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Big Data, Dynamic Freight Pricing and Bid Savings (maybe)

dynamic freight pricing

Editor's Note: This is a blog from our friend Augie Grasis who shows us how big data can work to our advantage with dynamic freight pricing.

One of the big buzzwords in many industries is “Big Data.”  Whether you realize it or not, the collection and use of customer and operational data affect a growing number of our everyday activities, whether it’s the type of coffee we are served at Starbucks, the ad we see in the sidebar of Facebook or the price we pay for an airline ticket.  Such is the case in the LTL freight industry as well. 

The most progressive carriers are tracking their every move by collecting data about every aspect of their business and every piece of freight they move.  Understanding this (and acting on it!) will lead to more effective utilization of company assets, lower costs, and better customer experiences. 

One example of the utilization of Big Data is dynamic pricing of LTL freight.  Some tech-forward carriers are now providing rates dynamically to customers, not unlike the way airline ticket prices are based on seat availability.  Carriers who have control of their own data understand trends such as seasonality, weekly and monthly fluctuations, or just specific contracts which cause empty backhauls; and reflect them in price changes almost daily.  This is goodness all around—good for the carrier who fills his trucks with freight, and good for the shipper who saves money. 

But wait—does the shipper really get the benefit of these reduced rates?  The answer is a resounding “it depends,” based on how LTL freight is actually being procured.  Are you working through a 3PL middleman, or through a freight exchange like www.freightorgator.com?  Let me explain why this matters… 

While we know that it takes a lot of technology on the side of the carrier to arrive at dynamic freight prices, it takes an investment in technology for these prices to find their way to the customer.  There must be an API connection between each carrier and the 3PL or freight exchange to transmit the rates that are constantly changing in real time.  While some 3PLs have invested in this API technology, many rely on blanket rates, established once a year through SMC3.  These are LTL freight tariffs established by an antiquated process so complex that it’s difficult to adjust them at all! 

Even if a 3PL has API connections direct with tech-forward freight carriers who provide dynamic  freight pricing, the shipper still may never see the discounted rate.  Why?  When the carrier lowers the price, a 3PL is quite likely to just pocket the discount as additional profit rather than pass it on to his customer.  This defeats the purpose for the carrier who is trying to fill trucks, not line the pockets of 3PLs, and for the shipper who never sees the discount! 

This is why more and more progressive carriers are supporting the FrieghtorGator LTL freight exchange.  Shippers can compare rates of leading carriers, many of which are provided directly from the carrier through modern API connections.  As a freight exchange, FreightorGator is TRANSPARENT with the price that the carrier is charging, and only adds a flat booking fee for the service.  This is a key element to the market efficiency that is created by dynamic freight pricing as the shipper actually SEES and benefits from the dynamic pricing the carrier is providing in comparison with other shippers.     

Big Data and Dynamic Freight Pricing are in their infancy in our industry.  But make no mistake—they will make life better and they are here to stay.  Be sure you are in a position to take full advantage of this money saving trend! 

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