Redwood Blog

How a 3PL Can Help You Make Sure Your Freight Rate is Fair

For shippers working with a broker or 3PL provider, getting a fair rate is a top priority. The problem is, how do you know the rate you’re given is in tune with current market prices? The problem is two-fold. If the rate is higher than fair market value, the shipper is wasting money and has an unnecessarily high freight spend. If the rate is lower than fair market value, then quality carriers will not accept your freight and service levels will decline. The market fluctuates due to the seasons, legislation and regulation, changing cost of fuel, and other factors. Your rate should fluctuate with it.

The best way to ensure that your freight spend is fair is to partner with a 3PL that can provide industry transparency, uses data-driven pricing, and can tap into hidden capacity.

Industry Transparency

A 3PL can provide you with heat map to show industry supply and demand

When your freight quote changes, your broker should be able to tell you why. A broker has a bird’s eye view of the transportation industry and knows where demand is increasing around the country. For example, Redwood reps can share a heat map (see left) of capacity availability in real time so their customers can easily understand why their freight quote is more or less than last week. 3PLs know when regulations will take effect and how they will change available capacity. By sharing industry information with shippers, 3PLs can help you understand why your freight is priced the way it is.

Data-Driven Pricing

Top tier 3PLs employ logic when providing freight quotes. They have a quoting system that can provide rates based on data aggregation, lane cost history, and current market conditions. By basing the quote on data, they make sure that the price is accurate and that service standards remain high.

Hidden Capacity

If you are only using asset-based carriers for your freight, you are missing out on the opportunity to fill private fleet backhauls at a lower rate. Shippers that are open to a relationship with a 3PL can take advantage of more capacity. The additional supply means a lower price – one that more accurately reflects current market conditions. The best 3PL’s will make sure that shippers are always paying rates below the market average.

Putting It All Together

Making sure you are paying a fair market price for your shipments is essential to managing your freight spend. Top tier 3PLs have the industry knowledge and data-driven technology to know what the market average is, plus the backhaul capacity to help keep your costs at or below market.