Companies across North America are seeing transportation costs rise as a percentage of their total costs. That’s driving a need for many business leaders to closely oversee their transportation spending.

The Total Economic Impact of Managed Transportation: 251% ROI

Total Economic Impact of Managed Transportation: 251% ROI and freight cost savings, according to independent study commissioned by Transportation Insight.

Of course, this requires easily accessible visibility to all those transportation activities. It also takes a keen eye focused on opportunities to improve your current managed transportation performance – and your service to customers.

To help small and mid-sized businesses identify the best support services available in a volatile freight transportation environment, we commissioned Forrester Consulting to complete a Total Economic Impact™ study of our Managed Transportation solution.

Forrester’s analysis identified some of the benefits our managed transportation brought one customer during a three-year period:

  • Freight and cost mitigation savings over $1.4 million; average annual LTL savings and cost mitigation of more than 10 percent of the annual transportation budget
  • Personnel cost savings exceeding $840,000
  • Transparency into freight costs allowing stakeholders to see all transportation spending in one place
  • Better on-time delivery to fulfill our customer’s specific shipping requirements, control costs and protect end customer experience
  • Technology tools supporting needs for specific capacity and special handling situations

According to the study, “Transportation Insight Managed Transportation provides managers with transparency into their total spend and allows them to see managed transportation not as a cost center, but as a source of competitive advantage.”

Let’s unpack some of the reasons the Forrester Consulting Total Economic Impact (TEI) study determined our managed transportation solution can deliver a 251 percent return-on-investment and $1.6 million net present value over three years. For an abridged version of the case study we commissioned, open our infographic.

Transportation Insight’s Managed Transportation solution delivers our customer a 251% ROI and a net present value of $1.6 million with a payback of less than 6 months.
Source: The Total Economic Impact™ Of Transportation Insight Managed Transportation

Managed Transportation Customer Testimony

Using its TEI methodology, Forrester interviewed the senior vice president with a Transportation Insight customer that provides school supplies and educational resources to its clients. Forrester based a three-year financial analysis on this conversation.

As Forrester’s interview revealed, transportation visibility is important as our customer:

  • Compiles products from several inbound resources into large shipments for outbound delivery
  • Aligns delivery within specific schedules for on-site work crews that offload, install and remove packaging refuse
  • Requires specialized equipment or wide trailers and doors.

“We’re very watchful of freight costs as they continue to go through levels we never thought they would,” our managed transportation customer said according to Forrester. “… It’s always at the top of the list when we’re monitoring expenses, so it’s easy to understand the reason we need a third party to provide these services.”

Need-Focused Transportation Solution

Prior to our partnership, this organization worked with another third-party transportation service that utilized a broker model to send most freight tenders through one preferred carrier. According to our customer’s comments to Forrester, this left many decision-makers wondering whether their organization was getting the best price or quality of service.

Considering a change, the organization sought a managed transportation provider that:

  • Works with multiple carriers on a pure cost and quality-of-service basis
  • Offers technology that allows a better view into freight spend to support full understanding of the cost of goods sold (COGS)
  • Provides carriers capable of meeting specialized needs of its shipping and installation services
  • Identifies additional efficiencies to reduce transportation costs on an ongoing basis

Forrester’s TEI analyzed how Transportation Insight’s managed transportation solution has been meeting those needs for the past three years. Elements of our solution considered in the TEI include:

  • Named enterprise service team including single-focus account manager a customer can call any time
  • Consolidated electronic billing
  • Customer understanding and improvement of standard operating procedure for each customer
  • Continuous improvement projects
  • Network simulation and modeling
  • Proprietary tools including:
    • Insight Freight (our freight audit and payment portal)
    • Insight Fusion (our business intelligence portal providing business analytics and reporting for actionable insights)

Based on the customer interview and financial analysis, Forrester determined a total present value of our solution at $2.23 million over three years. Compared to a cost of $632,000 during that time, the TEI determined a $1.6 million net present value of our managed transportation solution to our client.

Consolidated three-year, risk-adjusted metrics detail total costs, total benefits and cumulative net benefits of Transportation Insight’s Managed Transportation solution
Source: The Total Economic Impact™ Of Transportation Insight Managed Transportation

Findings: Managed Transportation Provides Freight Savings, Cost Visibility

According to the TEI’s key findings, Transportation Insight’s managed transportation solution provides quantified and unquantified benefits. Both are significant.

