had never before purchased illegal drugs, asks a dealer, “Is that a fair price you’re quoting me?”
Without adequate data and information on the freight market, shippers can find themselves in the same disadvantageous position as Mr. David.
Shippers’ primary operation is not moving freight; it’s processing food, or manufacturing auto parts, or selling office supplies.
Yet, shippers must negotiate with carriers and brokers that live, eat and sleep freight, many of which spend big capex dollars to be armed with internally developed freight intelligence systems.
While the information gap is less applicable to mega-shippers that have private fleets like Walmart, the typical information asymmetry issue is magnified when shippers are of relatively modest scale.
In addition to whether shippers are being charged a fair price, there is also the question of whether shippers are getting what they are paying for. Getting back to Mr. David, even if he was, in fact, quoted the going market price, the uninformed customer would not know if the product he was receiving was of adequate quality.
Similarly, since most freight contracts do not have “teeth,” and given the volatility of freight markets, it can be difficult for shippers to ascertain whether they are receiving sub-par service levels for what they are paying.
If carriers are rejecting one load of every 10 tendered loads, that could be solid service or poor service depending on the context. If carriers are rejecting twice as many loads in September as they were in August, that could be par for the course in a tightening market – or not.
FreightWaves SONAR can be used in many ways to help shippers manage the information gap and hold carriers accountable for fair prices and adequate service levels.
Here is where we recommend starting:
- Are carriers overcharging? Use SONAR SCI to benchmark rates against what shippers in your industry are paying.
- Are we getting the service we are paying for? Use SONAR to see how often carriers are rejecting loads with similar characteristics to yours.
- Which carriers should be elevated in the routing guide? The highest carriers in your routing guide shouldn’t always be the ones with the lowest rates. Use SONAR to score carriers based on your most important criteria.