Imagine that you’re on the phone with a new customer, a shipper who wants you to find ten trucks to haul some last-minute freight this week. You don’t have any recent experience in that lane, but you need to quote a price.
If you price the lane too high, you could lose that business. Too low, and you could lose some serious money. If you take too long to provide an answer, that shipper might not call you again.
Maybe you have a rate analyst on staff, to solve these problems for you. If not, you could call a couple of friendly carriers for some quick quotes. If you’re really lucky, one of them has all ten trucks available at a firm price. Add your margin, and you’re done.
If you've gone through your Rolodex and you still can’t price that lane, you might have a problem. Luckily, there are a few sources that claim to offer all kinds of information about prevailing lane rates.
But how do you know whether that rate guidance is trustworthy?
Qualities of a Good Market Rate Tool
If you're going to rely on guidance from an industry source for market rates, you need to ask these questions:
1. What is the rate based on? You want assurance that the rate is based on actual transactions. Don’t be fooled by rating tools that incorporate bids, which are a form of advertising, and tend to be higher than the actual rate. You also don’t want to use a reference rate that is based on factored loads, because carriers who use factors are already trading off a lower rate for faster payment terms. DAT RateView spot market rates are derived from rates paid by large and small freight brokers to the carriers, in more than 65,000 lanes. The rates are transmitted directly to DAT from the brokers’ TMS systems.
2. How many rates are included in the average? If you see a rate based on only a few transactions, or all from the same carrier, may not be statistically valid. Make sure you know how many contributors and how many reports went into the rate average. DAT RateView won't publish a rate unless there are at least three contributors, so we can preserve their anonymity.
3. What’s the time frame of the rate? Rates can change dramatically and quickly in high-volume lanes, especially when there is seasonal freight or a specialized equipment type. You need to know whether you are looking at a 7-day average or a 90-day average, and adjust your pricing accordingly.
DAT RateView enables you to control the time frame and geographic parameters of the rate display, so you can compare last week’s rate with the 365-day average, and define the origin and destination by 3-digit zip, metropolitan area or region, then adjust your pricing accordingly.
4. What’s the geography of the rate? Rates vary widely depending on the precise definition of the origin and destination points, due to changes in mileage, traffic and other conditions. If you define the origin and destination too broadly, you might deliver an inaccurate quote.
5. What’s the history of the rate? By examining the rate history in a lane, you can identify and anticipate seasonal changes in next year's pricing.
DAT RateView provides a 13-month lane rate history and a historical overview of the balance between freight availability and capacity, so you can predict future rate trends in the lane.
DAT RateView offers a full set of rate tools and a high degree of transparency, so that you can get rate guidance that is quick and accurate for your day-to-day needs. The rates are based on a comprehensive database, so you can rely on them for longer-term procurement and to support your bids on shippers' RFPs. Contact our award-winning customer service team and ask for a demo: call 800.551.8847 or fill out this online form.
Ralph Galantine is the product manager for DAT RateView.
Categories: Best Practices and Benchmarks