Our proprietary technology and processes, combined with our expertise across the less-than-load and truckload transportation environments, achieved savings on freight costs and cost mitigation of more than $1.4 million.

Using our transportation management system (TMS) bid board functionality, our customers can route shipments with the optimal, low-cost carriers that we help identify through a rating system based on their feedback. We also helped this customer achieve the best transportation costs on inbound freight shipments from its vendors.

“We put our complete confidence in Transportation Insight to manage that process and provide us good carriers at the best market prices,” said our customer’s executive, according to the Forrester study.

Findings: Managed Transportation Amplifies Personnel Efficiencies

It can be hard to quantify the benefit of technology applications like our TMS and our business intelligence and reporting tools. Still, transparency to freight costs and the cost of goods sold, as well as on-time delivery adherence delivers benefits across an organization, often in ways that mitigate future financial impact.

That said, implementing and managing a technology-enabled freight solution does come at a cost. And creating internal workflow efficiencies with easy-to-access reporting and streamlined execution realizes hard-dollar savings.

Forrester’s TEI determined that our managed transportation solution helped our client realize a personnel savings value of $847,214 over three years. That benefit represents the cost of personnel if our customer tried to develop and maintain an in-house solution to replace all the technology services and reporting we provide.

“The information that is in (Insight) Fusion  can be combined with our company information, and we can look at margin by carrier, margin by customer, and margin by lane,” our customer told Forrester according to the TEI we commissioned. “I can’t even conceive of all the ways we can slice and dice [the information].”

Quantifying Benefits Against Cost

Transportation Insight commissioned a Total Economic Impact study of our managed transportation solution to help shippers understand the cost, benefit, flexibility and any risk factors associated with this service offering.

I believe that the costs and risk factors of our managed transportation solution are far outweighed by the benefits – and we scratched the surface of those benefits above. But I also believe that shippers should have a clear view to the costs they incur when partnering for a new beneficial solution.

Transportation Insight’s fees depend on the customer, and they are often a combination of fixed transactional fees, subscription fees and/or savings share. Within the context of this managed transportation analysis, Forrester Consulting identified our fees over the past three years.

According to the TEI study, the total benefit of our managed transportation solution for this customer over three years is $2.23 million, compared to $632,000 paid in fees to Transportation Insight during that time. In this case, those fees varied from year to year based, in part, on the freight volumes our customer shipped during the period. Forrester concludes the payback period on this cost is less than six months for this client.

Transportation Insight’s solution delivered our customer $2.23 million in total benefits, including $1 million in personnel savings and $1.6 million in freight cost savings during the three-year period.
Source: The Total Economic Impact™ Of Transportation Insight Managed Transportation

That is an important benchmark for small- and medium-sized businesses. We know our customers often compete with larger shippers that possess the scale and capital to invest in a more complex transportation management platform. So we are focused on providing hybrid-digital solutions that make transportation control and visibility accessible to a broader market.

That is translating to managed transportation solutions that we are implementing in a matter of weeks and delivering return for our customer almost immediately thereafter. For this shipper, based on the TEI analysis, that Year 1 return was an $811,305 net value.

To learn more about the benefits and cost analysis of our managed transportation solution, download the Forrester Consulting Total Economic Impact™ of Transportation Insight Managed Transportation study.

Freight Capacity Shortages and Service Challenges Persist

Freight Capacity Shortages and Service Challenges Persist

Freight capacity challenges are driving upward rate pressure for over-the-road shippers.

The Logistics Manager’s Index (LMI) showed a December 2020 logistics growth rate of 66.7, or about 12.7 points ahead of the 2019 rate. While a small drop from November’s 70.8, this may be more of a breather than a shift. The decline in growth rates are reflected in slight declines across all of the metrics of the LMI (except for the two freight capacity metrics which have increased).

Consumers show no signs of halting online shopping activity. In addition, the ramp-up of vaccine distribution, while it will hasten a return to some sort of normalcy, it will consume freight capacity. The upshot? Service challenges likely will remain at some level.

LTL Capacity Bears Weight of Freight Volume Growth

LTL carriers struggle to keep pace with demands for capacity on docks and trucks.

Nearly all – 87.9 percent – survey respondents to a JOC survey in September and October 2020 indicated that longer transit times were a challenge. In addition, 47.2 percent experienced increased shipment loss or damages, and two-thirds had labor shortages.

The sustained growth in shipments across the logistics industry during 2020 contributed to these numbers. Tonnage in the LTL sector in November 2020 showed a 6 percent year-over-year increase in growth, according to the Cass Freight Index.

