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How to Analyze the Impact of Carrier Rate Changes

Carrier rate changes can be complicated. Carriers tend to release generalizations about the percent increase in rates, but these are just an average of the increases levied to various portions of the calculation. Shippers tend to react quickly to carriers’ published “average rate increases” by simply budgeting an extra matching average percentage for each carrier, but this is the wrong approach. The devil is in the details about where those changes take effect and the percentage increase applied. Speed to delivery, weight, distance, and package count are just some of the factors shippers need to consider to understand their true rate increase. Without examining the details closely, shippers’ rates could exceed the “average rate increase” and end up with a budget shortfall.

While the number of 2021 rate increases have been unprecedented, there’s no need to panic. With the right technology, shippers can avoid the pain points and embrace the bargains to bring their own average much lower. The trick is understanding how the rate hikes overlay with their own unique position and needs to better prepare for and execute negotiations with carriers.

Business Intelligence and automated scenario planning illustrate truer impact.

Businesses must manage growing parcel volumes successfully and offer cost-effective ways to meet rapidly evolving customer demands while also getting a good grasp on new rate increases and their impact on the business to effectively plan their budgets.

To get a jump on rate changes, shippers should simulate and analyze various transport factors to identify the potential impacts of rate increases before they take effect. Doing so supports contract negotiations with parcel carriers, and it gives merchants a chance to prepare by adjusting business rules, repackaging goods, or taking other steps.

To pinpoint cost-effective methods for parcel shipping, shippers can run the following types of simulations:

  • Assuming everything is the same as last year: Running re-rate scenarios shows the impact from one year to the next
  • Changing a business’s inventory footprint: Moving products from distribution centers to brick-and-mortar stores, etc.
  • Carrier network expansion: Adding new carriers to handle parcel deliveries, be it international or local
  • Changing the approach to packaging parcels: Administering simulations based on dimensional weight (size/weight of package)
  • Determining metrics and cost of shipment per SKU (cost per unit): Many organizations run SKU level analytics and business intelligence reports; parcel shipping data can help to illuminate even more impactful insights
  • Comparing last-mile/regional services against those from major carriers: Which carriers are best suited to meet delivery and cost expectations

Carriers run their own simulations to see how they can maximize efficiency and profits; technology can help level the playing field by enabling shippers to efficiently run simulations, analyze potential fees, and determine how to mitigate them, along with monitoring cost impacts that could take them by surprise.

For instance, Logistyx’s cloud transportation management system (TMS) for parcel shipping with Business Intelligence enables shippers to glean insights on their own shipping patterns, usage, and more with the ability to filter and identify specific characteristics to better understand impact. With the ability to analyze real time shipping data, shippers can better understand how factors such as distance, speed to delivery, package size, and density affect spend within their transportation landscape. Shippers can also highlight savings opportunities across attributes such as origin-destination, carrier services, modes, accessories, and more.

Once shippers run simulations to consider potential impacts and how to counter them, they can align strategy and budget to particular scenarios. Accessing and analyzing available data can help shippers truly evaluate carrier performance, ensuring carrier selection is better informed and they’re at an advantage when it comes to carrier negotiations.

Analyze your Shipping Data Today

To learn more about how cloud multi-carrier shipping technology can help you effectively analyze shipping data to better inform and execute carrier contract negotiations and yield greater returns, download our e-book: Understanding Carrier Rate Increases.