Intermodal Drayage: How Marketplaces Can Help IMCs Determine Price and Profit
For an Intermodal Marketing Company (IMC), or any freight broker, the business comes down to two essential questions:
- At what price can I move this freight?
- What profit can I earn on the load and still meet my customer’s objective to control freight costs?
For drayage moves to and from rail yards, IMCs have internal people and processes to answer both pricing questions. Most ignore the power of active freight marketplaces to answer the questions more objectively and accurately.
IMC pricing specialists look at the company’s own historical data for a lane to determine a price. Maybe, just maybe, they also reference some 3rd-party data, like price indexes (which are lagging and often misleading). But for the most part it is insular data determined by past rate negotiations with carriers – carriers who are driven by a desire to maximize profit from the load. Pricing does not reflect what a competitor might be bidding on the same lane.
A marketplace model is altogether different.
Intermodal marketplace DrayNow, for instance, is in a unique position to aggregate intermodal drayage rates – not just across a specific IMC’s customer base but across thousands of brokers bidding on thousands of lanes.
It’s objective data that has no “agenda” other than to identify the price the market suggests is optimal.
If the price is too high, brokers won’t move it on the platform.
If the price brokers post is too low, carriers will ignore it and the load will sit.
Either way, DrayNow loses. The Marketplace generates revenueonlywhen containers move, so it provides a fair and accurate pricing barometer.
DrayNow’s data makes no judgement about whether the load could move for more or less; it simply establishes, with a high degree of certainty, the going rate to move a container from A to B at this time on this day and at this time of year.
DrayNow’s pricing data is also predictive – a huge advantage for brokers. The platform’s pricing engines are constantly learning and evaluating how prices fluctuate in different lanes at different times of the year. IMCs can leverage this foresight to adjust strategies to capitalize on pricing opportunities. Using DrayNow’s new TRUprice tool, users can even test prices before they set them on the platform.
Your pricing specialist or team may be very, very good. But without access to aggregate data on what is actually happening across the market, it’s hard to be accurate. For IMCs who participate in the DrayNow Marketplace, this market-driven pricing data is available today.
Once rates are established and negotiated, the next step in the pricing puzzle is to determine what margin is required to cover costs and profit requirements. This is largely dependent upon an IMC’s efficiency and whether it is doing everything possible to provide a deeper discount to shippers and a higher profit margin. Sadly, many IMCs are woefully behind on this side of the pricing equation, and quoted rates must rise to hide these flaws.
Front-line brokers manage loads much the same way they did 20 years ago, ignoring the ability of marketplaces to digitize and automate currently manual processes. Some of the activities that take up a huge part of the broker’s day:
- Making dozens of phone calls to source carriers: With DrayNow, it takes less than a minute to post drayage loads and most are accepted within 7 minutes.
- Contacting carriers for status updates: With DrayNow, drivers’ GPS coordinates are tracked in real time using an app on driver phones, so you always know exactly where the container is and when it will arrive.
- Chasing down BOLs and other shipping documents: DrayNow drivers must upload documents to the platform immediately upon hitting milestones, helping to improve customer communication and speed billing.
Tools are available now to reverse this cycle of inefficiency, yet many IMCs ignore the power of digital workflows to transform their businesses. Bringing it back to the issue of pricing and margin enhancement, inefficient businesses must pad mark-ups to cover the cost of poor productivity and excess overhead.
A better answer: give frontline brokers the tools to eliminate valueless grunt work in order to double or triple the number of loads they can manage. With a lean, more productive staff, quoted rates can be much more aggressive, while still sustaining solid margins.
Marketplaces are more than a capacity source
Let’s be clear, freight marketplaces are not a foreign concept to IMCs and most know about the DrayNow platform for intermodal freight. But many still see DrayNow, and marketplaces in general, as simply an alternate capacity source when direct carriers are unavailable or fall off. That’s a huge mistake.
DrayNow is actually a business model disrupter, and in the best possible way for brokers.
Many of the newer freight marketplaces (think Uber Freight and Convoy) seek radical disruption. They want to remove freight brokers from the equation as non-value-adding middlemen. DrayNow, in contrast, is a platform, a set of tools, designed to help IMCs be more efficient and enhance their value to shippers.
Leverage the power of marketplaces
Digital marketplaces like Amazon and Etsy are transformational products of the internet age that create hyper-efficient ways to connect supply and demand.
It took a while for the model to reach the tech-starved intermodal space, but it’s here now. If you are an IMC, you can see marketplaces in one of two ways: as an outside threat that seeks to displace your role, or as a tool to transform your business’s approach to pricing and customer service.
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