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 Home » Services » Transportation Planning » Model-Based Benchmarking Consortium
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Model-Based Benchmarking Consortium
What Is It?
Benchmarking transportation rates is difficult today - direct rate comparisons of even line haul rates can be very misleading. Why? Because the rate that a carrier offers to a shipper is a reflection of a myriad of factors, such as the overall relationship, performance requirements, origin- and destination-specific characteristics, regional equipment imbalances, and the structure of accessorials. But head-to-head rate comparisons do not capture the real drivers of transportation costs because they:
- Rely too heavily on a single carrier's rates
- Don't capture the underlying cost drivers
- Prohibit confidential rate sharing between companies
- Require extra comparisons
Chainalytics' Model-Based Benchmarking (MBB) can help you compare transportation rates to market rates by normalizing the drivers that impact overall costs. By becoming a member of our Model-Based Benchmarking Consortium (MBBC), North American shippers of dry and temperature-controlled truckload (TL) and intermodal freight can confidentially share transportation rate information for the purpose of benchmarking costs. Chainalytics developed the MBB approach to answer three fundamental questions for users of transportation services:
- Am I paying a fair price for transportation with respect to my competitors and peer companies?
- Am I paying the best price for the level of transportation services that I am receiving?
- Am I doing the right things in my operations to lead to the best price for transportation services?
Our MBB statistical model can be used to estimate the price you should expect to pay for your, long-haul truckload or intermodal moves at "market" rates. The econometric model analyzes millions of individual truckload moves to calibrate the impact of a specific shipment characteristic or managerial policy on your per-load line haul cost.
What Do We Do?
Chainalytics' MBB approach integrates the best elements of traditional benchmarking with econometric based modeling methodologies. Within our approach, we create a normalized transportation cost model that captures factors such as distance, origin, destination, and loading conditions. This robust predictive model can be used for comparisons of a shipper's and an industry's overall shipping costs and can evaluate the effect each factor has on the overall cost. Our MBB approach is:
- An accurate snapshot of rate influences. Using transaction data, MBB has an accurate snapshot of what a firm actually paid for transportation, not what it had hoped to pay in its negotiated contracts. MBB also captures and quantifies the cost impact that operational characteristics and business practices have on transportation rates across all members' freight. By tying these cost drivers to the actual price paid, the model determines the variability that drives these transportation prices and can capture the effect of each factor on overall cost.
- A peer-comparative tool. The MBB approach provides a robust, predictive tool that can be used to compare overall shipping costs, costs for individual lanes, or costs for any subsets of a supply chain network. And because MBB only shares information regarding the drivers of transportation costs-not the actual rates themselves-companies never actually have to share or provide visibility into their confidential contract information.
- A precursor to optimal transportation procurement. Before conducting a procurement bid, MBB lets each firm estimate the amount of money it will save. In addition, the robustness of the model enough to enable a company to model and benchmark rates for new lanes and services that may arise in future business.
The Model-Based Benchmarking Consortium enables you to:
- Compare cost drivers across a cross-section of companies, regions and industries without needing to find "identical" matches
- Strip away accessorial charges to easily capture true line-haul costs
- Target lanes that can generate most value through procurement
The MBB approach for transportation has been developed and refined by members of Chainalytics' expert team since 2003. The model is comprised of over $5 billion in annual transportation spend and over 800,000 unique lanes. The methodology has been applied to a wide variety of surface transportation types, including dry van, temperature controlled, intermodal, team-driver and multi-stop truckloads.
Can Model-Based Benchmarking improve my operations? We can help you more effectively answer these questions:
- Am I paying a fair price for my transportation services compared to my peers?
- How can I determine where lane-by-lane transportation costs fall in comparison to market prices?
- What should I expect to pay for lanes where I don't presently ship, today?
- How effective have my previous carrier negotiations been?
- How can I develop appropriate - not arbitrary - pricing for various terms of sale such as customer pick-ups vs. door deliveries?
- How have my transportation rates changed in the last year relative to the marketplace?
- Am I realizing the cost savings I expected to achieve from my last round of rate negotiations?
Is It Right For You?
You are an ideal candidate for Chainalytics' Model-Based Benchmarking Consortium if your company has:
- Challenges determining the best price for transportation services with respect to operational requirements and decision-making rules.
- A need to understand the cost drivers of your transportation rates.
- Difficulty comparing your transportation rates to market rates.
- Internal access to transactional data rather than contract rate data.
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