Reduce freight costs by using data to find hidden savings
Not all freight costs are obvious. While many shippers focus solely on rates, hidden inefficiencies like poor routing or underperforming lanes can quietly drive up expenses. However, data and analytics can help uncover hidden costs and lead to a more efficient and more cost-effective freight network. This article will explore the often-overlooked costs in freight shipping and how shippers can use data analytics to uncover and eliminate inefficiencies.
Simplify freight cost reduction
As a shipper, it’s all too easy to fixate on rates. However, they’re only part of the story, and by hyperfocusing on freight rates, you won’t see the whole cost picture and can miss out on freight cost reduction opportunities.
In reality, small inefficiencies across a shipping network can quickly add up to significant costs. Everything from poor route planning to long dwell time at docks to market volatility can quietly cut into your margins, taking a significant toll on your profits.
In this article, we’ll review some of the most common hidden cost drivers, how data can help you uncover them, and how to reduce freight costs.
Understanding the true cost of freight
When evaluating freight costs, it’s easy to exclusively focus on the base rate, or the amount charged for transporting goods from the origin point to the final destination. But if you want a more birds-eye view, look beyond the base rate and consider the total landed cost.
The total landed cost includes the base rate as well as any additional expenses from hidden cost drivers. Common issues that can drive up freight costs can include:
- Less-than-ideal routing decisions: While some routing constraints are tied to broader supply chain design (like sourcing or warehouse locations), there’s still room for optimization. When loads are routed inefficiently, it can lead to longer transit times, higher fuel costs, and increased asset wear for carriers, all of which can affect future rates and service levels.
- Low-performing lanes: Likewise, low-performing lanes can result in unreliable deliveries and higher transportation costs. These lanes often mean higher fuel costs, operational headaches, and additional wear on vehicles and other equipment for carriers—and those costs often get passed on to shippers.
- Poor carrier service levels: Late deliveries, excessive dwell time, and other forms of poor carrier performance can result in missed deadlines, chargebacks, detention fees, and poor customer relationships, all of which can cost your business.
- Empty miles or capacity mismatches: Mismatched capacity and poor backhaul planning can cause your business to pay for unused trailer space, waste carriers’ time and fuel, and lose out on opportunities for more efficient load planning, driving up overall freight spend.
- Inconsistent procurement strategies: Without a consistent procurement strategy, it becomes difficult to leverage your shipping volume for better rates, strategically leverage the spot market, consolidate freight across lanes for efficiency, and build strong relationships with high-performing carriers. Over time, this can lead to inflated costs, unpredictable service, and missed opportunities for optimization.
Between all these hidden freight cost drivers, things quickly add up. By collecting and analyzing data, you can identify patterns, discover inefficiencies, make smarter decisions, and gain a better understanding of the full cost picture, even in the face of market volatility. With data on your side, you can take a more proactive approach to logistics cost optimization.
Identify underperforming lanes with benchmarking data
Benchmarking is one of the most effective methods for reducing freight costs. Using benchmarking to contextualize your performance provides insight into your spot mix, contract freight rates, carrier usage, seasonal trends, and more. As a result, you’ll be able to make optimizations to reduce costs and keep your business running smoothly during periods of market volatility.
With the help of benchmarking data, you can identify business drivers to understand where you have room for improvement. Common signs of underperforming lanes to look out for include high rejection rates, inflated rates compared to the rest of the market, and excessive delays.
Once you’ve properly identified any underperforming lanes, you can renegotiate rates, switch carriers, and adjust your routing strategies to improve your lanes. Even addressing just a few poorly performing lanes can drive significant savings and have a major impact on your business.
Optimize your routing decisions with network analytics
Routing guides are only as good as the data behind them. If they’re outdated or inflexible, even your best-laid plans can fall apart, especially during times of market volatility. A rigid guide might lock you into lanes or carriers that no longer make sense, leading to higher costs and poor service.
