15 Companies Evaluate Truckload Rates Through ‘Apple-to-Apple’ Market Comparison
Boston & Atlanta – July 14, 2004 - Chainalytics LLC today announced the release of the initial results from its new service aimed at helping companies benchmark their transportation services against other firms. The new Model-Based Benchmarking Consortium now has 15 members that total more than $1.4 billion in annual truckload transportation expenditures.
By addressing the shortcomings of traditional benchmarking, the Model-based Benchmarking approach enables each member to compare their unique transportation rates against the broader market without ever sharing or providing visibility into its actual contracts. The initial market data evaluated over 1.2 million shipments over 26,000 distinct lanes to determine company-specific lanes that fell above or below the market’s average. A combination of refrigerated and dry good long-haul shipments was evaluated.
The initial results compared each member’s total freight to the market, defined below- and above-market costs per lane, and highlighted the biggest areas of opportunity for cost improvement. Chainalytics plans to provide semi-annual evaluations to its members to continue to benchmark changes.
The model-based benchmarking approach creates a generalized transportation cost model that captures and normalizes underlying factors such as distance, origin, destination, shipment characteristics, and loading conditions. This creates a predictive tool that can be used to compare an individual shipper’s lane or aggregate shipping costs to the overall market. Additionally, the model enables each shipper to quantify the impact that service requirements and business restrictions have on its transportation rates to uncover those factors that might be inadvertently inflating overall rates. And since the individual factors’ effects are isolated and quantified, firms don’t need to find identical firms to benchmark their services. Additional benefits include:
- Overcome misleading direct rate comparisons by considering a myriad of business and service factors.
- Estimate market rates for lanes where a firm does not currently have coverage.
- Ensure that contract confidentiality is maintained since no specific contract information is shared between members.
Consortium members obtain insight into their unique transportation service requirements, and the resulting cost structures, compared to that of their peers and competitors. “We hope to gain a better understanding of the factors within our operations that are causing our transportation costs to be abnormally high”, said one director of logistics for a Fortune 500 company who is a consortium member. “Once we’ve determined that we can set a course of action to improve those areas.”
Chainalytics views this new approach as a substantial improvement over existing benchmarking techniques which simply compare rates on lanes without regard for service factors that ultimately drive carrier cost structures and, therefore, pricing. “Model-based benchmarking combines the best intentions of traditional benchmarking with advanced econometric-based modeling methodologies”, said Mike Kilgore, President, Chainalytics. “By joining the consortium, we hope to allow the members to better understand the drivers of their transportation cost structure through an ‘apples-to-apples’ comparison across a large cross-section of the market.”
Chainalytics provides leading manufacturers, wholesalers, and retailers with consulting and outsourcing services combined with market-leading technology needed to achieve double-digit cost reduction and service improvements in their supply chain. Specializing in the application of advanced decision sciences technology, Chainalytics supports improved strategic, tactical and operational decision-making for complex supply chain networks.
Chainalytics specializes in providing leading companies advanced consulting and outsourcing services to improve supply chain performance. Specializing in the application of advanced decision sciences technology, Chainalytics supports improved strategic, tactical and operational decision-making in the areas of supply chain strategy, transportation planning and inventory planning. The company’s powerful combination of analysis, technology, and methodology enables clients to achieve and sustain double-digit cost reductions and customer service improvements, resulting in millions of dollars of value creation. Chainalytics serves mid- to large-size enterprises with complex supply chains, with special emphasis on companies in retail, wholesale and manufacturing of consumer durable and non-durables.