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March 2019

Freight data

How Do Freight Shipping Carriers Utilize Your Data?

By | News, Shipping Knowledge | No Comments

The transportation industry is a vast network covering all major modes of transport such as road, rail, sea, and air, transporting both cargo and passengers.

The freight transportation market is one of the largest industries in the world moving goods valued more than USD4 trillion, in some cases accounting for 10% of GDP with an average growth rate of around 7% annually.

US alone moves in excess of 10.5 billion tons of freight annually, uses over 3.6 million heavy-duty trucks, and employs more than 3.5 million truck drivers consuming almost 39 billion gallons of fuel.

Such a volume of movement naturally generates enormous amounts of data, but that’s not a bad thing: this Big Data can be used to the advantage of all role players in the LTL freight transport industry – carriers, shippers, receivers, brokers, insurance companies, terminals, software developers etc.

 

Why the Need for Freight Data?

Here are a few compelling reasons why freight data is useful:

  • Monitoring various transport metrics
  • Average transit time
  • Inbound and outbound freight costs
  • Identify efficiency of the selected mode
  • Percentage of on-time pickups and deliveries
  • Create efficiencies in transportation operations
  • Demand forecasting
  • Real-time visibility into transportation performance and cost
  • Identify and create opportunities in new markets
  • Optimize modal and intermodal choices
  • Transportation safety and security
  • Understand the environmental impact
  • Lower shipping costs and reduce transportation spend

But just tracking data is not going to provide the efficiencies you need. It has to be coupled with setting goals, understanding the measured metrics, and taking quick and decisive actions based on the data.

 

How Is Freight Data Collected?

For starters, whichever LTL carrier you are booking with will be using a TMS (Transport Management System) to manage your shipments and you may already be using their TMS to make your bookings. In order to use their systems, you will be setting up a shipping profile with your service providers. A shipping profile allows the carrier to understand your shipping preferences, size and volume of your shipments, routes, total price, price per pound, average price, average weight, and everything else they need to know about your business so they can support you.

This is also a great way to get rid of any redundant shipping settings you may have had in their shipping system. You can also list the various items you ship so all your listings are connected to your profile and are available to the carrier at any time.

You are basically giving them information that they can analyze, resulting in better customer service and pricing.

Service providers generate and combine data from your shipping profile such as historical activity, CRM data etc, along with advanced technologies such as machine-to-machine data (truck sensors, RFID chips, GPS etc), geolocation, geocoding, IP trackers, and street map data.

 

How Do Freight Shipping Carriers Utilize Your Data?

Broadly speaking, your LTL carriers and freight brokers use this data to ensure that they provide the most competitive shipping rates and services based on your shipping profile.

The usage of the data collected allows the carriers to optimize your delivery system, identify and understand the bottlenecks in your logistics network, create, use, track and compare a wide range of algorithms, and build the best solution for your transportation needs.

By linking your historical activity data to your shipping profile, current market economic indicators, and geomarket data, the carriers and 3PL service providers are able to predict demand, anticipate daily volumes, optimize delivery routes, and allocate resources to deliver services efficiently and within budget.

By using the data efficiently, carriers are also able to create a dynamic pricing model as they can use the data to factor in cost-sensitive components and external data relating to weather patterns, transit time etc. to arrive at an optimized price which they could pass on to you as the customer. Such dynamic pricing also helps you to create a balance between the pricing to your customers and your shipping costs.

Obviously, knowing you will share data with your freight carrier, you have to make sure that you choose the right partner. A carrier has a considerable impact on your day-to-day operations and consequently, your business. Therefore, it is important to ensure that you do your due diligence and analyze and evaluate your options and select the companies that best meet all your supply chain demands.

In general, you want to work with more than one carrier because

  1. you may not get all your needs addressed by one carrier,
  2. it’s prudent to spread your risk,
  3. competition keeps them accountable.

