Whether your company is a big or small player in terms of shipping volumes, and regardless of your chosen transportation modes (road, rail, ocean, air), the health of your bottom line depends in no small part on the competitiveness of your ocean freight prices.

As you will know, though, if you are active in freight and shipping management, your freight prices depend on many variables. So, how can you be sure you’re getting the best freight rates possible? The answer is to benchmark your freight, of course.

At Logistics Bureau, we want to help you with that, so we’re publishing this brief guide to help you if you haven’t already included freight benchmarking in your management strategies or want to benchmark more effectively than you are now. In addition, it will imbue you with some knowledge about best practices—and the secrets to ocean freight-benchmarking success.

Key Triggers for Freight Review

Before diving into benchmarking specifics, it’s crucial to understand the key triggers that necessitate a freight review. From our experience working with shippers, these are the critical signs:

Service Performance Issues

  • On-time delivery rates falling below 95%
  • Consistent cargo delays at key transfer points
  • Rising detention and demurrage costs
  • Frequent load rejections during peak periods

Technology Gaps

  • No API connectivity with your TMS
  • Manual track-and-trace processes
  • Inability to provide real-time container visibility
  • Poor EDI compliance rates

Business Evolution

  • Volume increases exceeding 20% year-over-year
  • New DC locations or market expansion
  • Shift to omnichannel fulfillment requirements
  • Changes in shipping density or cargo mix

Market Indicators

  • Rate volatility in key lanes
  • Carrier network changes affecting your routes
  • New ESG reporting requirements
  • Fuel surcharge structure changes

Industry best practice is quarterly carrier scorecarding with comprehensive annual reviews. This cadence allows you to catch issues early while maintaining enough data for meaningful benchmarking.

What is Freight Benchmarking?

There’s no dark art to freight benchmarking. Indeed, it’s a very straightforward concept. It simply means checking your company’s rates paid for freight transportation against those borne by its peers in the same or similar industries and shipping scenarios.

Freight benchmarking services are seeing increased uptake by shippers. They provide intelligence about market rates, enabling a company to identify and compare results with peers and competitors that are very similar.

At Logistics Bureau, we capture, analyze, and exploit freight benchmarking data to help us when we provide freight contract negotiation services for our clients.

The intelligence we gather enables client companies to negotiate with carriers from a stronger starting position and ensure they don’t fall victim to inflated tariffs. This is easy to do when companies begin talks without sufficient freight pricing data.

How Can Your Business Benefit from Ocean Freight Benchmarking?

There are several advantages to understanding your freight costs compared to the market generally. Here is an overview of the most valuable benefits:

  • More informed freight spending: Because freight benchmarking involves the analysis of carriers and the rates paid by companies using them, it gives you an evolving picture of clarity about your freight spending. Benchmarking enables you to answer questions like “am I getting levels of service that justify the prices I’m paying?” and “what is a reasonable range of rates for our company’s typical shipping scenarios?”
  • Better freight rates for your trade lanes: Whether you ship freight by air, land, or sea, your shipments will travel along specific routes or groups of routes, known as trade lanes. Freight benchmarking enables you, over time, to get a handle on pricing norms for the trade lanes you use. As a result, you will be able to set target rates for vendors and ensure you don’t pay more than is reasonable for shipments along a given lane.
  • Improved ability to predict and manage trends: After you’ve spent a while working with freight benchmarks, you’ll get a feel for the directions of seasonal rate fluctuations and other pricing trends. You’ll have a better idea of when rates move up and when they move down. The benefit of this is that you’ll be in a more proactive state when unforeseen events or crises arise with minimal warning. That will help you weather such storms more effectively than your less-aware competitors.
  • Enhanced decision-making: Benchmarking is an activity that focuses on your freight history and the rates you have paid historically, along with current pricing and carrier performance. The insights you receive will help you decide which carriers and trade lanes to use and when. It will also make it easier to determine, for example, if you should opt for contract rates over spot rates or vice versa.
  • More advantageous contractual terms: Regardless of the freight modes your business uses, the knowledge gained from benchmarking will improve your ability to negotiate balanced contracts with carriers and ensure that you don’t agree to terms that disadvantage your business.

