Freight Forwarders Don’t Need Rate Management Systems

By John Edmonds, Research & Marketing, Freightos

No one needs a hammer – they need a way to drive nails into walls. And no one needs Netflix – they want on-demand TV shows. Similarly, no forwarder needs a rate management system (RMS) per se – they need a platform to improve sales efficiency.

Not that an RMS is bad, necessarily. About half of the largest forwarders currently use one. Most of them lack pricing or routing capabilities, but it’s still be better situation than those top forwarders who still rely on archaic folders of spreadsheets. Either way, the problem is that these methods create mountains of data that’s a pain to access.

That simply doesn’t cut it, given modern rate volatility.

According to Freights Index Data, over 50% of China-US quotes generated so far in 2017 relied on tariffs no more than two days old, with a further 30% relying on tariffs less than a week old. Even on less volatile trade lanes, pricing data changes radically. The median tariff age of US-Europe route quotes, for instance, was 10 days.

Freight data changes fast. And forwarders need to keep up.

2 days
6 days

Age of Tariff for Quoting on China-US Routes, based on Freightos data

What Freight Management Actually Needs To Do

Granted, a good freight RMS needs to provide a dynamic, multi-modal single source of truth for tariffs, where uploading and retrieving rates is simple, no matter how complex carrier pricing is. Important as that is, however, it’s still only a means to an end.

C-level logistics professionals approaching fragmented data systems across multiple offices, need to ask themselves one question:

What are you trying to achieve with your freight rate management platform?

Aim for a rate management system and, chances are, that’s all you get. Aim for improving sales efficiency by tapping into rate management … and it’s a whole different ballgame.

Getting multi-modal rates properly organized for an entire company is a herculean task but once it’s in place, it’s the foundation upon which actual efficiency lies.

Resting on that base of rate management should be routing, pricing and sales automation. Here is tangible value – and not just for sales teams, but potentially for online channels as well. With sales automation comes business intelligence, for instance, on sales performance and trade lane profitability.

Sticking with “mere” rate management without those automation tools is tantamount to switching all your records to CDs, when the only player you own is in the car. Sure, it’s easier to store them … but it’s a pain in the neck to listen to Led Zeppelin that way.

A Word About Getting There

Large IT projects are incredibly difficult, requiring long-term investment, corporate buy-in and support, and delayed benefit gratification. But tapping into the benefits of digitalized freight sales, the RMS iceberg’s tip, doesn’t need to be delayed.

True to startup ethos, Freightos typically rolls out Freightos AcceleRate rate management and sales automation technology using Agile methodology, so that the share of quotes automated snowballs as the rollout proceeds. When based on rollout by country, new countries are frequently added in batches – automating their domestic quotes, international quotes with local leg only, and door to door shipments using previously rolled out rates. Each batch increases the company’s total ratio of quotes that can be automated.

Future Proofed Freight

As a recent Freightos webinar made clear, controlling data at enterprise forwarders isn’t only a smart move – it’s the best way to stay ahead of the curve in an industry that is in flux, shaken by tech-enabled forwarders, newcomers like Amazon, and the potential for digital carrier sales. Traditional rate management systems organized freight operations. Next-generation rate management systems need to improve the bottom line with better freight analytic and sales capabilities.

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