The Base Rate Index, which excludes the impact of Accessorial Charges assessed by carriers increased by a modest .4% in November versus October. Since March of 2011 Base Rates have risen 4.3% in aggregate.

An increase in Fuel Surcharges assessed by carriers is the primary reason why Total Costs are increasing a a faster rate than Base Rates.   In November the Fuel Surcharges assessed by carriers equated to 20.86% of Base Rates, up from 18.79% in March.

“We are starting to see increases in some sectors that have been hit the hardest during the economic downturn” said Doug Payne, President & COO, Nulogx. “This may be a sign that we are seeing both an increase in demand as well as continued operational and pricing discipline from carriers” continued Payne.

The CGFI is sponsored by Nulogx, a leading Transportation Management Solutions provider, and is used by shippers and carriers to benchmark performance, develop business plans, and secure competitive agreements. It was developed with the assistance of Dr. Alan Saipe. For more information visit the CGFI website: www.cgfi.ca.

Click Here to see the public results.

The CGFI is sponsored by Nulogx, a leading Transportation Management Solutions provider, and is used by shippers and carriers to benchmark performance, develop business plans, and secure competitive agreements. It was developed with the assistance of Dr. Alan Saipe. For more information visit the CGFI website: www.cgfi.ca.

As a member of the CGFI community your company can take advantage of access to this database to benchmark your company’s performance against the market. Please contact us for more information on how to gain access to this valuable service.

However the Base Rate Index, which excludes the impact of Accessorial Charges assessed by carriers decreased by .1% for the same period.  This was the first decrease in Base Rates since March 2011.

Offsetting the decrease in Base Rates were slight increases in both Average Fuel Surcharges assessed by carriers and Other Accessorial Charges.  During this period the Fuel Surcharges assessed by carriers equated to 20.16% of Base Rates, up from 20.1% in August.  The combined effect of lower Base Rates and higher Accessorial Charges resulted in no change in average transportation costs for Canadian shippers.

“The slight decrease in Base Rates was predominantly driven by reduced costs in the Transborder Truckload sector,” said Doug Payne, President  & COO, Nulogx. “Over the summer these movements were subject to significant cost increases and it is possible that these are easing somewhat” continued Payne.

The CGFI is sponsored by Nulogx, a leading Transportation Management Solutions provider, and is used by shippers and carriers to benchmark performance, develop business plans, and secure competitive agreements. It was developed with the assistance of Dr. Alan Saipe.  The most recent results are available (after registering) at the CGFI website: www.cgfi.ca.

The Base Rate Index, which excludes the impact of Fuel Surcharges assessed by carriers, has increased for 6 consecutive months including a .6% increase in August. However, Base Rates remain 4.8% below the same period a year ago.

Average Fuel Surcharges assessed by carriers increased from 19.0% of Base Rates in July to 20.1% in August.

“The trend toward marginal increases in Base Rates we observed last month has continued,” said Doug Payne, President  & COO, Nulogx. “although it is interesting to note that they are still significantly below prior year levels” continued Payne.

The Base Rate Index, which excludes the impact of Fuel Surcharges assessed by carriers, has increased for 4 consecutive months including a 1.4% increase in July. However, Base Rates remain 3.6% below the same period in July 2010.

Average Fuel Surcharges assessed by carriers declined from 19.3% of Base Rates in June to 19.0% in July.

“It appears there is a trend toward marginal increases in Base Rates,” said Doug Payne, President  & COO, Nulogx. “If carriers continue to manage their capacity and price rationally we may see this trend continue, however that could be offset if there is a slowing economy” continued Payne.

However, after the negotiations are completed, the resulting carrier selections are usually communicated to those in the company making shipping decisions via a Static Routing Guide.   The problem is that “Static” or paper/spreadsheet routing guides have built in efficiencies that can cost shippers significant amounts of money.

Here’s why:

1.       Arbitrary Decision Rules

Static Routing Guides typically determine the choice of carrier based on the origin-destination pair, and the weight (or size) of the shipment.   The problem is that the weight factor used will almost always be incorrect.

For example, if a routing guide stipulates that shipments less than 100 lbs should be routed via a small package carrier, it will only be by coincidence that 100 lbs is the weight at which parcel carriers become more cost effective than LTL carriers.  The actual weight at which a Parcel carrier becomes more cost effective might in fact be 86 lbs, or just as easily 167 lbs.  And it might be a different weight for every market.

In reality a Static Routing Guide, and its users, could never accommodate the level of complexity involved in optimizing the correct cut-off points, so as a necessity arbitrary rules are used.

Unfortunately these rules cost more than you think.  In a recent study of a large small parcel user it was discovered that simply using the right carrier for each individual shipment weight would result in a savings of almost 5%.  While this may not seem like a lot, when your shipping bill is in the millions it really adds up.

2.       Limited Carrier Choices

Again, concerns with how well a Static Routing Guide might be followed result in shippers over-simplifying their networks, limiting their carrier choices and as a result increasing their costs.

The fact is that there are a number of carriers that service smaller territories across Canada that offer extremely good service at very competitive rate levels.   As an example, your most cost effective solution might be to use two different carriers to service a province; splitting the business either geographically, or maybe giving one carrier lighter shipments and another the heavier shipments.  Either way, many Transportation Managers would be concerned about those selecting carriers “getting it right”, and the impact on costs or service if they got it wrong.  So a common decision is to use one carrier instead of two, tolerate the additional cost and keep it simple.

