At present, global trade has been increasing at a colossal rate, leading to an increase in the volume of freight shipping. With the increasing volumes of freight shipping, the shipping environment has also drastically changed, leading to unforeseen delays, obstacles, or changes. Shippers are looking for numerous fixes to address this challenge and make their supply chain agile and flexible. Consequently, logistics companies are resorting to freight cost benchmarking to address this problem, which leverages accurate and up-to-date market intelligence information. The freight cost benchmarking process optimizes the supply chain by comparing ocean freight costs against the payments made by the competition. It thereby assists in the process of finding the best rates in the current market.
Suppliers and shippers can resort to freight cost benchmarking to analyze spot rates against long-term contracted rates by measuring freight averages over time. It also allows companies to analyze and benchmark data related to the mode of transport, shipping destinations, shipment weight, and mileage, cost, distance, and cost per mile. Such an analysis provides the company with an understanding of the competitive shipping rates they get from the carriers and benchmark it against actual freight rates. Companies can finally decide if they want to give the business to the shipper or if they should be looking for more competitive rates. It also provides the company with an advantage during contract negotiations.
Since freight cost benchmarking provides detailed insights into the average contracted freight rates, it allows companies to control excessive accessorial charges and additional surcharges. Companies can figure out ways to avoid these charges or decide alternative options. Additionally, by getting a deeper understanding of competitive shipping rates, companies can handle negotiations better and build stronger relationships with shippers.
Although it may seem as cost control is the end goal of freight cost benchmarking, there’s more on offer than just cost control. Freight cost benchmarking can also assess local and regional markets, trade lanes, and multimodal transport systems to identify and avoid root cause issues which enable companies to evaluate the contracts. Additionally, it can also provide an understanding of the market dynamics, which enables companies to maintain optimal inventory levels.
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