With industry experts predicting an increase in freight rates later this year, pressure is growing for shippers to reduce transportation spend. But, if a shipper pays lower freight rates than their peers, will it negatively affect the carrier’s performance? A recent study set out to answer this question.
Performance criteria in the study included metrics like transit time, technical competencies, flexibility in disruption, information, and claim history.
There was no absolute relationship between carrier performance and freight rate. But, when shippers paid below market average, there was a visible decrease in on time delivery. An average rate $50 below market price led to less than 40% on time delivery. A rate $20 below market price led to 40-70% on time delivery. Shippers with on time delivery between 80-90% paid just over the market standard. There was little to no rate incentive for achieving 90-100% on time delivery.