Approximately 90% of all goods sold fall under the category of freight prior to reaching customers’ hands. That equals an endless number of data points and decisions along supply chains that affect the on-time, on-budget final delivery of each product.
Freight analytics helps businesses cut through the noise. The use of technology, including AI, to collect, interpret, and apply shipping data allows companies to make informed decisions that improve operational efficiency, cost-effectiveness, and their ability to succeed throughout changing times.
Understanding Freight and Its Importance
Freight, at its simplest definition, refers to goods and commodities transported in bulk for commercial reasons.
The exact categorization of goods differs slightly depending on purpose and type of transport. At the level of freight insurance, goods are typically broken down into:
- General merchandise not prone to breakage
- Branded goods
- Precision instruments
- Machinery not prone to breakage
- Fragile goods
- Bottled products excluding beverages
- Non-perishable food
- Bottled beverages
- Automobiles and motorbikes
- Household goods and personal effects
- Frozen foods
- Frozen meat
- Chemicals and hazardous materials
- Fine arts
- Steel sheets, coils, bars, billets and the like
- Yachts and boats
- Computers
- Electronics
- Cell phones
- Telescopes
- Jewelry
Freight modes differ in cost, speed, and regulations and services:
- Road – Ground, land, road transport breaks down into full truckload (FTL), less-than-truckload (LTL), partial truckload (PTL), and private or dedicated vehicular transport. It’s the most common method of shipping for domestic freight and across connected borders, as well as in the first and last steps of other shipping methods (i.e., to move goods from warehouse to ocean port).
- Rail – Train or rail freight is a greener method of shipping often used for hazardous materials and oversized goods like construction machinery.
- Ocean – Maritime, sea, boat, or ocean transport, typically by container, is primarily used for international freight.
- Air – Air cargo is often time-sensitive and typically has a higher density, requiring less storage space.
Why Freight Matters in Logistics
Logistics encompasses the movement of information, raw materials, and goods across all stages of procurement, production, delivery, and consumption.
Optimization through freight analytics is critical to effective logistics. Transportation comprises a huge slice of the supply chain budget, eating up an estimated 60 cents of every dollar.
Freight also requires a vast amount of coordination and attention to detail both internally and across multiple external partners and providers.
Key Components of Freight Management
The management of freight operations breaks down into three major areas that overlap and interact. Balancing all three requires real-time monitoring, prioritization, and quick responsiveness to changing conditions.
Planning and Route Optimization
Planning the best route from point A to point B takes more than a paper map and a wooden ruler or your favorite map app. You need to take into account:
- Total trip time and coordinating multi-stop routes
- Weather, road conditions, and anticipated delay factors
- Cost of freight mode including associated fees and specific carrier charges
- Fuel charges including direct costs as well as BAF, IFP, OFUE, DFUE, and FSC
- Handling, container, and special charges
- Applicable tariffs, tolls, taxes, and currency adjustments
For international freight, shipping can encompass multiple stages, modes, and ports. Even with a simpler domestic route, the fastest road or rail between pick-up and destination isn’t always the most effective. Weather, road conditions, transport mode and carrier availability, tolls and fees—there are many details that go into calculating the best outcome to balance:
- On-time arrival for supply chain needs, carrier connections, or customer demand
- Total direct and indirect freight costs
- Managing safety, human resources, and asset longevity (i.e., fleet vehicles)
Freight Cost Management
Cost management and cost savings are always a goal within freight management. With so many external factors involved, particularly with international freight, it can be a challenge to stay on budget. Strategies include:
- Shipping consolidation
- Freight rate negotiation with carriers including taking advantage of dynamic pricing
- Regular contract review and comparison-shopping
- Use of route optimization software
- Understanding fees, who governs each, and which are fixed, variable, or negotiable
- Tracking regulatory and geopolitical changes that impact access, process, and costs
- Load optimization including backhauling, cross-docking, and quick loading
- Off-peak shipping and night pick-up availability
- Optimization of product and packaging design including dunnage reduction
- Software integration to automatically audit shipping invoices and pursue refunds
- Use of integrated business information systems including freight analytics
Legal and Compliance Aspects
There’s no shortage of paperwork in freight management. Shippers must comply with complex regulations across multiple countries, jurisdictions, and agencies related to:
- Safety issues at all levels
- Import and export declarations, documentation, duties, and processes
- Carrier- and mode-specific guidelines and limits on goods, packaging, and labeling
- Taxation
- Insurance
- Driver and fleet qualification, maintenance, hours of service, etc.
Benefits of Implementing Freight Analytics
The true benefits of implementing an efficient freight analytics program are lower cost, less time, and greater confidence. Rather than anecdotal evidence, generic best practices, or endless time spent on the manual tabulation of data, you’ll have specific, exclusive, and factual information backing every decision.
