Shippers know a carrier’s rate is the amount charged for transporting freight in a particular lane. After working in the transportation and logistics industry for a while, and using the same carriers, shippers may want to use historical rate figures to build their budgets. Is this a good idea? First off, shippers should only use historical rates for budgetary purposes such as planning transportation costs for certain cargo. While best practice dictates shippers should obtain new pricing quotes every time they use carriers to transport their freight, we’ve highlighted a few scenarios in which using historical rates is ok.
You Have A Good Amount Of Historical Data
If you have worked with the same carriers on similar types of projects for many years, this historical data is an asset for your company. You can use this data to analyze different types of shipments to gain insights such as which carrier provides the best value for given lanes. This historical data is often stored and analyzed with the help of a transportation management system (TMS). Learning how to take full advantage of a TMS allows shippers to glean insights from their historical data. Next time you want to compare carriers on factors such as price before shipping cargo, make sure to use your historical data.
You Don’t Have To Worry About Seasonality
You can also use historical rate figures when planning transportation budgets if your shipments aren’t affected by seasonal changes. For example, if your supply chain and transportation vendors are immune to the stress caused by holidays such as Christmas, you should feel comfortable using historical rates for budgetary purposes. However, if seasonal changes can potentially disrupt your supply chain, it is best to seek new pricing quotes before hiring carriers to transport your freight. At the end of the day, it’s better to have an accurate budget that reflects market conditions than it is to be misled by outdated historical rates.
You Do Not Anticipate Significant Market Changes
Finally, if you don’t believe the transportation market will undergo major changes in the near future, it is probably ok to plan your shipping budget using historical rates. Major market shifts include changes in the price of fuel, government protocol, new hours of service regulations, and mandates for newer equipment. Significant market changes should be seen as anything that can affect short term, variable costs. These market shifts make using historical rates unwise, as too many other factors will make budgeting unpredictable. Therefore, it is best to get new quotes for transportation costs while also sorting out other costs as determined by the market.
Overall, best practice dictates shippers should go out and get new pricing quotes from their transportation vendors as new factors can arise, impacting pricing. However, if you have experience shipping with the same carriers, there are some instances when it is ok to use historical pricing quotes for your budgetary purposes. The above list examines some of the scenarios in which using historical rates to put together a comprehensive and accurate transportation budget is safe.