Dealing with rate management calls for more than merely good calculation ability. Wildly fluctuating freight rates and the choice of the right method of transport, including optimal routes, should be brought under control as far as possible through the ability to anticipate – and by using (artificial) intelligence. For example, by using SHIPSTA, which offers fully centralized rate management.
Freight rates are the chameleon of the transport industry. While the prices for individual consumer goods have held steady for years, the prices for freight volumes have seen considerable volatility. Adapting swiftly to altered circumstances, freight rates can change literally within seconds.
Hard and fast rules such as “air freight goes over weight” and “sea freight over volume” give only limited help in seeking an up-to-date transport solution: They are, rather, the basis for long-term supply chain planning, with the goal of being able to react to changes in advance and in good time. The supreme discipline here is the ability to plan as far as possible in advance, since freight rates are influenced by a large number of individual factors that affect the final price.
The management of freight rates – a game with unknown variables
Container freight rates consist of both fixed and variable costs. The variables here are the “salt in the soup”. In addition to weather conditions, these variables also include, for example, crude oil prices. Fluctuations on the world market are priced into the rates via the so-called Bunker Adjustment Factor (BAF). The same applies to the fluctuations on the foreign exchange market. Large shipping companies keep the final price open according to the “Value at time of shipping” principle. These surcharges are fixed for the shipper only on the day of shipment.
Managing freight rates is therefore always a game with unknown variables. And it usually represents a very important adjustment – often the last one! – that must be made if the profitability of a freight consignment is to be secured for the long term. Especially when you know that freight prices have experienced extreme peaks in recent years: On some routes the price for a 20 TEU container halved – only to double again the following year.
The goal of every freight manager is to bring the greatest possible transparency to the negotiation of freight rates. But how do you find the best transport routes and get the matching rates under conditions that escape linear planning? In the past, the most important tool here was: Negotiating skills. But tough price negotiations cost time and nerves and in times of digital transformation are certainly not the most efficient way to achieve the desired result. The answer is IT-supported central management of freight rates.
SHIPSTA as an effective tool for central rate management
Platforms such as SHIPSTA cannot change the complex and volatile environment or the general framework of freight rates. SHIPSTA can, however, find the best solution for both sides by balancing the interests of shippers and carriers – and can do so in a spirit of fairness. This saves users night-long marathon negotiations.
As a tool for central rate management, SHIPSTA offers continuous access to current rates as well as to a global supplier portfolio. In addition to a flexible search of rates and surcharges, SHIPSTA provides push information on expiring contracts, takes various types of calculations into account, and excels thanks to perfect system synchronization and a deliberately simple import and export of data. In the future, SHIPSTA will unerringly find the right mode of transport and thus contribute to a sustainable bundling of transport costs. SHIPSTA provides transparency and comparability with its in-depth analysis of rate development, delivery performance, and expense management. And in the end a rather impressive feat is pulled off: Taming the chameleon.
SHIPSTA powers smart logistics procurement with a digital platform that connects shippers and carriers to ensure a frictionless procurement process for spot and contract buying, entirely online. It automates complex tasks, provides unrivalled visibility and supports fast data-driven decision-making. Designed and built by experts in logistics procurement, it is bringing transparency, automation and efficiency to the global logistics industry. It is used by some of the world’s largest companies to respond to market volatility, control freight costs and manage risk. The company was founded in 2015 and is based in Mertert, Luxembourg and Hamburg, Germany.