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Industry Standard Rates Explained

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Freight_Cost_Solutions_Fragile_Freight_savings

If your company’s freight spend is under $3,000 per month, carriers will either deny you an account or charge you like a wounded Spanish bull. But, if you spend from $60,000 to $25,000,000, the rates offered by Carriers will become competitive and more generous.

Carriers within the transport sector are no different to any other industry. They compete against each other and have Industry Standard Rates based on freight volumes. As the operational costs of large carriers are similar to their competitors, by design or by default there exists rate similarities and competitiveness across specific freight volumes.

So, note an important fact here … your monthly or annual freight expenditure is irrelevant to you achieving the correct discount level, but do not tell the Carriers your current freight expenditure. What you do need to share is the volume of freight you distribute and the individual consignment detail. This should include item numbers per consignment, the actual physical and charged weight, and the cubic dimensions.

More than likely, your company’s freight volumes increase every year due to compound growth. Because of this, it’s hard for most to accurately ascertain what rates offered by a carrier are competitive after three years of distribution growth. Just because you achieved rate discounts 2 or 3 years ago does not mean that today you’re on competitive rates.

 A 5 to 10% annual compound growth each year could lead to an additional 15 to 30% freight volume over 3 years. Simultaneously over that time, your carrier will apply annual rate increases of 3 to 5 percent. After 3 years there is up to an additional 15 percent in rate increases and up to 30 percent in increased volumes. Ask yourself, is this situation not a tad strange? You could be ready to receive a hefty rate discount if you manage the process correctly.

Never tell a carrier salesperson your monthly freight expense, let alone your annual freight expenditure. If you do, they will utilise the spend figure you gave them to determine your current discount level. 

Furthermore, if you are on the wrong discount level, carrier sales representatives will endeavour to offer a minimal savings to keep your rates high. They do this to increase their monthly sales commission. At the same time, they will then push the age-old sales pitch that their company offers better service, more depots and infrastructure and blah blah blah to win your business!

At Freight Cost Solutions™, we utilise a proven process that has worked for 20 years. Our process can analyse freight volumes, compare them against industry standard rates (We have developed our own cost model which is 99% accurate against industry standards) and can calculate the correct discount level and applicable rates for you.

Want to know more? Contact Darren Ash on dash@freightcostsolutions.com or call 1800 428 348 for further information and help.

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