Network analytics helps you spot those failures before they spiral. By analyzing how freight is actually moving across your network, you can identify underperforming lanes, shifting costs, and patterns that signal it’s time to adjust. Real-time insights allow you to strengthen your routing guide by making it more resilient and responsive to change.
Looking at supply and demand data adds another layer of power. You can pinpoint where capacity is tight or plentiful, track spot rate shifts, and anticipate disruptions. Armed with these insights, you can optimize your network design, make smarter routing decisions, and balance contract and spot freight more strategically—whether during RFP season or in response to market pressure.
Fix capacity imbalances and missed opportunities
Capacity imbalances can result in unnecessary costs for your business, but capacity forecasting can help you take advantage of missed opportunities. Having historical lane performance, real-time market capacity trends, and forecasted capacity supply and demand data at your fingertips will allow you to avoid overpaying during tight markets, as you can better anticipate when and where capacity will be constrained. You can then secure carriers before rates spike. Keeping a pulse on market conditions can also give you insights into which lanes are likely to face capacity shortages, allowing you to shift volume to more reliable carriers, reroute freight, or plan alternative strategies in advance to prevent the disruptions and service failures associated with undersupplied lanes.
What’s more, historical trends and predictive analytics will allow you to understand seasonal trends and proactively adjust your strategy to smooth out imbalances. Predictive analytics help you time decisions more effectively—like identifying when to secure carriers before capacity tightens.
Data can help eliminate waste caused by underutilized or misaligned contracts. It will also enable you to discover which agreements no longer serve your business, renegotiate or terminate contracts as needed, and ensure you only pay for the carrier capacity your business uses.
Evaluate carrier performance with real data
Poor service levels can quietly eat into your business’s margins. Late deliveries, damaged freight, and low tender acceptance can disrupt your supply chain, erode trust, and drive up transportation costs. Meanwhile, issues like detention charges—often caused by delays at docks or inefficient facility processes—create additional expenses and can strain relationships with your carrier base. These challenges put pressure on your operations, frustrate customers, and ultimately impact your bottom line.
Luckily, data analytics can help you quickly identify which carriers consistently meet your expectations and which are causing costly issues. By tracking key metrics and service data, such as on-time delivery rates, dwell time, damage rates, tender acceptance, and incident reports, you can better understand the carriers you work with. This will allow you to make smarter routing choices, better carrier selections, and even improve the onboarding process. You can avoid repeat issues, improve long-term efficiency across your network, and reduce freight costs with regular performance reviews.
Align procurement with market realities
Often, businesses overspend due to a lack of visibility, ineffective contract management, ignoring backhaul opportunities, and other mistakes during the freight procurement process. The market is constantly changing, and periods of volatility can make it increasingly challenging to make effective decisions. That’s why it’s essential to use reliable rate forecasts and market monitoring during logistics cost optimization.
Not only can forecasts and current market data help you time mini-bids more effectively, ensuring you don’t lock in high rates during market peaks, but they can also provide the information you need to manage and adjust your contracts. In addition to enabling you to renegotiate contracts proactively, frequently updated, lane-level insights can uncover backhaul opportunities and improve distribution across your carriers.
Shippers who use real-time market data and forecasts when planning their sourcing strategies can boost performance and savings. With the right data and technology in place companies can more easily update routing guides, optimize budgets, identify loads that will go to the spot market, and establish fair rates that accurately reflect the market’s performance.
For example, a company with access to current market data and accurate forecasts can pinpoint underperforming lanes. It can then adjust its routing guide mid-cycle to help cut costs while improving reliability. Similarly, a company could use real-time pricing data to re-source its key lanes every quarter to reduce the average price per mile. With better data, procurement becomes another opportunity for savings and increased efficiency, as companies can respond to market shifts quickly.
Put it all together: building a cost-optimized freight network
Building a freight network is a lot of work, and it doesn’t end as soon as the contracts are signed and the lanes are assigned. Not only do markets regularly shift, but carrier performance can also change, and new inefficiencies can emerge. That’s why having ongoing data visibility is vital. It’s incredibly easy to fall into a “set it and forget it” trap without it.
