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Shipper — Case Study
Tire manufacturer saves money with Market Index Pricing
While consistently shipping freight on predictable, high-volume lanes can make transportation easier, it’s not always possible. Low-density, hard-to-cover freight cannot always be avoided. A tire manufacturer was familiar with this challenge. It experienced sticker shock while shipping its unpredictable freight on the spot market. After paying too much for too long, the manufacturer knew it needed to make a U-turn and find a better shipping solution.
Volatility of shipments leads to costly challenges
The manufacturer shipped product from distribution centers to retailers across the United States. It was using a cost-plus model — where a markup is added on top of the actual transportation cost — to cover freight that fell through its routing guide. As the manufacturer’s business increased, it was sending more and more freight this way.
The manufacturer’s supply chain was volatile — the number of loads and lanes the manufacturer used varied, and so did its shipping schedule. Plus, its products were challenging to load and unload. Shipping its freight via a cost-plus model had proven to be extremely pricy.
Cost wasn’t the only concern on the manufacturer’s mind. It operated on a lean manufacturing model, with only a day or two of extra inventory on hand at any given time. The manufacturer’s shipments also had short lead times – often fewer than 48 hours to tender a load. It sometimes felt like it was living life in the fast lane.
Like many companies, the manufacturer’s shipping processes occasionally needed to change last-minute due to extreme weather or a surge in business. It also needed flexibility and reliability in its shipping solution.
Market Index Pricing allows manufacturer to bypass spot market
The manufacturer had worked with Schneider Brokerage for 11 years, and Schneider helped the company optimize its supply chain. Because the manufacturer viewed the transportation provider as a trusted partner, it asked if Schneider could help.
Schneider recommended Market Index Pricing as a solution for the manufacturer to bypass the spot market. That meant Schneider analyzed the manufacturer’s current purchasing behavior against third-party indexes. It used this information to create an index that established a predictable rate and would deliver 100% acceptance and execution. The fixed shipping rate would help the manufacturer balance costs during market fluctuations, insulating the company from market volatility.
Instead of using many carriers on a one-off basis through the spot market, the manufacturer chose to work with Schneider using Market Index Pricing. This model appealed to the manufacturer, as Schneider would also be accountable for cost containment. The manufacturer could trust that Schneider would find the best solution possible because the transportation provider’s own success depended on doing so.
Schneider’s service provides even more shipping benefits
Schneider shared reporting and analysis on the manufacturer’s savings using Market Index Pricing. It found patterns in the manufacturer’s shipping and offered contracted, cost-saving solutions.
For example, Schneider pointed out when the manufacturer was shipping the same lane each month or if there was a high volume of freight on a particular lane. In these situations, Schneider was able to provide drop capacity to create efficiency in the manufacturer’s shipping.
The manufacturer also received benefits with increased access while managing the spot market on its own: It could take advantage of Schneider service offerings, including:
- Claims management
- Award-winning technology
- Relationships with over 40,000 carriers
Market Index Pricing helps control the supply chain and create cost savings
Thanks to Market Index Pricing, the tire manufacturer gained better control of its supply chain – and saved both time and money on labor. Its employees no longer scrambled to cover loads or spent time on dispatch efforts.
Schneider’s reporting and analysis provided visibility into the manufacturer’s shipping processes. With this insight, the manufacturer could make informed decisions about how to optimize its shipping.
The Market Index Pricing solution paid off: The manufacturer saved $379,000 in just nine months compared to what it would have paid on the spot market, according to a third-party index. With Schneider’s help, the manufacturer could keep its tires rolling down the road to their destinations without breaking the bank.
To explore your customized Market Index Pricing solution, contact an expert at Schneider.
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