Sure, the cost impact might be in the 2-4% range, but again – for shippers with large spends this can really start to add up.

3.       Compliance

It is one thing for a Transportation Manager to aggregate their company’s spend to negotiate an agreement, and a completely different thing to ensure this gets implemented properly.

It is very common for shippers to stray from the routing guide, for a variety of reasons.  These could range from issues like a simple mistake, or perhaps a carrier being tendered another carrier’s shipments because they were at the dock and it was just easier to give it to them rather than wait for the right carrier. Or from more complex issues when shipping locations engage in maverick spending which dilutes the company’s buying power and makes it more difficult to meet the volume commitments made to carriers.

The first step in controlling compliance is having the ability to measure it, and quantify the impact of the non-compliant spend.  Not just by carrier, but by “decision” – meaning given the weight and destination was the right carrier selected.? The latter is an important step in having the ability to quantify the cost impact of these decisions.  With this information, each shipping location can fully understand the impact of their actions and modify them accordingly.

The Solution – A Dynamic vs. Static Routing Guide

The only way to address the inefficiencies associated with a Static Routing Guide solution is to use a rating engine to power a Dynamic Routing Guide.   A rating engine that is typically found in a TMS will enable a shipper to:

1. Increase the sophistication of their transportation network to use the best carriers to service each area they deliver to.   Cost competitive carriers will not need to be eliminated as the TMS will be able to identify the best carrier for each shipment, based on total cost and delivery requirement.
2. Eliminate arbitrary rules for selecting carriers.  The ability to determine the lowest cost carrier for each individual shipment, based on weight, destination, and all accessorial charges will ensure the lowest overall cost is achieved.  The inherent inefficiencies caused by using arbitrary rules to select carriers will be completely eliminated.
3. Monitor or enforce carrier compliance.  A TMS set-up can either be “open” which allows for non-compliant carriers to be used, or “closed” meaning only the system-selected carrier is to be used.  Either way, the incidence and cost impact associated with using a non-compliant carrier can be easily monitored, reported and reduced.

While these may seem like small areas of inefficiency, the availability of easily acquired TMS applications, and their potentially high ROI’s now make this the low hanging fruit for any Transportation Manager seeking to reduce costs in their organization.

Nulogx has a hosted service that is well positioned to deliver these efficiency improvements, without the need to purchase software or hardware, or learn how to use or maintain it.   Ask us today for more information on how we can help you improve your transportation processes.

Results published today by the Canadian General Freight Index (CGFI) indicate that the cost of ground transportation for Canadian Shippers increased in May when compared to April due to increases in both Base Rates and Fuel Surcharges assessed by carriers.

The CGFI Total Freight Cost Index rose by 0.8% in May when compared to April, its 3^rd consecutive monthly increase. The Base Rate Index, which excludes the impact of Fuel Surcharges assessed by carriers, increased 0.4% during the same period. In addition, average fuel surcharges assessed by carriers increased from 19.9% of Base Rates to 20.3%.

Of note is that fuel surcharges increased for the 8^th consecutive month, and have reached their highest point since November 2008.

“In May we saw the second successive month of increases in Base Rates,” commented Doug Payne, President & COO, Nulogx. “When added to the increase in Fuel Surcharges, this has a notable effect on ground transportation costs for Canadian shippers,” continued Payne.

The CGFI Total Freight Cost Index rose by 1.7% in April when compared to March, the largest 1 month gain since July 2010. The Base Rate Index, which excludes the impact of Fuel Surcharges assessed by carriers, increased 1.1% during the same period. In addition, average fuel surcharges assessed by carriers increased from 18.8% of Base Rates to 19.9%, and contributed significantly to the rise in freight costs.

Of note is that fuel surcharges increased for the 7th consecutive month, and have reached their highest point since November 2008.

“Lately, increasing fuel prices have been the major factor affecting transportation costs”, commented Doug Payne, President & COO Nulogx. “However in April we saw a notable increase in Truckload Base Rates begin to contribute to this rise in freight costs” continued Payne.

The CGFI Total Freight Cost Index rose by .4% in March when compared to February, while the Base Rate Index, which excludes the impact of Fuel Surcharges assessed by carriers, decreased .7% during the same period. Offsetting the decrease in Base Rates was a significant increase in average Fuel Surcharges which rose from 17.4% to 18.8% of Base Rates.

Fuel surcharges increased for the 6th consecutive month, and reached their highest point in over 2 years.

“Increasing fuel prices continue to be the major factor affecting transportation costs”, commented Doug Payne, President & COO Nulogx. “While Base Rates are relatively stable to declining, increasing fuel prices are starting to have a real impact on shipping costs” continued Payne.

The CGFI Total Freight Cost Index decreased by a nominal .1% in February when compared to January, while the Base Rate Index, which excludes the impact of Fuel Surcharges assessed by carriers, decreased 1.1% during the same period. The CGFI is still 2.3% above the April low point and 1.9% above last year’s result for the same period.

In February, Fuel Surcharges reached their highest point in over 2 years and averaged 17.4% of Base Rates, compared with 16.4% in January. “In February overall freight costs remained flat after successive months of decline,” commented Doug Payne, President & COO Nulogx. “The reduction in Base Rates was offset by increases in Fuel Surcharges, and with rising fuel prices we expect Total Freight Costs to increase in the near future,” continued Payne.

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