Data-Driven Decisions: Mastering Transportation Business Intelligence

Boost profits with transportation business intelligence  

In a soft economic market, supply often outweighs demand. Inflation and rising interest rates make consumers cautious about spending. As a result, logistics companies are more likely to see large volumes of goods collecting dust in warehouses.

To illustrate, the inventory sales ratio was 1.48 in February 2024. In other words, goods sat awaiting shipment for a month and a half on average. The slow movement of goods means that carriers have less business and may struggle to stay profitable, even if they lower their rates.

Shippers often have more negotiation leverage during these times. But there’s a fine line between negotiating better prices and negotiating rates that aren't sustainable. That’s why shippers, carriers, and third-party logistics providers (3PLs) must understand their supply chain costs so they can properly manage their money and partnerships in tough times.

How do you maximize every dollar spent?

First, you need to understand where every dollar is going. Transportation business intelligence starts with standardized and centralized network data. From there, you can improve your decision-making and find margin saving opportunities.

What is transportation business intelligence?

Transportation business intelligence (BI) gives you a pulse on your network performance. It requires collecting relevant data from across your logistics operations and new business so you can monitor trends, identify anomalies, and identify where you can streamline workflows to boost profit.

The data comes from every part of your transportation network—carriers, lanes, volumes, service-levels, facilities, etc. With almost infinite combinations of your data, you need high-quality data management to transform your data into a usable format.

Many companies rely on transportation management systems (TMSs) and carrier portals to provide network analytics. But these data sources only give a snapshot of total transportation spend and can contain manual mistakes. TMSs often have rate data manually keyed in and carriers sometimes forget to update rates. Reliable business intelligence has checks and balances to ensure accurate data.

How to get good data for your transportation business intelligence

Most companies have some transportation data. However, it’s often siloed within TMSs, enterprise resource planning platforms, carrier dashboards, BI tools, spreadsheets, paper documents, and other data sources.

To gain high-quality transportation business intelligence, you need to connect all these systems and standardize the data.

The supply chain software of the digital transformation (aka Supply Chain 2.0) over-promised and under-delivered, forcing organizations to resort to a handful of time-consuming and expensive options to sort through their data, such as:

• Employing large operation teams to manually extract each data point from physical documents
• Outsourcing data extraction to expensive business process outsourcing companies (BPOs), where quality control is difficult
• Hiring expensive data science teams to extract, unify, and clean the data
• Bringing in rigid software, like OCR solutions

These operations are either too expensive, inflexible, or not comprehensive enough to extract top-quality data. Traditional business intelligence tools can’t handle the complexity of modern supply chain data. So, you need software built specifically for today’s network complexity and fragmentation. Loop’s logistics-AI platform offers a few advantages:

• Centralized system: To get a complete view of your network, you need one system for data across carriers contracts, invoices, bills of lading (BOLs), and more. Logistics-AI can ingest all supply chain and spend from any data source, in any format. In turn, you don’t have to constantly bounce between systems.
• Organized data: AI-powered software should automatically clean, standardize, and organize your data. This is true whether it’s mapping line-haul charges that can be written differently on every invoice or assigning cost codes. In any case, great data management allows you to segment down to a line-item level and roll up for aggregate analysis.
• Seamless integration: Connected software enables seamless sharing and enrichment across different tools and data collections so your data isn’t siloed. Increasing data access across departments boosts decision quality.

With accurate data at your fingertips, you can proactively invest in your network with business intelligence as the logistics industry evolves.

5 ways to action your transportation business intelligence

1. Improve network efficiency

Soft markets push companies to make their network as efficient as possible. High-quality transportation business intelligence points to where you should focus your efforts to achieve the greatest impact:

• Inefficiencies within your network: These could be redundant carriers, unnecessary accessorials, or mismanaged facilities that routinely cost you. For example, you may find you’re footing the bill for outrageous lumper charges or inbound supplies that ship too frequently.
• Bottlenecks within your internal operations: Departments not adhering to shipping guides, slow invoice management, or late payments hurt your operations and profit. Impactful transportation BI means you can identify and resolve these inefficiencies.
• Opportunities to outsource loads: Depending on your needs and network, partnering with a freight forwarding company or 3PL could boost efficiency. For instance, they may have better rates because of their scale, or service a geography where your primary carriers don’t operate.

Great network configuration also reduces your overall risk if complications occur. It allows you to more easily support high-value partnerships and force prioritization if sudden disruptions arise. You may have a backup carrier for some segments, while others you send to the spot market.

2. Control your transportation costs

If your network insights are reliable, you can better manage transportation costs. In a market as turbulent as the supply chain, you can’t afford to mismanage controllable or uncontrollable costs.  