In some instances, employing the services of a freight carrier that can handle all your requirements makes more commercial sense. You may also consider employing the services of 3PL service providers who can also assist with freight bill audits, parcel contract negotiation, and overall better decision making.

 

Final Thoughts on Freight Data

Whether you are a shipper, buyer, freight broker or 3PL service provider, getting your goods/your customers goods on time to the final destination, in the same condition they were picked up, and in a cost-effective manner is the essence of the whole freight transport industry.

A freight carrier that leverages the data available, whether it comes from you through your shipping profile or other technical sources discussed above, stands a great chance of achieving this objective. Your big data is what makes supply chain management possible. It is what tells you when you need your inventory or stock before you know about it. It is what guides you in making tactical decisions such as identification and appointment of reliable freight shipping carriers, understanding their capabilities and reliability. It is what helps you consolidate all required information from multiple sources and enables you to make predictions and take real-time decisions to keep your LTL shipments moving.

 

Are your freight contracts fully optimized? We wager they are not as much as you think.

Carrier Contract Optimization

FedEx Home Delivery vs. FedEx SmartPost: What’s Better for Shippers

By | FedEx, News, Shipping Knowledge

Shippers have to balance cost and time. Get the package delivered to the customer sooner, and it’s likely going to cost more money.

Sometimes it’s worth the cost and sometimes it’s better to save a few dollars and add a few days to the final delivery time. But cost and transit time aren’t the only two factors when deciding on whether to ship via FedEx Home Delivery or FedEx SmartPost.

Let’s start with the basics. What’s the difference between FedEx Home Delivery and FedEx SmartPost? Both are FedEx products that deliver packages to residences.

With FedEx Home Delivery, FedEx controls the package the entire route, from pick-up to front-door.

SmartPost is a last mile final delivery partnership between FedEx and the United States Postal Service (USPS). This collaboration provides less expensive shipping costs with greater delivery coverage in the United States and territories, but at the expense of a slightly longer delivery window. It’s a win-win for all involved.

Shippers and customers like the service because it’s more cost effective than FedEx Home Delivery, but with the excellent tracking services and visibility provided by FedEx, for an optimal website experience.

The carriers like it because it addresses a pain point. For FedEx, that pain point is home delivery, a more expensive, time consuming and challenge-filled prospect than delivering to commercial customers.

The postal service mandate is daily delivery to almost every home in the United States, so it’s not much more work to deliver a package. And the USPS gets a cut of the funding, addressing one of their pain points.

 

How FedEx SmartPost Works

FedEx collects and routes the packages the same way it does with any other package. They pick up parcels from the shipper’s location and sort them the same day at the FedEx distribution facility. The packages are then transported via the FedEx Ground shipping network. The shipments arrive at one of 34 FedEx destination hubs, where they’re sorted and brought to the local post service office or bulk mail center closest to the final delivery location. At this point, the packages are officially handed over to USPS for the final leg of the journey, and they’re brought to the residence, along with the rest of the USPS mail.

While carriers are offering more overlapping options these days, there are still many differences between them, making one shipment a good fit for SmartPost because it’s disqualified for FedEx Home Delivery, and another a better fit for Home Delivery because of timing issues, for example. Here are some of the pros and cons of each.

FedEx SmartPost Pros and Cons

SmartPost Pro: No residential delivery surcharges

This is a big one! The current rack rate for a residential surcharge via FedEx Home Delivery is $3.65 per package. Send it SmartPost, and that fee disappears since FedEx isn’t actually making the residential final delivery themselves.

SmartPost Pro: 100% United States coverage

The USPS already delivers to nearly every residence in the country, so they can easily deliver FedEx packages along with the regular mail. One postal service advantage is that they can also deliver to post office boxes and military and diplomatic APO, FPO and DPO destinations. FedEx does not deliver to P.O. boxes or to military bases or diplomatic locations.

SmartPost Pro: FedEx tracking is available

You can still use FedEx tracking to see where your SmartPost packages are at any given time, in spite of them switching carriers at the end.

