This three-part article series offers takeaways to help carriers define what they have and decide what they need to improve their profitability. The first article focused on the importance of geography on business performance. The second article explored utilizing data to guide decisions about current customers.
This final piece in the series highlights the value of understanding data regarding the market and potential customers.
The Importance of Knowing the Market Your Network Operates in
Once you fully understand your own freight network, the next step is to understand everyone else’s freight network. This is the market, which includes rates and volumes on geographic lanes for other shippers and carriers. Understanding your network’s customers and geography allows you to compare internally. However, knowing the market allows you to compare externally. This may include other customers on the same lanes as your customers, as well as shippers on lanes in which you’re not currently operating.
Step One: Define What You Have
Knowing what you have compared to your competition is valuable information. It’s secondary to how your current customers fit into your network, but market data can identify opportunities and potential threats. For example, if a current customer or lane meets your profitability targets but has a lower rate per mile than the market rate, you may be able to increase your rate or secure additional business at the below-market rate since the current rate fits well into your network.
Identifying lanes where your current rates are above market is important since other carriers may attempt to take the business at closer to market rates. Knowing your “break-even” rate can quantify this threat and allow you to make contingency plans, such as building density with additional shippers on the lane.
Step Two: Decide What You Need
Knowing the market outside your network is also beneficial. With the right tools, you can evaluate this information and compare it to your current customers and geography. Modeling the profitability of market rates on lanes you currently don’t operate on can give you the knowledge to expand or change your current network while maintaining or improving your network profitability. Building options while maintaining profitability is key to creating a sustainable freight network.
Step Three: Know or No
Once you know how your freight network profitability compares to the market, you have the data to support saying no to current shippers or lanes that can be replaced from the market at higher profitability levels. These changes do not need to be drastic, but they can be applied slowly to allow for the assessment of the changes in other parts of the network. Since the market is dynamic, continuing to compare your network to the market is key to maintaining its profitability.
How Forvis Mazars Can Help
Through our Freight Network NavigatorTM, we analyze your operational and financial data to help you effectively gauge your business’ profitability from a geographic view, down to the individual customer lane and load level. Gain access to market data to help you benchmark against competitors, evaluate and accurately price new opportunities in real time, and identify the rates you need to achieve target operating goals. Our consultants can fuel you with strategies that can help you deliver improved operational results to outpace your competition and accelerate your path to sustainability.
If you have any questions about our Transportation Profitability Analysis & Network Management service or want to request a demo of the Freight Network Navigator, please contact Chuck Jorgenson.