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All transport managers around the
world must navigate the landscape of
100s if not 1000s of potential carrier
options to move their company’s
freight to its intended market reliably,
safely and cost-effectively. How can
any shipper have reasonable insight
into whether the rates they are paying
are fair and in line with the broader
transportation market? Visibility into
the overall freight rates market is
required, and that is achieved through
transportation benchmarking.
Developing a reliable transportation
rate benchmarking barometer,
however, is not as simple as calling a
few carriers for rate quotes on every
lane, or simply averaging them. Multiple
factors influence the rates that are
quoted to individual shippers. The best
data comes from knowing what shippers
are actually paying on the lanes they
use and actual loads that are picked-
up. Not only does this provide tangible
insights into market rates, the rates
can also then be further deconstructed
to understand exactly how they are
created, allowing for analytics to better
understand which actions a shipper can
take to improve chances of getting the
best cost - service trade off.
Used with great success in North
America for many years, effective
benchmarking in Europe is relatively new
because of the additional complexities
the region inherently adds. When
reviewing benchmark data for lanes in
Europe, it is important to consider the
following to ensure that your intelligence
is reflective of actual market forces.
A large percentage of freight moved
within Europe crosses sovereign
borders. Some borders are relatively
porous, but others require formalized
customs procedures and time-
consuming paperwork; which can
significantly affect the costs of those
lanes. Knowing how carrier rates are
affected by different types of borders
is very important as some borders
can create rate cliffs. By changing the
destination or origin by just a few kms
you can create dramatic rate changes,
whereas others will have no effect at all.
Accompanying these sovereign
borders are a diverse set of laws and
regulations governing trucks throughout
Europe. Usage fees, tolls and emission
standards vary from country to country,
and each of these can add significant
costs, especially when transport gets
delayed due to compliance issues.
Benchmark data provides visibility
into the equipment required to satisfy
regulations and insights into the
associated cost drivers with procuring
this equipment and paying any other
necessary fees, while providing an
overview of total costs.
Transporting freight to nations, regions
and areas that are separated by sea
brings more options to the table
that make benchmarking even more
valuable. Is it better to use land routes-
-with bridges and tunnels, or short
sea options? Each of these modes
behaves differently, and short sea
carriers use their own unique models
for determining these rates. The only
way to optimize these lanes is with a full
360 degree view of every modal option
available.
North American shippers inquiring
about rates in Europe are likely to
get blank stares when asking about
intermodal or dry van options. That’s
because European carriers refer to
them as multimodal and ambient
transport. These terms can vary
between specific regions of Europe,
especially in areas where certain
equipment types are not available at
all and unique ones are used instead.
Complicated by language barriers,
understanding the European market
means truly knowing how transportation
is carried out in each specific area,
which quality benchmarking intelligence
can also provide.
Market transportation rates are more
than the sum of their parts, especially
in Europe. Even if it were possible
to keep updated rate quotes from
all of the 770,000 Logistic Service
Providers in Europe at all times (which
is near impossible), it still would not
provide insights that are as accurate
and actionable as that provided by
sophisticated freight market intelligence
benchmarking.
By Gary Girotti, EVP of Global Supply Chain Intelligence, Chainalytics
The Power of Benchmarking
- Shining A Light on
European Transportation
30
Logistics Business Magazine | November 2015
LOGISTICS SERVICE PROVIDERS