SmartPost Con: FedEx SmartPost does not pick up packages originating outside of the contiguous United States

Alaska and Hawaii, along with the United States territories, are not served by SmartPost for pick-ups. That said, SmartPost can do the deliveries.

SmartPost Con: SmartPost takes longer than FedEx Home

Estimates vary, but transit time is longer for SmartPost packages compared to FedEx Home Delivery. Estimates range from 1.5 extra days to five days for SmartPost.

SmartPost Con: No FedEx “on time or it’s free” guarantee

Both FedEx Home Delivery and Ground offer a full refund if packages aren’t delivered on time or by the right date. With SmartPost, there is no guarantee, as they don’t control the postal service final delivery times.

SmartPost Con: Damage and loss claims are not always available from FedEx

Once the package is handed over to the postal service, FedEx has no more liability for any loss or damage. Claims can be made with the postal service, however, that’s a separate process.

 

FedEx Home Delivery Pros and Cons

Home Delivery Pro: No Saturday delivery surcharge

Contrary to popular belief, Saturday delivery actually carries no surcharge, making this option more financially viable for shippers. SmartPost also has no Saturday delivery surcharge.

Home Delivery Pro: The package can be held at another location

If the customer is not going to be home for final delivery, the customer can schedule the package to be delivered to a FedEx location, even while it’s already en route.

Home Delivery Pro: Delivery is faster than SmartPost, and guaranteed

Home Delivery is guaranteed in 1 to 5 business days within the contiguous United States, and 3 to 7 business days to and from Alaska and Hawaii. SmartPost packages take longer and do not come with a money-back guarantee.

Home Delivery Con: Home Delivery is only available in the 50 United States

You cannot use Home Delivery to send a package to someone in the foreign service or a soldier using an APO address, for example. Nor does Home Delivery include post office boxes or United States territories.

Home Delivery Con: No Saturday pick-up

Home Delivery will make Saturday deliveries in most areas, but only picks up Monday through Friday.

 

Considerations When Choosing FedEx SmartPost or FedEx Home Delivery

Shippers must add SmartPost into the contract in order to offer or use this service. It’s a helpful one to add in when giving customers shipping costs options, whether the shipper is offering free shipping or reduced shipping, or charging customers. Here are the reasons why a shipper or a customer might choose one service over another.

1.) Fees: Both services offer Monday through Saturday delivery, but FedEx Home Delivery charges a residential delivery fee, while SmartPost does not.

2.) Non-traditional residential address: The customer lives on a military base or wants shipping to go to a post office box. That customer cannot use FedEx Home Delivery.

3.) Cost is the greatest factor: SmartPost packages are usually the less expensive shipping costs option, but package size or other factors could affect pricing.

4.) Time-sensitive: FedEx Home Delivery promises 1-5 business day delivery time within the contiguous United States, or 3-7 business days to and from Alaska and Hawaii, and guarantees the final delivery date. SmartPost typically delivers in 2-7 business days based on distance (note “typically” as the timing is not guaranteed). Delivery outside the contiguous United States can take longer. Some shippers like to run internal studies tracking the transit time for various services to different locations.

5.) Saturday pick-up: FedEx Home Delivery does not pick up packages on Saturdays (it uses FedEx Ground service). SmartPost does offer Saturday pick-up. Both services offer Saturday delivery.

6.) Declared value: If you want to declare a parcel value of more than $100, you’ll need to choose FedEx Home Delivery. The declared value for SmartPost packages is a maximum of $100.

7.) Additional services: FedEx Home Delivery allows additional services, such as FedEx Delivery Signature Options, Return Solutions, FedEx Delivery Manager, a money-back guarantee, collection on delivery, declared value, signature proof of delivery collection, and evening or appointment delivery times. These features are not available for SmartPost. The customer can also request delivery to a FedEx location instead of the residence.

