Manual rate management: risks and costs for freight forwarders

If your organization still manually calculates rates and inputs unstructured data into a spreadsheet, it is costing you more than you think.

There are apparent costs like time and effort spent manually quoting, entering orders, recording everything, updating them, and tracking them.

However, there are more implicit costs stopping you from growing your business.

In this article, we will cover:

  • What manual rate management is
  • How much it is costing you
  • What a rate management system is
  • Why you should upgrade to rate management software (RMS)

What is Manual Rate Management?

It means a human manually enters and compares all the data from the proposed shipment and carrier price lists to choose the best rate.

Manual rate management requires a lot of time and resources, since it is usually done using only an Excel sheet or non-updated system. The process is made more complicated by the fact that many factors must then be considered in order to make the best decision.

To be able to accurately cross-check rates, a freight forwarder needs to take into account the type of cargo, end-to-end shipment distance, transportation method (LTL or FTL), if uni- or intermodal, fuel and service surcharges, to name a few.

This process takes up valuable time that could be spent on other tasks that would add more value to the business, like customer service and sales. But that’s not all. Let’s understand the additional risks involved when doing a manual rate management.

Risks of Manual Rate Management

Operational costs

43% of a sales executive’s time is spent on quotes and pricing. Now, combine this with the volatile transport industry; what’s the result?

The manual process is very error-prone, which results in delayed and incorrect tenders and, sometimes, unregulated prices. Instead of using their expertise to offer good services, freight forwarding professionals spend time and money on basic operations. Don't forget that losing time and resources on errors and delays is losing money.

Billing errors

While manually entering billing data, there is a higher risk of error with every invoice. If a single number is input incorrectly, it can change the person and the amount billed.  In other words, another cause for unnecessary delays and losses.

Anywhere between 15-66% of all invoices are wrong. The freighting industry incurs losses of ca $700 million annually due to invoicing errors.

Other common problems with manual billing and invoice handling are lost invoices and double billings.

Volatile market

One of the most significant risks freight forwarders face in a volatile market is the ever-changing shipping market prices. If you have not negotiated prices with your carriers and operators, considerable time and effort goes into the communication with carriers as well as shippers in order to have all the up-to-date information needed to build a tender.

On top of that, is updating any docs or spreadsheets you keep for freight rate tracking and pricing. Just trying to keep up with the market becomes a hurdle for your team in their everyday operations.

Inaccurate information

Both quoting and billing make use of data. And they have to be repeatedly calculated and inputted. These are processes prone to errors. Any place that requires inputting can have the following:

  • Inaccuracies
  • Delays between carriers
  • Inconsistency in quote prices
  • Problems with documents management
  • Budget flaws
  • Inaccurate inventory numbers, etc

According to the IDC, human errors cost US and UK firms $435 per employee, or $18 billion per country, every year. The implicitly lost time could’ve been used on more attentive and urgent tasks, like winning more business.

Lack of shipping history

A lack of shipping history can make it difficult to predict shipping costs, leading to overcharges or undercharges accurately. Plus, it becomes more difficult to identify trends and to optimize shipping routes without a complete shipping history. This can ultimately lead to higher shipping costs and inefficiency.

Lack of data visibility

There are always various bottlenecks and issues that can halt your shipping. Without access to real-time data, freight forwarders can’t accurately track their costs or predict trends. This can lead to overspending on shipping rates and, ultimately, lower profits.

65% of transportation leaders have no visibility past tier-one suppliers. Having no visibility can have far-reaching consequences.

For instance, you can't centralize or automate processes without supply chain data visibility.

Dig deeper into this and more implications of the lack of supply chain data visibility.

Rate management software

In logistics, rate management software is software or a platform that freight forwarders use to help automate the process of cross-checking and choosing the best rates for their shipments.

It’s designed to help logistics managers optimize their pricing strategies by considering several factors, including market demand, competitor pricing, type of shipment, routes, and the cost of goods and services. The software can also help businesses quote, track, and monitor their pricing over time, allowing them to make adjustments as needed.

Digital rate management: how to start?

The digitalization of transportation logistics processes is no longer a question—and this is not different for freight forwarding companies.

Although moving to digital rate management may seem complex, plenty of providers specialize in taking the manual process from Excel spreadsheets to online automated software. The first and most important step to going digital is deciding on the best one for you and your type of forwarding business.

Map your and your shippers' needs to understand what needs to be taken into account to select the best carriers and rates, and compare the tools in the market. You can choose simple, but efficient software where you upload price lists to quickly find and compare route rates, a more advanced SaaS solution that e.g., offers currency conversion and price tracking, or something in between.

We wrote a dedicated blog post on freight rate management for container hinterland transports, in which we also cover the benefits of a digital solution.

Beyond our freight management system, we have also developed the rouvia eQuote app to assist your team with everyday rate management processes. With rouvia eQuote, your team members no longer have to do labor-intensive manual quoting and data entry with high error margins. Instead, they can put more time into areas of your freight forwarding business that can differentiate your company, like customer relationships – adding more value to your company.

To get started, contact us here, and someone in our team will get in touch with you shortly.

Mehedi Hasan
Logistics Content Writer
December 29, 2022

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