Types of freight analytics include:
- Descriptive – Summarization of past data (what’s already occurred) within dashboards and reporting, often used to track KPIs (key performance indicators) such as delivery times and cost per package, truckload, month, etc.
- Diagnostic – Also backward-facing, diagnostic analytics digs into connections—not just what occurred, but why. Patterns are identified, such as driver performance or delivery time or cost in relation to carrier, transport type, or particular countries or ports.
- Predictive – Using data patterns and statistical modeling to predict what’s likely to happen in the future is the next stage. For freight analytics, this could incorporate logical predictions related to seasonality, weather, customer demand cycles, and any type of risk assessment.
- Prescriptive – The leading edge of analysis is prescriptive: offering a course of action based on insights from the first three stages. This is where AI has the potential to shine, combing through vast amounts of internal and external data, patterns, and predictions to identify connections, risk levels, and probabilities leading to practical recommendations and actions free of bias, habit, or self-interest.
Cost Optimization
Freight analytics can help reduce costs by exploring patterns between costs and causes. This could include:
- Where, when, and why certain fees or surcharges are applied
- Contract compliance, billing error, and refund incidences by carrier and work group
- Complete cost and profit analysis of free shipping offers
Enhanced Operational Efficiency
A freight analytics platform that connects data and departments can save time and increase results. Consider:
- Immediate access to real-time data on shipment status and location
- Demand planning based on predictive analysis as part of contract negotiations
- Identification of bottlenecks, underperformers, and inefficiencies
- Cloud connection of pertinent data points across internal and external teams
- Identification of training needs
Improved Risk Management
Your data can be one of the best resources available to guide risk assessment. Analytics can help you:
- Identify and reduce factors that correlate with damage and accidents
- Lower theft and fraud risks by diagnosing incidents and identifying patterns
- Practice continuous improvement on crisis and change response plans of action
Increased Customer Satisfaction
Utilizing freight analytics to understand, predict, and reduce your freight costs and speed leads to greater customer satisfaction.
You can also incorporate data management alongside enhanced and automated communication to reduce wait time and increase the accuracy of connecting customers with real-time reporting on their shipments.
Enhanced Sustainability in Operations
Businesses that rely on freight shipping need to remain aware of regulations and practices urging a move away from traditional fuels. Freight analytics can help:
- Identify the impact of greener modes like rail on cost, speed, and other factors
- Evaluate sustainability as a factor in weighing mileage within route optimization
- Track the impact of using newer alternative-fuel ocean vessels
Elevate Your Freight Strategy with Lojistic
Freight analytics is critical for businesses to stay competitive and be able to adapt to changing external factors.
Lojistic is a business intelligence and shipping analytics platform designed for companies of all sizes. Our software helps you make sense of all your data—including parcel and freight auditing with the option to automatically pursue refunds you’re owed.
We help clients reduce shipping costs with discounted group parcel rates and parcel shipping cost comparison plus access to our freight marketplace and carrier contract optimization services.
Our intuitive dashboard provides real-time data and shipping reporting with instant access to actionable insights and automation opportunities. You’ll see where you’re overspending, how to reduce administrative work hours, and how to avoid unnecessary fees and surcharges.
Ready to learn more about reducing your shipping costs and increasing your profit with Lojistic? Contact us about how we can take your freight operations to the next level. You can also check out our success stories, explore a virtual demo account, or jump right into creating a free Lojistic account.
Sources:
ScienceDirect. Challenges and Opportunities of Big Data Analytics for Upcoming Regulations and Future Transformation of the Shipping Industry. https://www.sciencedirect.com/science/article/pii/S1877705817333386
PAF Insurance Services LLC. ITEM/COMMODITY CATEGORY DEFINITIONS. https://www.grw-products.com/definitions_of_commodity_categor.htm
Freight Insurance Center. Online Freight Insurance Rates for Instant Coverage. https://www.freightinsurancecenter.com/freightinsuranceonlinerates.htm
FreightCenter. Most Common Freight Modes. https://www.freightcenter.com/most-common-freight-modes/
Statistica. Breakdown of U.S. transportation costs in 2021, by mode of transportation. https://www.statista.com/statistics/645322/us-logistics-market-transportation-costs-breakdown/
Navata. Strategies For Freight Cost Optimization. https://www.navata.com/cms/freight-cost-optimization/
Chartio. Types of Data Analysis. https://chartio.com/learn/data-analytics/types-of-data-analysis/
Author
Rich Harkey
Rich Harkey
Senior Strategy Manager
As the Senior Strategy Manager at Lojistic, Rich leverages over three decades of expertise to help businesses improve their shipping strategies and reduce costs. With a deep understanding of the requirements of shippers and the operational intricacies of carriers, he excels in everything from optimizing business rules and managing carrier invoices to negotiating carrier contracts.
Rich's comprehensive knowledge of the logistics industry, combined with his strategic insights and passion for data analysis, has enabled thousands of companies to gain visibility into their shipping expenses, driving impactful results.