Part 3: The Future of Freight Pricing is Finally Here
How Transfix TrueRate+ Removes Rate Opacity and Builds Trust
In freight partnerships, the word “trust” is frequently thrown around, but the complexity of moving and pricing freight often undermines that promise. Much of shippers’ distrust of carriers and brokers is caused by rate opacity and unpredictability, meaning that shippers don’t have visibility into rates quoted by carriers and the associated brokers’ fees. This pricing murkiness is only exacerbated by the cumbersome and time-consuming RFP process, which we all know can quickly cost a company its competitive rates. This habitual pattern – locking in rates for 6 to 12 months in advance and then scrambling for spot coverage when carriers reject tenders in favor of higher rates – is a recipe for unreliability, poor service, and, indeed, mistrust in freight partners.
In September, Transfix launched Transfix TrueRate+, a fresh approach to transportation pricing, offering shippers a modern option beyond contract and spot that ensures tender acceptance and pricing you can plan for – even in times of volatility. As an evolution of traditional cost-plus, this solution exemplifies a true cross-organizational effort at Transfix to derive forward-looking rates – a blend of machine learning and a deep understanding of the freight market.
Nina Cheng, Pricing and Growth Strategy Manager at Transfix, explained that when pricing for contract rates, her team must consider the duration of the entire contract, including seasonality and other varying components.
“But one can never truly predict a 12-month cost on a lane,” said Cheng. “While our algorithms can forecast using numerous data sets, there will always be black swan events that are unpredictable and render long-term pricing moot. It’s impossible to predict things like the threat of a rail strike or a war in Eastern Europe, or the resulting disruptions they will cause within each shipper’s network and supply chain.”
Transfix TrueRate+, however, helps shippers mitigate that risk, as Cheng’s team is working closely with the data science team to provide a solution that offers a split of the risk with the shipper, getting a greater savings when the market is soft and taking on less risk as it tightens. This way, shippers have a more predictable way to manage their freight spend, as well as transparency and a more strategic partnership.
Transfix TrueRate+ incorporates real-time freight data and blends machine-learning technology with industry expertise to determine a projected Market Rate, plus a management fee calculated by our Shipper Savings formula.
This chart provides an inside view of our shipper software, where shippers have full visibility of Transfix’s procurement process, including the rates that are declined and accepted.
“What makes our solution different is that TTR+ truly does align Transfix’s incentives with those of the shipper,” said Cheng. “Every single load we price, the shipper can see the price we procured at through our shipper software and why we are charging what we’re charging.”
In other words, when Transfix procures below an estimated rate, shippers get a higher percentage of the savings. When we procure above an estimated rate, we’ll take on a higher percentage of the costs – all the while considering shippers’ service KPIs. For our shipper customers, choosing the TTR+ solution means guaranteeing tender acceptance, relying less on RFPs, and anticipating savings of upwards of 10% on average freight cost.
“We want to create a fair market for both carriers and shippers, regardless of market conditions,” said Scott Sokoloff, VP of data and analytics at Transfix. “With TTR+, we can provide the best possible price while also keeping up with shippers’ service expectations. During favorable market conditions, we’re willing to share the benefits, but also take on more of the risk when less favorable circumstances arise.”
This Modern Evolution of Cost-Plus is the Predictable Pricing Shippers Need
At Transfix, we’ve been analyzing market data and seasonality for almost a decade. Our insights into pricing stem from a combination of supply, demand, price, and service metrics. As shippers explore alternative strategies to pricing outside contract, spot, and traditional pricing solutions like cost-plus, we are uniquely positioned to provide a fresh approach that best fits the shippers’ needs.
Cheng added: “Based on the data we have with shippers, we’re able to identify their spot activity, which allows us to locate trends and say, for example, ‘We’ve noticed this lane has hit your spot board quite a few times. Is there a problem here at this facility?’ We can then offer them data insights and advice when alternate pricing solutions like TTR+ may be the best solution.”
Pricing solutions based on real-time data that offer potential savings, as well as opportunities for carrier consolidation, are becoming a more attractive option for shippers– given uncertain market dynamics, rate volatility, and their desire to mitigate risk while maintaining confidence in high service levels. Our strategic relationships with mid-sized carriers allow us to act like an asset carrier, while maintaining the flexibility of a broker.
“Anecdotally, during RFPs, we have heard from our shippers a desire to consolidate their carrier networks and work with trusted carriers again and again,” said Cheng. “When a longer partnership is at stake, carriers are incentivized to commit long-term to a shipper’s lane and learn the ins and outs of their facilities and customers.”
Shippers: Do you want to build stronger relationships with your carrier network? TTR+ can help. When pricing is transparent, you can plan with a higher level of confidence, which drives higher service levels and potential savings.
To learn more about Transfix TrueRate+, click here.