Managing Price Volatility in Freight Transport

Freight transport is characterised by high price volatility. It is particularly marked in air and sea freight, but also concerns the road transport of goods. Indeed, several parameters have an impact on the evolution of prices: transport costs, the economic situation, the political/geopolitical context or even exceptional elements (health crisis, climatic hazards, etc). The transportation mode is also a determining factor in the price, each having its own functioning in terms of pricing and taxation.

How can transport operators gain visibility on transport prices and put an end to the opacity of the market? The digitalisation of freight transport and the use of data science now offer tools to improve price forecasting and bring more transparency to the supply chain.

Monitor freight costs

Operating costs are one of the important parameters that determine freight transport prices. The following are the main operating costs to be monitored, regardless of the type of transport:

  • Staff wages. This point is particularly sensitive in road freight transport, firstly because it weighs heavily in the cost of a truck, and secondly because of the shortage of drivers. The cost of truck drivers is influenced by the shortage of labour, but also by the social policy of each country.

  • Fuel. This is an essential component of operating costs, both for road hauliers and for shipping and airline companies. The volatility of the price of oil baril is therefore an important factor that weighs on the price of fuel. Taxation also plays a significant role: in most modes of transport, there are fuel surcharge or price indexation mechanisms.

  • Transportation modes: heavy trucks, container ships, aircraft. Transport equipment requires significant investment. The cost of owning these means of transport and insurance (of transport equipment but also of cargo) influence the operating costs of the carrier. Optimising the volumetric weight is an important parameter, both for the carrier, who must make the means of transport profitable, and for the shipper, who seeks to reduce his transport costs.
supply-chain-digital

Tracking the economic situation

Freight transport is a real barometer of the economic situation. This has a strong influence on transport prices because in a liberalised market, the balance of supply and demand has a greater impact on transport prices than on operating costs.

Several indicators are to be followed, both for domestic and international transport:

  • Transport supply: in case of overcapacity, freight rates decrease. These conditions are advantageous for shippers, who can thus even reduce their transport costs, but they weigh on the operating accounts of road, sea and air carriers. On the other hand, a lack of transport means increases on the cost of transporting goods.

  • Demand: transport is highly dependent on a healthy economy and consumption. It is therefore very sensitive to economic crises (e.g. the 2008 crisis), but also to cyclical peaks. The sector experiences "peak seasons", for example at Christmas, which have a significant influence on transport prices. The development of e-commerce is multiplying these consumption peaks.
camin quai de chargement

The political and regulatory context

Political decisions can sometimes have a considerable impact on the evolution of transport costs. In particular, Governments act on taxation, which can have an impact on the cost of labour or be used to guide the energy transition. Some obligations may also be imposed, to be taken in consideration in the transport contract.

Furthermore, over the last 30 years, logistics has become largely globalized, boosting international transport. Geopolitics is therefore a decisive element for the fluidity of the supply chain. The strategy of governments with regard to customs duties, in particular, can have a heavy impact on the cost of goods. It can influence locations/relocations and thus modify transport flows and the transit of goods. Shippers, for both imports and exports, must ensure customs clearance conditions, which are an integral part of an optimised strategy.

drapeaux-europe

Digitalisation at the service of transparency

Logistics chains are increasingly dependent on multiple parameters that vary significantly predetermine freight transport prices. This situation has led to a certain opacity in the market, but solutions exist. Shippers, freight forwarders and carriers now have access to digital platforms that bring transparency, using the potential of big data and artificial intelligence.

It is possible to compare freight transport prices and obtain forecasts of freight rate trends. Moreover, in a context that requires constant reactivity to the hazards that can unbalance transport supply and demand, digital marketplaces and freight exchanges can bring fluidity by allowing players in the sector to find freight or carriers in real-time.

camions-supply-chain

Key figures of the sector

500 M€

This is the amount of revenue generated by road transport in Europe. The sector accounts for 5.7% of jobs worldwide, according to the IRU.

27%

This is the return on investment in Supply Chain digitisation for companies using a digital platform, compared to 21.8% without, according to Accenture.

30%

This is the reduction in operational costs that companies can expect by deploying Supply Chain 4.0, according to McKinsey & Company.

Sources : IRU, Acccenture, McKinsey & Company

Discover reports and barometers

International Transport Barometer - January 2021

What are the price trends for air and sea freight transport in the context of a sustainable pandemic?

Download

Seaborne container transport in 2020

Find out why and what the impact is on sea freight rates.

Download

Benchmark of European road freight rates in Q4 2020

The Transport Intelligence and Upply report devoted to the evolution of road freight rates.

Download

boris pernet cercle


"Volatility, asymmetry and opacity of information, overbooking, last-minute cancellations, the tension on capacity or under-utilisation are all market imperfections that reduce its efficiency and its ability to meet demand. Upply provides the answer to these challenges by combining business expertise and data science, offering a digital solution dedicated to the comparison and analysis of freight transport prices."

Boris Pernet, Managing Director of Upply

Data Science and business expertise to compare transport prices

In 3 clicks, compare a freight transport price: air and sea freight worldwide, road freight in Europe and North America.

  • Position your price at the median of the market and discover the price evolutions over 2 years.

  • Save up to 80% of your time by analysing tens of thousands of prices in an instant (up to 100,000 lines). A perfect solution for preparing tenders!

  • Create personalised alerts on your lines to stay informed
page pilier benchmark

Anticipate the evolution of freight rates

Upply uses proprietary algorithms and the learning machine to reveal the history and future trends of freight transport prices.

  • Anticipate price volatility in 3 modes: road, sea and air.

  • Get instant price trends for the next 6 weeks on dozens of corridors

  • Automate your requests via our API connection
gif_tendances_prix_transport_upply

Register now for a personalised presentation!