DC Velocity - October 2012

technologyreview FREIGHT RATE FORECASTING

15 to three core carriers, all super regionals capable of making next-day deliveries. The carrier consolidation, coupled with good negotiating skills, helped Invacare keep freight costs down for several years.

By 2011, however, that tactic had
pretty much run its course, Knittle
says. “We had saved over $10 mil-
lion on transportation over five
years from pure negotiations, but
that was the last water out of the
well. It was pretty dry,” he explains.
“We were at a point on the rate
negotiations side where we could
not get more done without more
intelligence on the market and sys-
tems to analyze the various rate
bases that exist in the market.”
The problem facing Knittle was
that the tariffs he used for all of his
existing carriers relied on one com-
mon rate base, which was itself an
outdated pricing structure.

Specifically, Invacare was still
using the Southern Motor Carriers
Rate Conference (SMCRC) tariff
system to determine rates, and then
discounting as much as 50 to 60
percent from the benchmark price.
But most truckers today have their
own rate tariffs that reflect their
unique costs and freight densities
on specific lanes.

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FINDING THE BEST DEAL

That’s where the software came in. In the fall of 2011, Knittle brought in RateLinx, a developer of freight analysis software, to assist him with the analytical process.

RateLinx offered a software application that could analyze carrier tariffs by lane. Knittle loaded six months’ worth of data— about 100,000 shipments—into the RateLinx model. The software used the historical shipping data as the basis for determining average shipping volumes on lanes.

It then priced Invacare’s freight move-
ments on specific lanes against the individ-
ual tariffs published by the company’s three
core carriers as well as by three new carri-
ers—another super regional and two small
regionals—that also offered next-day serv-
ice. Knittle says he added carriers to the
freight analysis because “we felt the need
for some improvement as some of our car-
riers had been with us for a long time.”
The software model identified which of
the six carriers would operate most cost
effectively on each of Invacare’s freight
lanes. Armed with a lane-by-lane freight
analysis, Knittle assembled a proposal for
each of the six carriers to haul designated
portions of Invacare’s freight and began
negotiations with them.

For the most part, the carriers went along with the proposals, Knittle says. “It helps their profitability because you’re putting them [in places] they want to go to,” he explains.

As for Invacare itself, Knittle reports that the company saw a big payoff—savings of 7. 5 percent on an annual LTL transportation spend of approximately $25 million.