Parcel BI is your most reliable partner when it comes to monitoring your parcel data. Our BI solutions are designed to help businesses manage their parcel spend by exposing errors and finding savings!
In today's blog, we are discussing a Parcel BI client who thought they were getting a “great” deal through a broker, but as it turns out, they could have done better on their own by being connected to their data.
Brokered rates are when a company signs up with a third-party to get better shipping discounts instead of working with the carrier directly. The broker will position the fact that they have a really good contract with a carrier and the shipper can use these rates for shipping instead of their current contract, which in contrast to a very bad contract, a broker’s rates look very appealing.
The idea is that this broker gets a much better discount as a group than this individual company can get on their own. Therefore, they are thinking these rates must be saving money, but that is not always the case.
Though broker rates can seem like a great deal, they can often lead to more costs than you would think. There's still a middleman in place who is making money off of your volume.
It's a misconception that these broker rates are really great. Certainly, brokered rates are "better than bad," but better than bad doesn't make them as good as they can be. Broker rates are okay at best and better than nothing, but still may not be ideal. Depending on the broker, there are things that you may be sacrificing over a direct relationship with the carrier.
Broker rates create a lack of visibility to your data, a dependency on this broker to give you information. There's a lack of connection with the carriers and a lack of relationship. The carriers are more interested in serving the broker than they are you.
If you do have a broker, make sure you are able to connect to your data and address issues like penalty fees, monitoring third parties, and all the other issues that Parcel BI can expose. Without this visibility, your spend is not optimized and savings are lost.
By using Parcel BI, the client in this case study was able to see that going to a direct relationship or an alternate carrier was much more advantageous to them. They were able to get lower rates, much better customer service, and much better visibility into their data to realize significant savings of 10% over their previous engagement with the broker.
For companies who are using a broker account, the best thing that they can do is get in touch with their data. This will give them the insight they need to know if they are getting a good deal or not and allow for a true analysis of their spend and how good their rates compare to what is achievable with a direct relationship.
Understanding their data will also expose those areas where their deal might be weaker than they realize, especially for private equity groups. Parcel BI can take in data from multiple sources and combine them so the private equity group can have insight across all entities. Then they can strategically create direct relationships with their carriers, manage their own accounts, and not have the costs of paying the middleman.
If you are a part of a company that is using broker rates, contact us at Parcel BI to see if you are getting the best rates for your parcel. You can also learn more about how Parcel BI's tools provide valuable insights into other areas of your parcel spend by watching more videos like this in our video library.