Virtual Transportation Management, Inc.
Everything You Need to Know About Freight Rating
Effective freight rating is critical to any shipper’s control system over their spending. This guide provides an overview of everything you need to know about freight shipment rating.
What is Freight Rating?
Freight rating is the process of determining the cost associated with transporting goods from one location to another. This involves evaluating numerous factors such as the weight, dimensions of the shipment, the distance it needs to travel, the type of goods shipped, class, special handling and any unique equipment needed.
Accurate freight rating is crucial in the shipping industry as it helps businesses manage their carrier spend efficiently. Understanding and effectively applying freight rates, companies can optimize their shipping processes, ensure competitive pricing, and maintain better control over their freight expenditures.
The Process of Freight Rating
The process of freight rating involves several critical steps that provide accurate and efficient calculation of shipping costs.
It begins with data collection, where essential information such as the weight, dimensions, class, origin, and destination of the shipment is gathered. This data forms the foundation for the rating process.
Next, calculation methods are applied, which may include determining the dimensional weight or actual weight of the shipment, depending on which is greater.
The freight class and NMFC (National Motor Freight Classification) codes are used to categorize the shipment, influencing the base rate. Additionally, various surcharges and discounts are applied, such as fuel surcharges, accessorial charges for additional services, and volume discounts for larger shipments.
These factors all contribute to identifying the proper rate for each shipment.
Benefits of Effective Freight Rating
Effective freight rating offers numerous benefits that can significantly enhance a shipper’s operations and bottom line.
Cost Savings
The primary advantage is cost savings, as accurate rating helps identify the most economical shipping option, reducing overall transportation spend. Improved accuracy in shipping costs ensures that shippers are not overpaying and can better forecast their logistics budget.
This accuracy also translates to enhanced negotiation power with carriers, allowing shippers to secure better rates and terms.
Accurate Freight Accruals support your budget and month end accounting practices. Knowing what has shipped vs what has paid improves visibility into your future expenditures.
Improved Transparency, Decision Making & Planning
Effective freight rating facilitates better decision-making and planning, enabling shippers to optimize routes, consolidate shipments, and manage their supply chain spend more efficiently.
Additionally, it increases transparency and predictability in shipping operations, which is crucial for maintaining trust with customers and partners.
By leveraging accurate freight rates, shippers can ensure they meet delivery commitments without unexpected cost fluctuations, contributing to a smoother and more reliable shipping process.
Comparisons of actual spend to budget estimates identify areas for additional review. Eliminate accounting surprises at month end, quarter end and year end.
Challenges in Freight Rating
Freight rating presents several challenges that can complicate the process for shippers. One of the primary difficulties is the complexity of rate structures, as shipping costs are influenced by numerous variables like weight, dimensions, distance, freight class, special handling and unique equipment types required.
Additionally, rates and surcharges frequently change, requiring shippers to constantly update rates to avoid inaccuracies. The variability between carriers adds another layer of complexity, as each carrier may have different pricing models, surcharges, and service levels.
Managing multiple shipments and carriers simultaneously can be daunting, particularly for shippers with high volumes of goods or shipments.
Integrating freight rating systems with existing logistics and management tools can also pose challenges, as compatibility and data synchronization issues often arise.
These challenges underscore the need for robust, flexible freight rating solutions that can manage the dynamic nature of shipping rates and streamline the rating process.
Freight Rating Tools and Software
Freight rating tools and software play a crucial role in streamlining the freight rating process and ensuring accuracy. Popular options include:
- Freight Rate Calculators: Freight rate calculators are another valuable tool, allowing shippers to quickly and accurately determine shipping costs based on various parameters.
- Carrier Specific API’s (Application Programming Interface): Input shipment specifics and receive a quote from a single freight carrier.
- Transportation Management Systems: Transportation Management Systems (TMS) can integrate with a shipper’s existing logistics infrastructure to provide real-time rate updates and comprehensive rate management.
- Third-Party Logistics Providers: Additionally, third-party logistics providers often offer rating solutions as part of their service packages.