A few regions were especially hard hit. The Port of Los Angeles processed 889,748 twenty-foot equivalent units (TEUs) in November 2020, up 22 percent from a year earlier. During the same time, at least one carrier suspended financial guarantees for time-critical services in California and Portland, Oregon due to spiking COVID-19 cases among its drivers.

The increases in shipment volume also meant many distribution centers were taking longer to accept shipments. That led to backups with carriers. Detention and storage charges, formerly unheard of in the LTL market, have become more common.

Consolidation in the market continues among both larger and regional companies. Among these moves, Cross Country Freight Solutions announced in January the acquisition of Midwestern LTL carriers, Price Truck Lines and Mergenthaler Transportation. In September 2020, Forward Air Corporation, an asset-light freight and logistics company, announced its acquisition of the assets of CLW Delivery, Inc., a privately-held, final-mile provider with annual revenues of about $20 million.

Because capacity constraints show little sign of easing, service challenges likely will continue into early 2021. Expect corresponding impacts on rates in 2021

LTL Solidifies Residential Deliveries, Moves Toward Digitization

Many LTL carriers focused on effectively handling residential deliveries are exploring new methods, such as purchasing smaller trucks that can maneuver in neighborhoods and urban areas.

The LTL sector is steadily digitizing, with the formation in November 2020 of the Digital LTL Council, comprised of 20-plus transportation companies. Its goal is to establish a set of uniform standards that support the scalable automation and digitalization of LTL shipments.

Over the past year, some council members experimented with standards for electronic bill of lading (eBOL) solutions. Carriers that digitize could save up to 1.3 percent of costs. Digitization should also cut errors and allow all parties to quickly locate freight in transit.

Given ongoing tightness in the LTL market, carriers likely will be selective about the shippers with whom they partner. Shippers can make it easier for carriers by improving facilities where needed and facilitating efficient drop-offs and pickups.

Truckload Freight: Volume Up, Service Down

Truckload shippers face cost and service challenges as high volumes exceed capacity already limited by the number of trucks on the road.

As in the LTL market, the truckload (TL) market is experiencing both sustained growth and service challenges. The American Trucking Association’s For-Hire Truck Tonnage Index rose by 3.7 percent in November, driven in part by robust e-commerce orders and strong single-family housing starts. At the same time, languishing restaurant, manufacturing and energy sectors remained a drag, the ATA noted.

Data from DAT Freight & Analytics shows another bifurcation in the truckload market. Dry van contract volumes were down 10 percent year-over-year, while spot market volumes were up 107 percent. Similarly, refrigerated contract volumes were down 21 percent, while spot market volumes had spiked 116 percent.

About 41 percent of carriers responding to the 22nd COVID-19 survey by Morgan Stanley, published in December 2020, indicated COVID-19 has hampered their ability to operate smoothly. The driver shortage was the most commonly cited reason, with varying emergency restrictions coming in second.

Freight Capacity Constraints Drive Up Truckload Rates

Rate volatility is affected by driver shortage, even as more equipment is expected on the road.

Given ongoing capacity constraints, the truckload market likely will see rates continue to increase for at least the first half of 2021. Transportation Insight expects contract rates to increase 3-5 percent, and spot rates to rise by about 5-7 percent.

However, some good news appears further out on the horizon. A smaller percentage of carriers responding to the Morgan Stanley COVID-19 survey – 36 percent versus the previous 39 percent – indicated the impact of COVID-19 would remain negative a year out.

In addition, truck sales are up nearly 197 percent year-over-year. As these come online, they will boost capacity, helping moderate the upward pressure on rates.

Several unknowns could affect the truckload market. They include the potential for another wave of shutdowns. Transportation has been considered an essential business, which should mitigate any impact.

Potential changes from the new presidential administration, as well as from newly elected state and local officials, are additional unknowns. However, as of early January, no proposed regulations that would significantly impact the truckload market appeared on the horizon.

Challenges to Truckload Digitization

Many shippers in the truckload space are interested in digitization, including electronic bills of lading, which would cut the time required to load trucks and reduce exposure to illness. However, given the thousands of carriers across the country, ranging from national enterprises to operations with a handful of trucks, this shift likely would occur incrementally.

Even as the volatility of 2020 abates, most carriers will continue to focus on contractual rather than spot pricing as a way of gaining further stability.

Shippers of Choice

In both the truckload and LTL markets, capacity constraints appear likely to continue.