• Controllable costs: These are expenses entirely within your power. Usually, they’re operational costs like team performance, internal operations, and carrier compliance. Whether it’s consolidating less-than-truckload (LTL) shipments into full-truckload (FTL) shipments or ensuring you’re always billed your discounted rate.
• Uncontrollable costs: These are external factors like supply chain disruptions, international conflict, or carrier bankruptcies that impact your costs. While you can’t manage these events, you can prepare for them by building a resilient supply chain and determining how to best address them with great data.

In any case, high-quality transportation BI should inform you of the dollar impact of each decision so you can make choices based on cost.

3. Improve supply chain resiliency

Resilience means being able to adapt to disruptions without affecting your performance and jeopardizing customer relationships. Strengthening your network requires two important types of resilience:

• Financial resilience: The supply chain has many moments where you can leak your margin. To keep as much working capital on hand as possible, you need financially rigorous processes and great carrier/vendor compliance. Additionally, you need to be able to drill down to the product level to understand cost allocation. That way, you have insight into the total cost of each individual line item and how those expenses roll up in aggregate.
• Supply chain resilience: Increased visibility into your network and its trends helps you accurately forecast future scenarios, planned or unplanned. To improve resilience, you can then diversify carriers based on your routes, truck type, and service needs. But don’t just keep tabs on your transportation—pay attention to what’s happening across the entire supply chain.

The best time to start developing both types of resilience is before you experience unforeseen issues that threaten to cut into your profit margins.

4. Monitor facility performance

The hubs of your logistics network should run as smoothly as the routes that connect them. By using BI software to monitor your team and your carriers’ performance at your facilities, you can often prevent loading delays and driver backlogs. Or, at the very least, you can keep customers informed when delays occur.

Track these key performance indicators (KPIs):

• On-time pickup: Percentage of pickups at the agreed-upon time. This gives valuable insight into carrier reliability.
• Loading cycle time: Total time to load a truck. Faster is better, of course.
• Driver waiting time (dwell time): The time the driver waits at pickup/delivery. Again, speed is key.
• Detention cost: Financial penalty for exceeding free waiting time. This incentivizes expedited loading and unloading.
• Adherence to appointment time: Percentage of deliveries arriving on schedule. This reveals how efficient a carrier is.
• Document compliance: Accuracy and completeness of shipping documents. Incomplete or inaccurate invoices and supporting documentation result in delays and penalties.

If you can’t improve efficiency at your facilities, delivery times could suffer. This could ultimately hurt your sales.

Comprehensive insight into your network makes it easy to spot where you’re overpaying on carrier contracts. The same data also tells you how to enact more cost-effective contracts.

5. Negotiate for more favorable carrier contracts

Carrier contracts determine how your shipment operates. Yet, in a soft market, contract negotiations are delicate. It’s critical that terms work for both you and your shipping partners.

There are a few ways to navigate carrier contract negotiations:

• Monitor carrier compliance: To make sure you don’t overpay on invoices, track whether carriers adhere to contractual terms. Do they frequently make late deliveries? If so, you have a bargaining chip.
• Consider consolidating contracts: If you have multiple business units using the same carrier, consolidate the contracts. This would increase your overall shipping volume and potentially give you more leverage in a negotiation.
• Diligently track accessorial charges: As part of your carrier compliance scorecard, track accessorials. If a carrier always charges a specific accessorial, negotiate for them to waive it or provide a discount.

Also, when you consider carrier discounts, pay attention to how discounts on different base rates impact your overall net rates.

Say you receive a discount of 25% from the carrier. If that 25% is applied to your base rate for freight costs, you still need to add on accessorial and surcharge costs to calculate your total shipment charge. In actuality, you might only be looking at a 10% reduction on your total shipment charge, even with a 25% net rate discount.

Make sure you verify where your percentage discount is applied: is it off your net rate and how will it impact the average spend per package? Carriers sometimes have a way off offering you a massive discount on package types you don’t often send.

Pro tip: A common mistake is overlooking the minimum contract charge, which means the “discounted rate” isn’t truly a discount. Take these base rates into consideration to ensure the discounts you’ve negotiated will actually help decrease your shipping costs. Loop can help identify the percentage of shipments this happens so you can better negotiate.

Gain actionable insights to inform your transportation business intelligence

High-quality data gives you end-to-end visibility into your current transportation network and spend. It can provide valuable insights that drive your strategic money-saving decisions.

To help you optimize your spend and network construction, leverage Loop’s logistics-AI and scenario planning. Contact Loop today to learn how the software can inform your decisions and sharpen your competitive edge.