To avoid this, analytics can create a continuous improvement loop. You’ll need to monitor your network’s performance closely, identify issues like underperforming lanes, capacity imbalances, poor carrier performance, or inefficient routing, adjust your strategy accordingly, and then measure the impact of the changes you’ve made.
By repeating this monitoring cycle, identifying, adjusting, and measuring, you can make your freight network more resilient and cost-effective. Centralizing all freight insights in a single platform like DAT iQ can make it much easier to track key performance indicators, uncover opportunities for improvement, and take effective action. Having up-to-date industry data allows you to benchmark performance, spot trends, and respond quickly to changing market conditions.
Freight savings start with better visibility
Freight costs don’t just come from rates. They result from hidden expenses like inefficient routes, poor carrier performance, and outdated procurement strategies. The bottom line? You can’t afford to leave your data unused or rely on outdated planning methods.
The good news is that these issues are fixable with the right data. With thoughtful, data-driven decision-making, you can optimize every aspect of your network, and the right tool can give you a clear line of sight into where costs are hiding and how to reduce freight costs. As a result, you’ll be able to build a stronger, more agile freight network and cut spending, even in periods of volatility.
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FAQs
A few things you might be asking yourself
Common hidden freight costs include detention fees, accessorial charges, and poor carrier performance resulting in late deliveries, excessive dwell times, and damaged goods. You may also encounter inefficiencies like suboptimal routing, empty miles, and low-volume or low-performing lanes that could increase your cost per shipment. On top of that, having inconsistent procurement strategies or underutilized contracts can contribute to your overall freight cost. While these costs aren’t reflected in the base rate, they can add up quickly and impact freight cost reduction efforts.
Quality freight data can help you reduce your overall shipping costs by providing the visibility needed to make smarter, more cost-effective decisions. With the right insights, you can pinpoint underperforming lanes, missed backhaul opportunities, empty miles, and detention time. Comparing your rates to the overall market helps flag overpriced lanes and strengthens your negotiation position. Plus, you can time bids more strategically, proactively renegotiate contracts, and optimize routing based on the current supply and demand. As a result, you can improve carrier performance, network efficiency, agility, and cost savings.
The best way to benchmark freight performance is to rely on a combination of internal historical data and external market benchmarks. By comparing your business’s rates, service levels, and lane performance against industry standards, such as those provided by DAT iQ Benchmark, you can easily discover where you’re overpaying or underperforming. Taking a close look at and comparing key metrics will enable you to uncover inefficiencies, pinpoint underperforming carriers, and make smarter, more profitable, and more efficient routing, procurement, and carrier selection decisions moving forward.
DAT iQ is a powerful solution that provides detailed, up-to-date transportation analytics, which can help you optimize your business’s freight costs. Using their database of $1 trillion in customer-submitted freight invoice data, DAT iQ offers insights into industry spot and contract rates, capacity, seasonal shifts, and more, allowing you to renegotiate contracts from a data-based position of strength and uncover cost-saving opportunities. You can also view freight rate forecasts, which are over 95% accurate, so you can anticipate market shifts and lock in the good rates at the right time.
Underperforming lanes can cost you time and money, and identifying them starts with taking a close look at your lane-level data. Be on alert for inflated rates compared to market benchmarks, frequent delays, or high tender rejection rates. Consider using benchmarking platforms to quickly gain an understanding of the current market conditions. After you’ve identified any underperforming lanes, you can renegotiate rates, adjust your routing guides, consolidate shipments, or source more reliable carriers to improve efficiency and freight cost reduction.
Gain valuable insights to reduce freight costs with DAT iQ
DAT iQ gives shippers the insights needed to reduce freight costs—from identifying underperforming lanes to optimizing procurement and carrier performance. Discover how smarter data leads to real savings and try it out today!
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