- Audit & Payment Providers: Companies also choose to outsource freight auditing and payment processes to specialized providers, who have in-depth knowledge of carrier rates and can correct inaccurate billings before or after payment.
How to Choose the Right Freight Rating Tool
Choosing the right freight rating tool involves a careful assessment of a shipper’s specific needs and operational requirements.
The process begins with evaluating the volume and complexity of the shipments, as different tools may be better suited for small-scale shippers versus large-scale operations.
Shippers should compare various tools and providers, considering factors such as the tool’s ability to manage real-time rate updates, its integration capabilities with existing systems, and the user interface’s ease of use.
When selecting freight rating tools, shippers should look for features such as
- real-time rate updates, which ensure the most current rates are applied.
- integration capabilities, which allow the tool to work seamlessly with other systems.
- a user-friendly interface, which makes the tool accessible and easy to use.
- and robust reporting and analytics, which provide insights into shipping costs and performance.
These tools not only enhance the efficiency of the freight rating process but also contribute to more informed decision-making and better overall logistics management.
Tips for Getting the Most Out of Your Freight Rating
There are important steps shippers can take to maximize the benefits of their freight rating process.
- Regularly Update Shipping Data: Ensure weights, dimensions, freight class and destinations are current and accurate.
- Stay Informed About Industry Changes: Keep track of shifts in fuel surcharges, new regulations, and other industry changes.
- Negotiate with Carriers: Use accurate freight rates to secure better terms and rates with carriers.
- Utilize Historical Data: Analyze past data to identify trends and make more informed decisions.
- Leverage Technology: Implement advanced freight rating tools and software to streamline processes, improve accuracy, and increase efficiency.
Common Mistakes to Avoid
When it comes to freight rating, there are common mistakes that shippers should avoid when producing useful accurate rates.
- Ignoring Hidden Charges: Overlooking accessorial fees can lead to unexpected costs.
- Not Updating Rates Regularly: Using outdated pricing that does not reflect current market conditions produce inaccurate freight accruals.
- Overlooking Small Discrepancies: Ignoring minor errors in weight, extensions or dimensions can cause inaccuracies.
- Relying Solely on Manual Processes: Manual calculations can lead to human errors and inefficiencies.
- Failing to Train Staff on Rating Tools: Underutilization of tools due to lack of proper training.
Future Trends in Freight Rating
The future of freight rating is shaped by emerging trends that promise to enhance accuracy and efficiency in the logistics industry.
Automation and AI are at the forefront, offering the potential to streamline the rating process, reduce manual errors, and provide real-time rate adjustments.
Blockchain technology is also gaining traction, providing greater transparency and security in freight transactions.
Predictive analytics is becoming increasingly important, allowing shippers to forecast rates and make informed decisions based on historical data and market trends.
Evolving regulations and their impact on freight rates require shippers to stay updated and adapt quickly to changes.
Additionally, the growing emphasis on sustainability is influencing freight costs, as eco-friendly practices and regulations become more prevalent.
By staying ahead of these trends, shippers can optimize their freight rating strategies and remain competitive in a dynamic market.
Virtual Transportation Management (VTM)
VTM Freight Rating Best Practices
To fully leverage the benefits of freight rating and stay ahead of the curve, implementing best practices is essential. At VTM, we have developed a comprehensive approach to deliver unparalleled accuracy and efficiency.
A Central Platform for Your Rates
- VTM Freight Rating engine utilizes TRANSWARE™ as a central platform to store and compare published bureau rates, customer specific contract rates & carrier API’s.
- Our freight rating tool allows you to model and forecast expected freight expenses when you install new carrier quotations.
- Our freight rating tool provides the tariff authority used for each rate produced.
Robust Reporting & Analytics
- Freight rating allows you to pre-rate your bills of lading for freight accruals.
- We produce robust rating reports from our TRANSWARE™ platform.
- Our rates support all TRANSWARE™ functions, analytics, and reports.
Put VTM to work validating your invoices against custom business rules & watch the savings add up.
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