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Bundling Lanes Can Improve Truckload Rates and Service

Bundling Lanes Can Improve Truckload Rates and Service [Infographic] | Transportfolio

aggregate-low-volume

Even in a down business year (e.g., 2008-2009) where transactional truckload shipments dropped by almost 80%, spot rates still cost more than contract rates. Aggregating low volume lanes can help save even more on truckload rates.

Research suggests that when you bundle low-volume lanes together, you can increase the density, allow carriers to optimize their networks, and make the lanes more attractive to serve. All of this can save shippers 7% on average vs. spot market rates.

aggregate-low-volume

As you can see above, a bid aggregation strategy can be applied to your business in many ways.

  1. Understand lane bundling. Know the relationship between quantity of loads on a lane, total distance of the lane, and the expected area the carrier will drive empty to pick up or deliver the load.
  2. Bid out overlapping lanes. Determine a cost breakpoint for aggregating region-to-point or point-to-region bidding rather than point-to-point. It will almost always be more cost effective to establish a region-to-region lane than to go to the spot market.
  3. Provide shipping history. The more you can tell a carrier about a lane, the better they can compare it with their own network.
  4. Aggregate lanes that had no contract rates. Because the cost of spot bids is so high, these aggregated lanes can be relatively large and still save when compared to spot lanes.

For more details about how to make bid aggregation work for your supply chain, download and read our white paper, Aggregate Low Volume Lanes, Lower Transportation Costs.

Take a look back at previous posts in this series, “Is Your Routing Guide Ready for a Tune Up?” and “What REALLY Impacts Carrier Rates and Service – Lead Time,” and wait for the final post in this series, which features¬†even more ways to impact carrier rates and service levels.

Comments

Dave Morris

Contract rates vs spot rates ... if I routinely ship the same route monthly ... 5,000-25,000 lbs each time ... can I put these under a contract and lower my outgoing freight costs? (I have about 15 customers that I ship once or twice a month, a few every week)

1.17.17

Reply

    Chris Brady

    Hello Dave, thank you for the question. Yes, for many shippers it makes sense to utilize contract vs spot rates due to the fact that average spot rates tend to be about 4-5% higher.
    In relation to the research mentioned in the blog, we studied lane aggregation for dry van truckload freight. If some of all of your customers are in the similar freight corridors, you might get some additional benefit for the lane aggregation if you decide to contract your rates.
    -Chris

    1.18.17

Kevin Xi

It's helpful! Very Good!

1.17.17

Reply

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