8.) Size matters: Both services max out at 70 pounds per package. However, the dimensional weight is different. Home Delivery allows 108” in length, 165” in length plus girth (considered L+2W+2H). SmartPost sizing is a maximum of 130” in length plus girth.

9.) Surcharges: FedEx Home Delivery has more surcharges than SmartPost. SmartPost package surcharges include: non-machinable packages (parcels with dimensions between 27”+, any two dimensions greater than 17”, more than 35 pounds, cylindrical tube packaging); delivery area; balloon items (weighs more than 20 pounds, but measures 84” to 108” in length + girth); oversize items (measuring 84” to 130” in length + girth); package re-labeling for parcels requiring an over-label or hand keying; third party billing (billing to an account that’s not related to the shipper).

When Offering SmartPost to Customers

Online shoppers expect not only ground service to be offered as a cost-effective shipping option, but economy ground as well, with 69% of shoppers expecting a choice including both services at check-out, according to the Pulse of the Online Shopper survey by UPS. A full 42% of shoppers will choose the economy ground option, and 20% will choose the ground option, with SmartPost falling into the economy ground category. The transit time for that category is 5 to 7 days from purchase. The survey showed that shoppers are looking for the best shipping costs. It also showed that 51% of online shoppers are looking for free shipping and discounted shipping costs when choosing one retailer over another, making SmartPost a smart shipping choice for retailers.

Shipping costs are not just a line item – they can be a competitive advantage or a liability, so it pays to ensure that your company is getting the best prices while meeting customer expectations. It’s hard to know whether you’re getting the best deal and determining which ones deserve money back, for missing the time or day guarantee. Invoice audit and recovery services, like those offered by Shipware, can often save shippers up to 30% of their annual shipping spend, by automatically sending claims to the carriers for missed delivery times/dates, missing discounts, and total billing accuracy. Shippers leave $2 billion on the table each year in unclaimed refunds from FedEx, UPS, and the LTL carriers.

Shipware can save money for 90% of shippers, and we offer a free shipping analysis. If we can’t offer you savings over what you’re paying and recovering now, we will give you $10,000.

Shipping savings

Lower Shipping Cost

9 Ways You Can Lower your Shipping Costs

By | Contract Negotiation, Invoice Auditing, Shipping Knowledge

The freight transportation system moves over 17.7 billion tons of goods valued at more than $18.1 trillion, or an average of 54.7 tons of freight annually in the United States. About 62.6% of this cargo and about 61.9% of the value is carried by trucks, which remains the primary mode of transport for distances less than 750 miles.

Goods move using a network of truck routes, railroads, waterways, and airports. The distance from origin-to-destination and the cost to ship play an important role in determining which mode(s) of transport are used in this multimodal journey.

Within road transport, there are two main types of shipping options – LTL or Less-than-Truck-Load and FTL or Full Truck Load. LTL is a type of transportation (shipping) service that is used for shipping small loads by shippers who do not have enough cargo to ship it as a Full Truck Load (FTL) whereas a Full Truck Load is just that – a truck full of your goods.

LTL shipments are usually between 151 and 20,000 lbs and shipping carriers apply “weight break” discounts on freight as the shipments increase in weight.

There is a lot of demand in the market for LTL carriers as businesses are starting to realize the cost savings LTL shipping offers. But LTL shipping rates could be quite high due to demand, and all shippers need to know what affects those rates, how they can leverage this knowledge, and reduce shipping costs effectively.

There is a multitude of factors that can influence the pricing of LTL shipping such as:

Freight Classification

The Standard for Freight Identification and Classification is a standard set by The National Motor Freight Classification® (NMFC®) to provide a comparison of commodities moving in interstate, intrastate, and foreign commerce. This standard provides a basis on which freight negotiations may be carried out between the carrier and shipper. NMFC has classified cargoes under 18 different classes from a low 50 to a high of 500 – based on the cargo’s density, handling, stowability, and liability.

