Freight Brokers and the Power of Prediction
Many manufacturers see the logistics department as a cost center for their entire company, a necessary but aggravating evil. After all, you have to deliver your product or you can’t invoice your customer. But this viewpoint is dated, and in fact, may be damaging to your bottom line. Here at AM Transport Services, we help savvy manufacturers hedge operating costs by offering logistics services to stabilize budgets and predict future costs–even in a disruptive market.
Are you using old formulas in a disrupted market?
In a typical manufacturing business, the sales team relies on the logistics department in order to create and provide accurate quotes for end customers. However, the process for doing so is often cumbersome and not replicable. Many manufacturers are using an old “formula” they’ve been using for years, and the truth is, it’s not actually a formula. In addition, it doesn’t take a variety of variables (real-time market fluctuations, capacity considerations, etc.) into account. For example, let’s say the “formula” relies on a flat rate of $3.00 a mile that is then multiplied by the number of miles required to reach the end customer.
Sure, these sorts of formulas have worked in the past, but they are worthless during times of disruption, and the logistics industry is now operating under a new normal that is predicated upon the daily possibility of disruption by way of increased government regulations, weather related events, or even geo political and/or mass health crises like the recent COVID-19 pandemic.
Quick math doesn’t add up.
Too often, a sales team will invest time and money in training, sharpening sales messaging, prospecting customers, and a variety of marketing materials. What they forget, or perhaps do not realize, is they continue to use the same arbitrary formula that doesn’t really take the scope of the logistics process into consideration–let’s call it quick math–to price their products.
During our research of this phenomenon, we’ve found that a typical Illinois manufacturer spends at least 10% of their total revenue on supply-chain related costs. When you’re using quick math numbers, this 10% adds up quickly. What manufacturers don’t know about the real cost (and cost savings available) in logistics hinders their ability to leverage logistics for the good.
A good freight broker offers technology, data analysis, and supply chain experience.
Here’s the good news. There are excellent tools out there. A combination of technology, data analysis, and long-term supply chain experience can be used by freight brokers like AM Transport Services to help sales teams predict pricing for future sales.
Here’s how it works: A freight broker takes a look at the lanes involved to assess whether they’re a good fit for their operations based on volume, weight, and transit times. Then with lane analysis, they can reach out to carriers who’ve run similar lanes before. Here’s where a broker’s long-term relationships with a variety of preferred carriers in the market really benefits the manufacturer. Finally, a forward-thinking freight broker will use an always-evolving rating tool that utilizes internal and true market data to generate predictive rates which means lower costs and higher efficiency for the manufacturer–especially when pricing future products.
No, freight brokers don’t have a crystal ball, but they can help smart manufacturers make sense of a volatile freight market. This relationship extends beyond securing a truck to pick up a load from your shipping dock. A good freight broker understands your business, gets to know your customers, and offers cloud-based tools for accurate rate prediction.
Historically, logistics operations and outsourcing freight to brokers has been largely transactional. This is changing. With advanced technologies, long-term relationships, and data analysis, freight brokers like AM Transport Services will help you make predictions that will make a big difference in your budget.