Do higher Freight Rates result in better Carrier performance?

Pieter Kinds

Pieter Kinds

July 1, 2016 - 16:09

Freight Rates and shipping performance

Do you get what you pay for? And will I get better on time performance and better load tender acceptance if I pay higher freight rates to truckload carriers?

A recent study, lead by Nane Amiryan and Sharmistha Bhattacharjee, graduate students at MIT’s Center for Transportation & Logistics (MIT CTL), looked for the answers to these and more questions related to freight rates and Carrier Performance.

Many logistics industry experts are predicting an increase of freight rates later this year, putting the heat on for logistics professionals trying to bring down transportation costs. But when a shipper pays higher freight rates, do they actually receive better on time performance and load tender acceptance patterns from their carriers?

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Summary of the report: Relation between Freight Rates and Carrier Performance

Shippers must understand that, in order to improve the overall shipping performance and service levels, simply paying higher freight rates is NOT the solution. The key to success is the understanding of carrier performance data. However, the study did find some interesting figures. When shippers paid below market average, there was a visible decrease in on time delivery. An average rate $50 below market price led to less than 40% on time delivery. A rate $20 below market price led to 40-70% on time delivery. Shippers with on time delivery between 80-90% paid just over the market standard. There was little to no rate incentive for achieving 90-100% on time delivery.

The true understanding of carrier performance start with getting clinical logistics data at your fingertips. According to the 27th annual State of Logistics report (June 2016), the logistics industry is demanding increased logistics visibility and (cost) control into all transportation management activities to ensure ongoing logistics costs optimization. When you are looking for total visibility of your logistics costs over different countries, modes, sites, business units, systems, regions and carriers then outsourcing Freight Audit is a solid solution to deliver the correct data.

It allows for greater drill-down into less obvious costs such as weight per pallet, loyalty discounts, road tolls and regional tax regimes. Additional are On Time Delivery Performance dashboard, service level dashboards, carrier activity reports, extra costs insights (fuel surcharges etc.).

5 Ways TenderTool will simplify your freight tenders

Access the full report: Do Higher Truckload Rates Bring Better Carrier Performance?

The study included performance criteria metrics like technical competencies, flexibility in disruption, transit time and claim history.

Do Higher Freight Rates bring Better Carrier Performance?