Lower classes of cargo are generally heavier and dense and do not damage easily, therefore lower in freight whereas higher classes of cargo are more volumetric and lighter–thus higher in freight.

Cargo Weight, Dimensions, Density

These are critical determinants of the freight class based on which the LTL rates are calculated. The freight rate increases in proportion to the weight of the shipment, the dimensions and the density of the cargo.

Zones and Transit Time

This is another critical determinant of the freight rates charged by carriers. The longer the haul, the higher the rate.

Seasonality

Seasonality influences LTL rates because of the supply and demand metrics attached to the season. Black Friday, Thanksgiving, Christmas are all heavy demand periods and shipping rates spike around the periods of deliveries for these days.

Rates

Even when there are rate negotiations with carriers, rates are not just rates. There are Tariff rates, Flat Rate, FAK, Named Account, Contracted Rates and there are several combinations of these.

Technological Advances

Incredible progressions in the transportation industry (and its many benefits) are fast catching on, but so is the cost. A carrier with the ability to provide real-time data of your cargo using IoT, Big Data, Blockchain, etc., can command a higher rate than those who are not technologically fit.

Volume-based Discounts

Along with rates, volume-based discounts are probably one of the biggest influencers of how LTL pricing is set.

Surcharges/Accessorials  

Usually termed as surprise items in freight pricing, these charges could influence the profit or loss of business quite heavily.

Due to complexities involved in understanding all the above factors, most shippers end up overpaying for the shipment of their goods. Many shippers end up overpaying because their service provider contracts disguise the actual costs and charge many fees and surcharges which are unnecessary.

Since there is no standard, it may be impossible for shippers to know the best-in-class standard costs across various transportation services. It is important for shippers, especially small businesses, to understand the freight transportation market, how it has evolved over the years, and to look for ways to lower shipping costs.

The main thing to understand here is that lowering shipping costs does not automatically mean negotiating the lowest LTL rates. You may be able to get these rates at times, but in the long run, using only this method will not be sustainable.

You’ve been shipping via less-than-truckload (LTL) carriers for years. Yes, they’re expensive, schedules are unpredictable. If you’ve thought, “I don’t have a choice”, then think again because there are definitely opportunities for you to lower your shipping costs and achieve better margins.

But, before that, it’s important to know some of the factors in freight shipping that carrier representatives don’t want you to know, such as:

  • If not handled properly, LTL shipping could cost you much more than other modes of transport or shipping
  • There could be a mid-year rate increase without notice
  • Freight rates increase every year due to capacity crunch, fuel price increase, fuel surcharge or just plain old supply and demand metrics
  • LTL costs depend on various factors and each carrier charges based on the best formula for them, making it difficult for you to forecast the costs for your shipment accurately
  • Due to rehandling, LTL cargo may take longer than expected to reach the destination and this means you need to have buffer stock to cover for any delays or may even be forced to air freight your cargo to maintain your commitment to your clients
  • Rehandling also increases the change of cargo damage which could also increase your insurance rates

But for every challenge there are solutions. Here, we give you 9 tips and strategies on how to effectively lower your shipping costs.

1. Plan your Shipments…Better

Planning is crucial when it comes to transportation because each mistake can be costly and erode the profits of not just the current shipment, but many others. One sure-fire method of reducing shipping costs is effective planning of your inventory cycle which means you only ship when you have to.

With effective inventory planning, you can avoid rush orders and express replenishment orders which will cost you much more than standard deliveries. Planning your deliveries allows you to negotiate effectively with your LTL carrier and work out a consistent schedule within the standard rates on offer.

The carrier will be happy to have a base load from you regularly. This also helps you reduce storage costs in your warehouse for excess inventory.

2. Know your Market Inside and Out

It is important to know who your competitors in the market are, not just from the standpoint of your own business, but also from the perspective of the LTL carrier you may be using. You need to know which carrier your competition may be using, and the areas where they may be better than you in terms of rates and services.

