The freight industry is built on relationships. Shippers and carriers depend on each other; the best LTL practices create a system in which both shippers and carriers benefit. By leveraging standardized big data, shippers can get the best possible rates while carriers manage their shipping lanes to achieve maximum efficiency. Let’s look at how both sides of the LTL freight business can benefit from supply chain big data.
Standardized Big Data Improves Carrier Relations
Big data gives the carriers visibility to their shipments sooner, which allows them to optimize the deliveries better. This allows for increases in service standards as well as a positive impact on the environment through a smaller carbon footprint. Small parcel carriers have used big data to better optimize their routes for years. Where they used to rely on their drivers to determine the delivery order of the packages, they now rely on logistics technology.
UPS uses big data to offer services like MyChoice, which allows the shipper to adjust the time a shipment will be delivered at a moment’s notice. UPS and other carriers are also using big data to help optimize their routes which will cut down on their fuel costs and reduce their carbon footprint.
This is where the Less Than Truckload (LTL) industry is still lagging behind. I recently asked a major LTL carrier how many of their shipments were tendered to them electronically and the answer was eye-opening 14%. What makes this number even more staggering is that 9% were tendered using their website and only 5% were tendered via Electronic Data Interchange (EDI). What this tells me is that periodic shippers appear to the carrier to be more sophisticated than high volume shippers, since the shipments tendered via the website are typically done by a small shipper with very low volume.
As the LTL freight business evolves, the playing field is going to be tilted towards the carrier that not only has the most data but actually does something with it. Look at what UPS has done on the small parcel side. UPS has been receiving data from their Package Level Detail (PLD) feeds for almost 20 years. It’s used this data to become very profitable and’ along with FedEx they have almost driven every other small parcel carrier out of the U.S.
The LTL market has two challenges that they have to overcome to catch up:
- Standardized Data – My conversations with LTL carriers have taught me that the bill of lading does not contain accurate information. Receiving this electronically would not add any value, because the product descriptions and weights are often wrong. LTL carriers must base their pricing on more objective characteristics, such as density, rather than the traditional and subjective freight class.
- Internal Processes – Today, the bill of lading has a PRO number sticker on it that helps identify the freight as it moves through the carrier’s network. The carriers need to alter their process and have a standardized label placed on the freight that matches the electronically uploaded bill of lading. Then the person in the terminal would know what is on the pallet and where it has to go. The solution to both of these would require a large investment in logistics technology by the carriers and shippers. Remember, approximately 86% of all LTL shipments are not being tendered electronically which means that the shipper is probably using technology that was patented in 1888, a ballpoint pen.
Standardized Data Reduces Freight Cost
Shippers are now able to choose their carriers objectively as well as pinpoint the exact lanes that each carrier should be used in. Standardized data becomes the language that both shippers and carriers are communicating in. This allows their goals to be clearly defined, and that clear definition allows the shipper and carrier to align their business interests.
With supply chain, big data, shippers, and carriers are able to have an open conversation in which they collaborate on different strategies that benefit both parties. We are working with a shipper that received a 20% price increase from their carrier. In talking with the shipper and the carrier, I learned that the carrier had to adjust the shipper’s price in order to get their Operating Ratio (OR) under 100 (i.e. reduce operating expenses below net sales). The carrier increased every lane regardless of how it was operating in order to accomplish this. With the big data that we have and the RateLinx predictive modeling engine, we are working with the shipper and the carrier to pinpoint the lanes that should be adjusted so that the carrier’s OR can decrease without increasing the shipper’s cost. One of the strategies that we’re going to deploy is to not use this carrier in the lanes that they don’t operate profitably in. This will allow the shipper to continue to work with the carrier and not have to pay 20% more for the shipments.
Standardized Data – The Language of Freight
Standardized data becomes the language that both shippers and carriers are communicating in. This allows the goals to be clearly defined and that clear definition allows the shipper and carrier to align. No other logistics software provides standardized data like RateLinx. Other logistics software is merely that software.
With RateLinx, you get the power of the freight audit software that combines the freight invoice with the ShipLinx TMS data. The customization that RateLinx performs on each customer’s behalf provides the standardized data the shipper needs. We talk to many large companies that have what the analysts say is the best logistics software yet they are not gaining any insight from the data because it is nothing more than a repository of each carrier’s data. Most of the carrier’s data is just re-keyed information from a handwritten bill of lading.
The RateLinx Enterprise solution provides 3 things:
- Context – By integrating the ShipLinx TMS with the shipper’s ERP/WMS we are able to provide order level, item level and customer level data that is matched to the freight invoice. This allows the shipper to fully understand the data and provide insight into transportation trends.
- Relevant Data – The RateLinx Dashboard provides real-time data to the shipper. Shippers no longer have to pull data from multiple sources and combine them together only to be viewing data from six months ago because of the time it took to cleanse the data and access it.
- Transparency – Viewing the health of the supply chain through the Dashboard’s graphical KPI’s provides openness and accountability in the communication between the shipper and the carrier.