Road Freight Procurement Intelligence Report, 2024 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)
- Published Date: Jul, 2024
- Base Year for Estimate: 2023
- Report ID: GVR-P-10593
- Format: Electronic (PDF)
- Historical Data: 2021 - 2022
- Number of Pages: 60
The pricing and cost analysis helps in determining and projecting the actual cost of products or services over the forecasted period. It takes into account all the cost components and presents a competitive advantage during negotiations with suppliers. Additionally, the outcome helps procurement leaders identify fact-based and detailed cost drivers for the industry.
In this road freight procurement intelligence report, we have assessed the pricing of the major cost components such as cost of vehicles, fuel, labor, technology, licensing & compliance, maintenance & repair, and others. Other costs include safety equipment, general & administrative, rent & utilities, loading & unloading, road taxes & tolls, and marketing & sales.
In May 2024, the ‘TEG Road Transport’ Index, a metric used to track and measure changes in the ‘price per mile’ cost of the U.K.’s transport industry, continued its upward trend as it reached 122.8, witnessing a rise of 3.4% as compared to April 2024. Moreover, the ‘Hauler Vehicles’ index (used specifically for tracking heavy duty haulage in the U.K.) reached 118.5 in May 2024, also showcasing a 3.4% rise as compared to April 2024. The upward trend in the points/prices of both indices mentioned above can be attributed to inflation, seasonal trends, and driver shortages.
Road Freight service providers often use one of many pricing structures. One of the key pricing models being used is flat-rate pricing. In this pricing structure, a fixed fee is applied to a designated route or shipment, irrespective of weight, volume, or distance. It is commonly employed for standardized routes or regular shipments with consistent variables. Another prevalent pricing model being utilized is mileage-based pricing, where the cost is determined according to the distance traveled. This approach entails charging a fixed rate per mile and is commonly applied in long-haul transportation, where the predominant factor influencing costs is the distance covered. Other key pricing models used in this industry are volume-based pricing, weight-based pricing, spot pricing, and contract pricing.
Key factors leading to variations in prices include type of shipment (FTL/LTL), speed and transit time, cargo volume and weight, distance covered, customs and tariffs, and labor cost. For instance, shorter transit times may enhance operational efficiency, by enabling road freight companies to maximize the utilization of their fleet. However, these short transit times also require expedited services, which are often placed at a premium due to the need for direct routes, fewer stops, and additional resources. Thus, it increases the overall prices for buyers. Moreover, road freight companies typically pass on costs associated with customs clearance and tariffs to buyers, which is also reflected in higher freight rates. Key macro-economic factors that affected the prices in 2024 were driver shortage, volatile fuel prices, trade policies, and geopolitical tensions.
Every company and its procurement unit look to bargain for the best deal while procuring a set of products or subscribing to a set of services. Rate benchmarking contains price/cost comparison of multiple sets of products/services to evaluate the most effective combination that can potentially assist the procurement team in getting the optimal rate.
The average prices of FTL in the U.S. in 2024 (H1) were in the range of USD 2.1 to USD 2.5 per mile. During the same period, the prices in the U.K. spanned between USD 2.0 and USD 2.4 per mile, those in India spanned within USD 1.0 to USD 1.3 per mile, and those in Japan fell within USD 1.8 to USD 2.2 per mile. The average LTL prices in the U.S. during the same period (H1 2024) spanned within the range of USD 0.30 to USD 1.60 (measured per pound). The LTL prices in the U.K. fell within the range of USD 0.25 to USD 1.45 per pound. Those in India spanned within the spectrum of USD 0.20 to USD 1.15 per pound, and the Japanese LTL rates spanned from USD 0.25 to USD 1.50 per pound.
To gain a comprehensive understanding of other aspects of rate benchmarking, please subscribe to our services and get access to the complete report.
Labor cost is one of the key components of the total cost incurred while offering a product or service. Therefore, an organization must decide whether the focus category should be retained in-house or outsourced if the organization is providing its products or services at competitive prices. If the organization decides in favor of outsourcing, it must understand the difference in the salary structures of suppliers before selecting a supplier and formulating a negotiation strategy.
According to our research, operations managers working in C.H. Robinson Worldwide, Inc. and FedEx Corporation receive a 10% - 15% higher base salary as compared to the salary received by Operations Managers working in J.B. Hunt Transport Services, Inc. and DSV A/S. However, the year-on-year increment rate majorly depends on the Key Result Areas (KRAs).
Organizations may find it burdensome to constantly track all the latest improvements in their supplier landscape. Outsourcing the activities related to collecting intelligence allows organizations to focus on their core offerings. At this juncture, our newsletter service can help companies stay up to date with the latest innovations and developments and subsequently support in preventing disruptions in the supply chain. We have identified the following developments within the road freight industry over the last two years:
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In February 2024, C.H. Robinson Worldwide, Inc. introduced an innovative technology to streamline freight shipping by eliminating the need for manual and separate appointment scheduling at pickup and delivery locations. The innovation includes using touchless appointments to enable complete automation of the scheduling process, allowing for round-the-clock support.
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In February 2024, FedEx Logistics and FedEx Express, (both divisions of FedEx Corp.) partnered to upgrade their ‘Less-than-Container Load (LCL)’ service. The upgradations/innovations include seamless customs-cleared solution, facilitating both door-to-door and port-to-door shipments, improved balance concerning affordability and speed, and enhanced productivity. The upgraded version efficiently links the APAC region with MEA through a seamlessly integrated road and ocean network.
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In November 2023, United Parcel Service of America, Inc. (UPS) finalized the acquisition of MNX Global Logistics, a prominent global provider of ‘time-critical’ services in logistics. This acquisition has enhanced UPS's capabilities in time-sensitive logistics, particularly benefiting healthcare clients across the U.S., Europe, and APAC. MNX’s specialized proficiency in transporting temperature-sensitive products and radiopharmaceuticals has bolstered UPS’ clinical trial logistics arm, Marken, in meeting the escalating demand from the healthcare sector.
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Add-on Services
Should Cost Analysis
Component wise cost break down for better negotiation for the client, highlights the key cost drivers in the market with future price fluctuation for different materials (e.g.: steel, aluminum, etc.) used in the production process
Rate Benchmarking
Offering cost transparency for different products / services procured by the client. A typical report involves 2-3 case scenarios helping clients to select the best suited engagement with the supplier
Salary Benchmarking
Determining and forecasting salaries for specific skill set labor to make decision on outsourcing vs in-house.
Supplier Newsletter
A typical newsletter study by capturing latest information for specific suppliers related to: M&As, technological innovations, expansion, litigations, bankruptcy etc.
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