General rate increases (GRI) are expected each year in less-than-truckload shipping, but the GRIs for 2018 may easily soar past expectations. Meanwhile, full truckload rates are also rising, but full truckload rates may be less expensive than continuing to use LTL shipping options. An unplanned shipment, poor shipment attractiveness, and other factors may adversely affect full truckload rates per shipper. As a result, more shippers are looking for ways to take advantage and budget better for full truckload, and shippers that understand the nature of contracted versus spot rates for full truckload are poised to overcome this problem.
The Problem: Shippers Struggle to Budget Better for Full Truckload Due to Rate Variances
Shippers often express concerns and challenges to leveraging full truckload, but how do they budget better for full truckload freight? This problem is not due to just capacity; it derives from inexperience too.
Small and mid-sized shippers may not have the skills necessary to negotiate transportation contracts, including those involving full truckload shipping. If negotiations rely on an understanding of all inbound and outbound freight statistics and processes, lacking information will result in strong variances between rates and trouble securing available capacity.
As explained by Steven C. Beda of Inbound Logistics, this problem grows when applied to international shipping, and shippers may not even be considering total shipping costs. For example, Zipline Logistics denotes these factors affecting freight rates and spend:
- Origin, destination and lane.
- Market capacity.
- Attractiveness of freight.
- Fuel costs.
- Accessorial charges.
- Spot rate or contracted rates.
These factors also impact full truckload rates, so avoiding them in a contract negotiation is a terrible idea!
The Solution: Take Control of Full Truckload Variables
Communicating information clearly and concisely is essential to taking control of full truckload variables to avoid struggle in lieu of the capacity crunch. Shippers should provide as much information as possible and complete the order tender process as soon as possible. Although everyone claims full truckload only depends on lane and destination, drivers may take into consideration factors that affect GRIs in other modes. Therefore, informed shippers can take greater control over the process.
Shippers must also understand the typical life of a full truckload shipment. As explained by Zipline Logistics, a typical process for full truckload includes the order tender, freight scheduling, dispatch, loading, transit, unloading and delivery, and billing. In the digital age, another step may be involved-auditing the invoice and identifying potential instances of overbilling or double billing too. Independent contractors (drivers) also increase risk of such problems, so shippers need to take control over all variables.
This includes working with experienced full truckload and multi-modal freight brokers, such as third-party logistics providers (3PLs). Depending on the 3PL, additional services, like invoice auditing and value-added services may be available. In fact, Cerasis offers these services too. Plus, working with a 3PL may open the door to even greater savings and enables control over full truckload freight management.
The Reward: Using a 3PL May Lock in Contracted Rates
Imagine letting a 3PL handle the process for full truckload shipping. While decreasing in-house activities to manage full truckload freight, a 3PL may have access to discounted rates as part of a larger contract. A 3PL manages many shipper-client relationships, so the company has enough volume to tap into lower-than-average full truckload rates. This allows shippers to budget better for full truckload shipping.
Shippers seeking to budget better need to consider freight allocation, including identifying the most profitable and costly shipping destinations and origins. The budget changes, so do the factors affect truckload freight rates. However, contracted freight rates, provided an organization can meet demand, as stipulated in a contract, can be locked in. Also, working with a 3PL puts the experience of an entire company at the helm of negotiations, so your company can work on advertising, getting and retaining customers, and manufacturing, not just logistics.
The Big Picture
Decisions affecting full truckload shipping will affect adherence or deviation to your freight spend projections and budget. To budget better for full truckload, you need an advocate for your company, a skilled negotiator that will use the knowledge and capacity crunch to get the best deal for full truckload shipping. Moreover, the lowest cost doesn’t necessarily make the best deal, so understanding how the industry responds to changes in volume within transportation hubs and the market is crucial to making informed decisions. Contracted rates are indeed possible in full truckload freight management.