WHAT NO ONE TELLS YOU ABOUT GROUND FREIGHT RATES. ESSENTIAL BUYER’S GUIDE
In this post, we go beyond what you have already read in other articles about how ground freight transport rates are calculated. We will tell you what no one else tells you about how rates are established at the management level in transport companies. We will share with you an essential guide for buyers that will help you better understand the freight transport market between Mexico, Canada, and the United States. With this information, you will be able to propose the strategy that allows you to reduce your freight transportation costs or successfully navigate this contingency period in which all ground freight transportation prices are on the rise.
WHAT IS NOBODY TELLING YOU ABOUT HOW TO GET THE LOWEST FREIGHT RATES IN A TIGHT MARKET?
1- UNDERSTAND THE FREIGHT MARKET IN NORTH AMERICA: A TIGHT MARKET
If you are familiar with the freight trucking industry between Mexico, the United States, and Canada, you have surely heard or been personally shocked by the sharp increase in rates that has occurred in recent years. Especially since the chaos caused by the current pandemic, coupled with the protests and adverse weather conditions, the market dynamics have seen unprecedented movements. Prices have skyrocketed while the availability of both transport equipment and drivers has dropped dramatically. As a result, companies are actively looking for ways to get better rates to lower their ground transportation costs.
Even in this scenario, there are companies that continue to ship merchandise at the best rate that is possible to obtain in these times. How do they do that? What is nobody telling you about how to get better freight rates? What are other companies doing to negotiate for better ground transportation rates? What are the secrets to shipping merchandise at a lower cost? Read on and find out.
To understand freight rates, you must first understand the market and have a realistic view. Freight transport between Canada, the United States, and Mexico moves in a tight market. What does this mean? The demand is greater than the supply.
In other words, the number of requests outweighs the number of trucks and drivers available to make the trips.
Factors such as the lack of drivers, strikes, COVID infections, adverse weather conditions, international restrictions on the cross-border crossing of goods, etc. They mean that some international transport routes between Canada, the United States, and Mexico have seen an increase in the cost of freight transport. Even shipping lanes that were historically stable in terms of costs have been affected by the current situation.
2- UNDERSTAND THE IMPACT THAT VOLUME AND FLEXIBILITY IN PICKUP TIMES HAVE ON FREIGHT RATES
A well-trained purchasing team will present your company’s transportation needs in an appropriate, complete, and attractive manner, thus speeding up the quoting process and obtaining the most advantageous prices for your specific case.
Evidently, transport quotes are based on the information provided by the buyer. Omitting fundamental details such as the volume of loads per month or flexibility in pick-up times can result in a higher freight shipping rate than what could have been obtained.
Spot trips have a higher rate than regular and project trips.
Trips with flexible pickup times will earn lower transportation rates.
That is why a complete request, which includes cargo volume and flexibility in pick up times, can reduce the cost by up to 20% for each trip.
In contrast, a buyer without proper training:
A buyer without proper training will ask exploratory or overly general questions, so it will be channeled to the department that deals with questions of this type and not to the team specialized in the type of services, industry, and specific routes that the project addresses. Being in contact with the relevant department results in cheaper solutions to specific problems.
A buyer without proper training will make incomplete requests for quotes, which delays the response time because a large mail exchange is required to obtain all the information that allows preparing a quote to transport freight.
Incomplete quotation requests not only delay the quotation process but also present the risk of obtaining higher transport rates, as seen in the previous point.
Furthermore, it is worth saying that:
A complete RFQ saves an exchange of up to 20 unnecessary emails.
3- PLANNING: FLEXIBILITY IN PICK-UP TIMES CAN REDUCE THE TRANSPORTATION RATE EVEN IF IT IS A SPOT SHIPMENT.
Although carriers will offer better rates for contract freight, there is a way to get better transportation rates when you have a low volume of shipments or a spot freight. The secret here is planning. An example will serve to illustrate the point:
Freight rate example:
From Montreal, QC, Canada to CDMX, Mexico
Quote for direct spot rates:
Same day pickup: $7,510 USD
48-72 hour pickup: $6,259 USD
Extensive pickup flexibility: $6,091 USD
The variation in rates is due to the fact that the logistics service provider has more time to contact more carriers, negotiate, or give carriers contract freight to make up for the spot freight, and thus achieve the lowest possible ground freight rate for the final customer. Remember that 3PL providers always have options to cover shipments according to the needs of the buyer. However, they are subject to the current prices given by the carrier network.
RECOMMENDATIONS FOR COMPANIES THAT SHIP FREIGHT BETWEEN MEXICO, THE UNITED STATES, AND CANADA.
Train / Strengthen the purchasing team
Stay Flexible: Allow flexibility in schedules, pickup, and transit times.
Plan shipments in advance
Prepare for an increase in rates