Contracting with those service providers will assist not just in reducing your shipping costs, but also in staying ahead of the competition and increasing your client base.

3. Get to Know Your Service Provider

In a lot of the cases, you as the shipper may be paying more because you did not vet the service provider and their capabilities thoroughly.

In the current freight market, it’s essential to have a service provider that can offer cost reductions on the back of their administrative capabilities and service such as:

  • A sound financial background
  • Technologically fit and capable of providing network and market analysis
  • Business intelligence which can also enhance your business acumen
  • The flexibility of service which allows you to choose the best options for your clients

Leverage the strengths of your preferred carrier and through analysis of historical freight shipping data, invoice audits, freight analysis, and contract optimization to negotiate the best possible contract rates for your shipments.

4. Make the LTL Carrier an Extension of You

By this, we mean once you have identified the best carrier for your shipments, use their strengths and resources to track, monitor and report the progress of the shipments instead of spending your resources which costs you time and money. Such tracking activity can include proof of delivery, cross-docking information where applicable, estimated shipment periods, etc.

5. Go for Speed

Time is of the essence in trade and in shipping; transit time is crucial, not just for your customers, but also you because the quicker your products reach their destination, the faster you get paid, reducing your cash outlay period and finance costs.

Negotiate early delivery discounts with your customers where possible and consider offering your LTL carrier(s) incentives for such deliveries while keeping your margins intact.

6. Negotiate Correctly

Many shippers lose out on significant savings because they don’t understand what types of rates should be negotiated. Carriers offer different kinds of rates – Tariff rate, Flat Rate, FAK, Named Account, Contracted Rate and there are several combinations of these.

As a shipper, you need to negotiate using the characteristics of your business in terms of volume, seasonality, weight, dimensions, density, routes etc and decide which type suits you best. For example, if you are a freight broker, you would definitely have a contracted rate along with a FAK angle so you can base your sell rates on those rates to your regular customers. As a broker, for certain customers with the regular volume, you may also negotiate with a carrier based on a Named Business or Named Account basis.

7. Consolidate, then Collaborate

In this huge market, you don’t need to do it alone. LTL carriers offer discounted rates based on consolidation of cargo with other shippers and this could result in huge costs savings for you.

You could also collaborate with known shippers on specific routes to combine the shipments in order to save on shipping costs. Or, if you have multiple shipments for different clients in the same area, consolidate it.

If you are a small to medium size shipper, it may be an excellent strategy to consolidate your shipments through a freight broker who may be able to help you reduce your shipping costs based on their FAK or volume-based rates that they enjoy with certain LTL carriers.

The use of FAK rates could be a game changer. FAK stands for Freight All Kinds which provides high shipping volume customers with the means to ship multiple items under a lower freight class, which in turn lowers the shipping costs.

8. Distance

While consolidating your orders, it’s wise to choose an LTL carrier that operates in most or all of the zip codes. This is important because when it comes to road freight transportation, the longer the distance, the higher the cost in general; when it comes to LTL carriers in particular if they don’t operate in certain areas, the goods may need to be transferred to other carriers which will increase your shipping costs.

This could also cause extra handling while transferring the cargo which not only leads to additional costs but could also lead to associated costs such as insurance for any damages that may happen during the rehandling of cargo.

9. Optimize Space

Pallets are designed to optimize space and dimension utilization. Select carriers that have the latest technologies for your LTL shipments. Using this, you can calculate the dimensional pricing of your palletized shipments. Palletized cargo is also cheaper to transport as the carrier can optimize the space on the truck due to the standard dimensions of the pallets.

Final Thoughts on Shipping Cost Reduction

Shipping costs are the single largest logistics cost component in a supply chain. Therefore, for any shipper, controlling and lowering shipping costs should be a priority.

In summary, there are several ways in which you can effectively lower your shipping cost. Forget the “this is how it’s always been done” and follow the above tips to reduce shipping costs and make your business profitable.