“Big Data” has become one of the more popular business expressions over the past couple of years.  This commonly refers to a collection of data sets so large and complex that it becomes difficult to process using on-hand database management tools or traditional data processing applications.  While this is a legitimate concern for some companies, possessing good freight data is a key issue for many others.

In our work with shippers and carriers, we find that having good quality data, data that can be used to make fact-based decisions that help companies improve their profitability is still a major issue, an issue far more important than big data.  In this blog I will address two issues.  First, what data does a shipper need to run an effective freight transportation operation?  Second, I will highlight how a business benefits from having “Good (freight transportation) Data.”

Good Freight Data - The Essentials

For a shipper to manage an effective freight operation, the following are the key data files required.

1. Minimum One Year of Detailed Shipping Data

To be useful, the file must capture the following fields:

An article in the February 11 issue of Bloomberg BusinessWeek caught my eye and got me thinking about another way of reducing freight costs.  Here is the idea.

Hardys became Britain’s best-selling Australian wine brand by selling wine for as little as $5 a bottle, despite the 37 percent surge in the home country’s currency since 2009.  To do that and earn a profit, Hardys changed their paradigm for shipping wine.  Accolade Wines, the producer of Hardys, came up with the idea of shipping the equivalent of 32,000 bottles of wine in a 24,000 liter plastic bag.  The company reduced shipping costs by $3 a case by moving the wine 10,000 miles to a bottling plant that is a two hour drive from London.  The bottling plant receives the shipping containers via truck each day.

Australia’s wine industry that generates the equivalent of $5.8 billion in annual sales, now ships more than half of its overseas shipments in bulk.  The wine makes the 40-day trip to Europe in plastic “bladders.”  Richard Lloyd, Accolade’s global logistics manufacturing director stated:  “We don’t ship glass around the world; we ship wine.”

The BusinessWeek article highlights that shipping in bottles can add 25 cents per bottle to the cost.  Shipping wine by the case fills a ship with containers of bottles.  A third of the volume is taken up with bottles and cartons.  While a 20-foot container can hold 9,000 liters of bottled wine, it can carry a 24,000-liter bladder at slightly higher cost.

While shipping freight in bulk is not new, it is not commonplace for certain commodities.  For low cost products, that typically move in bottles or cans (e.g. no name fruit juices or tomato sauce), “deferred packaging” may help reduce freight costs.

This is a very interesting year in the world of freight transportation.  The economy is improving but at a very slow pace.  Supply and demand for freight transportation services are pretty much in balance.  Trucking companies are all singing the same song.  Their number one problem throughout North America is finding qualified drivers.  Carriers are replacing equipment that comes to the end of its service life but are not making additions to their fleet for potential growth.  Adding capacity without the drivers to move the rigs and customers that commit to provide the freight is not a sound business approach.

Carriers are being very strategic in how they allocate their capacity to their customer base and to uncommitted prospects.  Improved asset management technology is allowing transport companies to manage their fleet more effectively and to pinpoint (and charge for) abuse.  Freight rates are on the rise.  This is confirmed by some of the better known published freight rate indices.

While the pendulum has not totally swung back in the carrier’s favour, it has certainly tilted in their direction.  Shippers are not having the same easy time reducing or controlling their freight rates as they did during the Great Recession.

While freight bids are still prevalent, there are less of them in 2012.  Some shippers are receiving a rude awakening.  Shippers that put their freight out for bid to the same core group of carriers as they have in the past, run the risk that the result of the exercise will be higher rather than lower rates.  For shippers that cannot find the capacity and rates they are seeking, they run the risk of an even nastier surprise if they put their business on the spot market.  Freight that may have moved for $1.30 a mile may be moving at $2.00 a mile on the spot market.

What can shippers do to mitigate freight rate increases in 2012?  For companies that have not put their business out for bid in the last couple of years, it always worth testing the market with a high quality RFP that is sent to a broad range of carriers and logistics companies.