Complete Guide on Freight Benchmarking
Whether you ship goods by air or sea, getting competitive prices each time is crucial to your bottom line. While the traditional negotiation system has stifled the ability of shippers to negotiate effectively for ages, today there are better ways to negotiate and drive profitability.
The emergence of digital automation technology in the supply chain space has transformed the process of freight rate negotiation, making the task easier and more efficient than ever before. It has eliminated the need for you to make several calls, exchange dozens of emails and laborious person-follow ups with your vendors.
Modern-day Logistics Resource Management platforms, make it possible for you to create and share enquires with all your vendors digitally within a few minutes. From there on you can simply sit back and relax while the system automatically negotiates with ALL of your vendors so that you receive the very best offer for your shipment without having to spend any extra time or effort.
What’s more? You can go a step further and get even more competitive rates by leveraging freight benchmarking along with automated negotiations. If you are looking for ways to determine the best possible trade lanes for your shipments, better manage costs and ultimately reduce freight spends, it is here that freight benchmarking steps in.
It is one practice that can benefit you immensely irrespective of whether you are a big shipper with thousands of shipments per month or a small shipper. Along with saving costs for you, it can also help you gain valuable business insights and hence boost your performance.
To begin with, what is freight benchmarking?
In simple terms, freight benchmarking is the process of comparing freight costs you pay to the real-time rates being paid in the market for the same shipments. Which means that every time you negotiate rates you are aware of the rates being paid by other players in the market for the same deal.
To benchmark rates, the tool you use will consider your enquiry in light of your freight rate history, the carriers you have used in the past and compare them to the prevalent market rates for the concerned trade lanes and ports. Based on the results, you can then get an idea of the best possible rates, trade lanes, etc. and evaluate your position.
By default freight benchmarking would also mean that there are no doubts about the competitiveness of the rates you pay as against those paid by your peers. The key is to use a credible system. It should provide you with reliable, live and precise market rates so that you can make the right decisions.
How exactly does freight benchmarking help shippers?
Negotiate the best possible freight rates each time
When you benchmark rates, you potentially have a comprehensive idea of the live-market rates for the concerned trade lane. Thus, while you negotiate rates be it the traditional way or with the help of a Logistics Resource Management platform, you can give your vendors a target rate based on the benchmarked price. You can then award business to the vendor offering a rate that’s closest to the target rate. This will make sure that you receive the best deal and more importantly save you from paying more than what’s needed.
Besides, sometimes freight rates within the same shipping lane can vary to quite an extent. In this case, freight benchmarking will also help you get clarity over these differences and hence make better decisions.
Better handle unforeseen events
A byproduct of being aware of the real-time market rates will be that you will be better equipped to predict the future trends in rates. Over a while, you will gain an understanding of the direction in which the rates tend to move. It will aid you in proactively responding to any crisis or unforeseen event and minimise the damage it can cause to your operations.
Invaluable real-time business insights
With unlimited data regarding market rates and your freight history at your disposal, you can draw valuable business insights. It can also simplify the task of determining whether spot rates or contract rates suit you better, which carrier and lane are more beneficial to you and more.
You can thus proactively choose vendors, carriers and lanes that help you drive efficiency and reduce costs.
Actively control your freight spend
By benchmarking rates you effectively take charge of your freight spends. You are sure that you don’t stand the risk of paying more as compared to your peers. You have the option to offer target rates and there’s a clear distinction between reasonable rates and otherwise. Also, over time these benefits trickle down to your customers, furthering better business.
Benchmarking can also help you…
- Analyse different geographies and identify new business opportunities
- Better understand the market dynamics
- Gain unprecedented clarity on the service and performance of the carriers you use
- Get insights on what the spot rates will be like in the short and long term
If we are to consider the evolution of the supply chain space, we can be certain that in the years ahead freight rate benchmarking will become an integral part of procurement strategies.
GoComet Freight Index
GoComet Freight Index allows you to benchmark freight rates for all your shipments on a single dashboard for free in a matter of few seconds.
The system uses spot as well as contract rates to calculate the GFI and the data is obtained in real-time from freight forwarders and carriers with whom a shipper has partnered with for a shipment.
How does GoComet Freight Index benchmark rates?
The GoComet Freight Index system considers the top-rated and lowest quoting vendors on each route from over 25,000 quotes that are submitted by more than 4,000 vendors from all across the globe on the GoComet RFQ management module.
On entering the name of the origin port, destination port and the container type, the system runs its proprietary machine learning algorithms and instantly displays the benchmarked rates. These algorithms are similar to those used by the World Container Freight Index and Shanghai Freight Index.
Access GoComet Freight Index (GFI) for free!
For more information on how GoComet can help you build a cost-effective and resilient supply chain with its innovative digital automation technology, reach us here.