That’s what drives our recommendation, when we execute freight tendering projects, to precede our client’s contract negotiations with a benchmarking process.

4 Best Practices in Freight Benchmarking

Does your company intend to find its way through the freight benchmarking process without any external help? If so, it will be beneficial to gather knowledge of the best practices that experienced benchmarking specialists recommend

A detailed set of guidelines is beyond the scope of this brief guide and would, in any case, be better imparted during a real-world project as they are applied. However, we can at least summarise a few of the best practices here to give you a jumping-off point for further research and introductory discussions with your project team.

1: Share Results With Relevant Stakeholders

As you begin to realize intelligence generated by freight benchmarking, disseminate the knowledge among ALL stakeholders who can use it. When helping our clients with freight contract negotiations, we find, all too often, that the wrong people hold much of the knowledge that matters.

That’s especially true when a specific department owns a benchmarking project. So, for example, if you use a benchmarking platform, your IT department might be accountable for interpreting and visualizing the data.

At the same time, the IT team is unlikely to be acting on the benchmarking output, so appropriate stakeholders from the broader business, especially those in procurement and logistics management, should be involved in the benchmarking process as much as possible.

2: Take Care in Identifying the KPIs to Use

Like all benchmarking and performance measurement processes, freight benchmarking can utilize a wide range of metrics, and the sheer abundance of KPIs can be overwhelming. Furthermore, many of them might not be actionable in your business—or only actionable when results are combined with other specific metrics.

In some cases, it might even be possible to inadvertently use metrics that counteract one another, frustrating your efforts to understand your freight profile and cost performance.

To avoid issues like these, you’ll need to be careful to use only relevant and actionable metrics in your operation—and it’s not always obvious which ones they are.

3: Choose Your Comparisons Carefully

Benchmarking is all about comparisons, but results become skewed and lose their value when the comparisons lack relevance. So, when you set out to benchmark your freight rates, spare no effort in choosing which peer companies you include in your analysis.

That doesn’t necessarily mean you need to use only competitors or peers that operate in your industrial sector. Still, it would be best to look for companies of similar scale, with similar freight-volume profiles, using the same trade lanes as your company.

One of the primary benefits of using a consulting partner to assist with benchmarking, as opposed to direct use of software, is that your partner will have the experience and expertise to identify appropriate peer groups to benchmark against and provide the data for comparison.

4: Use Standardised Metrics

This final point is related to choosing the right metrics for your operation but bears separate discussion as it is crucial for obtaining meaningful and actionable benchmarking results.

The metrics you select to measure your company’s freight cost performance are only helpful if you can also apply them to those companies against which you will benchmark.

This selection process can be tricky, so it helps a lot to work with external specialists who have access to mountains of proprietary freight data and can provide standardized KPIs to compare your company’s performance accurately.

As a quick and simple illustration of this, a road freight benchmarking project might require the use of the following KPIs:

  • Freight cost as a percentage of sales
  • Freight cost per kilogram/100 kgs/tonne
  • Cost per kilo/100 kgs/tonne per kilometer

If we take the cost per kilo per kilometer KPI as a comparison metric, your benchmarking platform, or consulting partner, would need to hold the following data in its database for all your company’s freight bills and those of the peers against which you will be benchmarked:

  • Shipment origin and destination
  • Shipment weight
  • Freight charges
  • Mileage covered by the shipment
  • A digital freight benchmarking product from a software house will likely provide you with access to masses of such data.

However, only a comprehensive service from a specialized benchmarking partner will be able to help you quickly and easily isolate the most relevant peers, data, and metrics and get your project up and running smoothly. That’s due to the presence of experts who have completed countless projects similar to yours.

Rob O’Byrne is the Owner and CEO of Logistics Bureau. To learn how their consultants can help you get freight costs down and extract value from your contracts, check out their freight contract negotiation page and use the form to book a FREE initial consultation.