Smart Strategies For Saving On Freight In 2019

It’s a fact: shippers who have been playing the spot rate market in 2018 have been paying more for freight than at any time in 2017. After a barrage of hurricanes and new ELD regulations sent rates soaring at the end of last year, driver shortages and a booming economy have kept costs high and capacity low on every page of the calendar.

Unlike in previous years, where competition to fill space drove a shipper's market, in 2018 demand is exceeding supply which has shifted the balance of pricing power. These new market conditions have left shippers lamenting rates they haven’t encountered since the beginning of the decade. 

Donald Broughton, managing partner and founder of Broughton Capital and author of the Cass Freight Index, addressed the capacity crunch in his most recent report. With freight volumes up 6.2% and the expenditure index up another 12% some economists believe that inflation is back on the rise. 

“Deflation has allowed companies to improve their margins in recent years without significantly cutting costs. But inflation is back, and rising supply chain costs are starting to erode earnings. In boardrooms around the world, executives now realize that they quickly need to take stronger measures to meet their productivity targets,” Bain & Company wrote in a recent report.

However, according to analysis from Broughton Capital, measures are already being made to right the system and they don’t see inflation as being an issue in their long-term forecast.

We are confident that the increased spending on equipment, technology, and people will eventually result in increased capacity in most transportation modes. That said, many modes are continuing to report “limited amounts of capacity” or even “no capacity” at any price shippers are willing to pay. –Donald Broughton

Unfortunately, for shippers looking to save now, all of the above solutions take time to implement and such outlays require capital investments. With many shippers’ transportation budgets already upside down, adding additional costs to an already strained supply chain may seem counterintuitive on the surface.

Since shippers can’t control the hiring practices of their carriers or drastically change the freight market on their own (unless you're reading this at Walmart or Amazon) you may be wondering what kind of measurable difference you can even make. 

You only have control over three things in your life – the thoughts you think, the images you visualize, and the actions your take. - Jack Canfield  ?

2018 may have been a surprise to some shippers and a wake-up call to others as many were unprepared for over 12-months of elevated pricing, dropped shipments, and disinterested carrier partners. 

Fortunately, there are a number of things that shippers can do to make 2019 a much less costly and stressful year than the one before it. Here are some ways that you can start saving on your trucking freight in 2019.

1. Data – There’s no single greater indicator of the health of a supply chain than the data it produces and how its captured. Well managed supply chains produce great data, and great data is the gateway to nearly every single aspect of supply chain modernization. Shippers who take ownership of their data and its capture understand that data isn’t a receipt received at the end of transaction, it’s a mirror that reflects the very function of your transportation, inventory, and revenue in real-time.

You’ve heard the old adage, bad data in bad data out, but as supply chains become more advanced that same sage old saying has taken on new meaning. Dirty data doesn’t just mean poor internal visibility, lost optimization and cost saving opportunity, no, it also cripples shippers who are interested in investing in AI, automation, blockchain, etc. None of those services can be leveraged in a meaningful way if the very information that informs, trains, and drives them is inaccurate, unavailable, or never captured properly in the first place.

Shippers who enter 2019 with a New Year’s resolution to clean up their transportation data will unlock capacity via intelligent routing, reduces miles driven, and optimize savings, while allowing them to explore deeper cross-functional opportunities than their less proactive peers.

2. Internal – While most shippers realize that communication and visibility are core precepts of well managed departments, why is it that most departmental data is siloed in walled gardens? Successful leadership teams identify where departments intersect and use an integrated approach to cost management by uncovering savings opportunities across organizational boundaries. 

In fact, a recent report by Bain & Company recommends, ‘developing and analyzing data holistically across silos’ as a fundamental key to uncovering these opportunities. In addition, a ‘Cost Czar” working with cross-functional teams could be used to ensure accountability for results. 

3. Neutral Optimization – When’s the last time you took a deep dive into how exactly your freight is routed? You may be surprised to learn that your shipment routing just doesn’t always make a whole heck of a lot of sense. The reason for that is that brokers and carriers have lanes they need to fill and sell. The result can be freight that is optimized for them but not you. 

Since truckers have assets to fill, and many brokers are contractually obligated to sell space along specific routes, there can be a clear conflict of interest between what’s good for the goose and what’s good for the gander. 

A Transportation Management System and other optimization tools are often best administered by a freight agnostic firm that doesn’t look at your freight spend as revenue, and instead sees it how a shipper should: as cost. 

4. Relationship – Now that you've compiled your data and looked at different ways to move your cargo, it may be time to move out of the spot market and negotiate contracted rates. A volatile freight market creates a perilous environment for shippers as they risk paying exorbitant rates while waiting in line for trucks. While contracted rates could be up as much as 10% that's still far less than the 33% increase importers are paying on the spot market. 

There may be no better time than the present to start creating true business relationships with carriers. In a tough market, carriers are going to provide the best service to companies that give them clear roles and responsibilities and then adhere to those guidelines that they lay out. Those are their shippers of choice. 

5. Negotiate – Once you’ve tidied up your data you’ll also be able to use that information to leverage these carrier relationships. The carrier world is always trying to create as much of a forecast as possible during negotiations so that they can understand what your value proposition to them is actually worth. Your trend lines are invaluable to carriers and should not be dismissed during negotiations. Speaking of data, this would also be a great time to discuss with them your new requirements for data capture. 

As you solidify these partnerships you may even want to rethink your approach. It’s very common for the shipper/carrier relationship to be highly focused on the ones and zeros at the bottom of the rate quote. Well managed modern supply chains understand that the 1s and 0s that matter most are digital and reflect your supply chain. Knowing those 1s and 0s means paying a lot less of the other ones and zeros.

Looking to take control of your freight and future-proof your supply chain? Get ready for tomorrow…today with Aborn & Company’s Advantage Modern Managed Freight Solutions. Find out how we’ve combined traditional freight management fundamentals with data and technology to help companies reduce freight costs, improve carrier service, and bring visibility to their supply chain. Click here now to set up a complimentary consultation. Isn’t it time you got optimized?

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