Shippers who continually switch carriers to improve service may find their efforts fruitless.

Instead, by taking steps internally to remain shippers of choice and working with logistics providers like Transportation Insight to address challenges, you can mitigate rate increases and strengthen the service your receive and your access to capacity.

Download our First Quarter ChainLink 2021 for more forecasts and cost impact analysis from our freight capacity experts. Read this quarterly industry forecast for a multi-modal look at the trends that will affect your business in the months ahead.

How will NMFC Classification Changes Affect Your Cost?

The National Motor Freight Traffic Association considers quarterly updates to NMFC Classification.

The NMFC classification, according to the National Motor Freight Traffic Association, is a way of grouping different commodities that move in interstate, intrastate, and foreign commerce. The commodities are grouped into one of 18 classes, ranging from class 50 to class 500, based on four characteristics that determine how easily different commodities can be transported, or their “transportability.” Generally, products with a lower the class are denser and easier to ship. That translates to a lower freight rate. 

Each quarter, the National Motor Freight Transportation Association, which is made up of motor carriers, considers updates to the NMFC. The proposed changes then are voted on by the members of the Commodity Classification Standards Boards. The CCSB is made up of employees of the National Motor Freight Traffic Association. 

It is important to understand how the latest round of changes affect your freight. Doing so allows you to make adjustments and leverage these changes to your benefit to improve your transportation cost control.

NMFC Classifications

NMFC classifies commodities for transportation based on four characteristics: stowability, liability, handling and density.

Stowability: This considers how easily items will fit and/or can be transported with other items on a truck. For instance, hazardous materials generally cannot be transported with non-hazardous materials, making them less “stowable.” The same tends to hold true for items of unusual or oversized shapes. The lower the stowability of an item, generally, the higher its class and cost to ship.

Liability: This covers the likelihood a product may be stolen or damaged, or damage the freight around it while in transit. It also takes into account whether a product is perishable. The more a product faces these risks, generally, the greater the liability to the carrier, and the higher its class and cost.

Ease of HandlingThis covers multiple characteristics that affect how easily products can be loaded or unloaded, including their size, weight and fragility.

Density: As you might guess, this is calculated by measuring an item’s weight and dimensions. The higher the density, the lower the NMFC class and thus, the cost. While this may initially seem counter-intuitive, the calculation recognizes that denser items take up less room than less-dense items, when compared to their weight. That leaves more room on the truck for other shipments.

Updates to the NMFC Classification

In general, the changes this quarter take the density of shipments into account to a greater degree than they previously did. For instance, gloves and mittens, along with sealing and masking tape, are shifting from a single class to a density-based classification. This is similar to other NMFC classification changes that have occurred recently. 

This quarter, the changes cover about 20 NMFC Groups:  

  • Automobile parts
  • Building materials, miscellaneous
  • Building metalworks
  • Building woodwork
  • Chemicals
  • Clothing
  • Drawing instruments, optical goods, or scientific instruments
  • Electrical equipment
  • Furniture
  • Games or toys
  • Hardware
  • Iron or Steel
  • Machinery
  • Paper articles
  • Plastic or rubber articles, other than expanded
  • Tools or parts named
  • Bases, flagpole or sign, concrete, with or without metal attachments
  • Compounds, industrial process water treating, o/t toxic or corrosive materials
  • Forms, concrete retaining, sign or lamp post base, taper-sided, sheet steel 

In addition to these changes, a rule change under Item 110 clarifies that “coin- or currency-operated” refers to items that accept debit or credit cards, or other forms of payment, as well as cash payments. 

Working with Transportation Insight to Stay Abreast of Changes 

When your product ships, you will want to make sure the correct NMFC code is visible on the bill of lading, so the carrier knows to use it. It also helps to describe the product being shipped to the extent possible. 

Every year hundreds of shippers master their supply chain leveraging Transportation Insight’s ability to monitor the industry trends that affect transportation costs. To ensure our clients are using updated codes, Transportation Insight proactively checks all products against the NMFC database to help you manage the changes and control your spend. Our freight bill audit and payment solution provides an additional layer of support that ensures alignment between your billing and invoiced classification.

Do you have questions about how the fourth quarter NMFC classification changes affect your products? Contact a member of our team for a consultation.

For more analysis on freight capacity planning strategy, watch our Capacity Masters Roundtable. It offers guidance from our truckload, LTL and brokerage experts that will help you understand – and control! – cost drivers in the year ahead.