4 Reasons to Get Rid of Your Routing Guide

By: Lance Healy

 

While shipping with a routing guide is one of the most common methods of managing freight, it’s also one of the oldest methods, and it’s time for an upgrade.

Routing guides are just sets of assumptions for shipping products, whether it be shipments out to customers, or materials in from suppliers. They include modes and carriers to use without actually validating on a shipment-by-shipment basis if that’s really the best carrier. Essentially, routing guides are better than single sourcing to a provider, but consume a lot of time and still leave a ton of money on the table.

Routing guides are just sets of assumptions for shipping products, whether it be shipments out to customers, or materials in from suppliers. They include modes and carriers to use without actually validating on a shipment-by-shipment basis if that’s really the best carrier. Essentially, routing guides are better than single sourcing to a provider, but consume a lot of time and still leave a ton of money on the table.

The majority of transportation management systems are built on static tables and/or routing guides. Very often we find color-coded maps of the US and Canada in the office of traffic managers. Carrier awarding is done at the region or state level. Even though the process is full of assumptions and limited use-case testing, a carrier is still deemed to be the best at a region or a state after the routing guide makes its selection. Routing guides are not always on paper or in a standalone excel spreadsheet. Your TMS may generate a single rate on one screen when prompted, but it’s more than likely pulling from a static table that someone loads into the system. In either instance, these are costing the company huge amounts of money.

Let’s take the state-to-state example; the typical process is to run a single scenario against the most common lanes in the last year and compare that same singular use-case to other carriers. For example, out of the 100 lanes in TX, for 40% of that one scenario, Carrier A was the least expensive, Carrier B won 25%, and Carriers C, D, E, & F split the rest. The routing guide says that all the freight going to TX will now use Carrier A. The shipper just, unknowingly, agreed to pay more than necessary on 60% of every lane in the state of Texas.

Because of the cost of assumptions, and lack of visibility, shippers are throwing their routing guides in the trash, and going with technology that can do a better job, more efficiently. Here are 4 reasons why you should get rid of your routing guide:

 

1. Assumptions are expensive

 

Carriers have preferences on the kind of freight they haul and where they go. Those preferences are reflected in their pricing. Let’s say you built the routing guide on a typical order of 2 pallets and 1500lbs. Carrier A might love that freight in their network, but Carrier B gets really price-aggressive at 3 pallets, and Carrier C is very competitive on the floor minimums. The routing guide dictates that Carrier A gets all the freight resulting in significant lost savings. That same scenario may play out differently in a different geography, but the assumptions may hide the savings.

We can replace the routing guides and show you how to use your existing carriers most effectively, every single shipment. It is not uncommon to see clients save 16-21%, without renegotiating a single carrier contract.

 

2. Routing guides are outdated

Maintaining a routing guide is one of the most manual tasks in the traditional freight management process. And, because it’s such a manual process to update pricing once each year, most shippers simply avoid the hassle and, instead, opt to do annual RFPs with their carriers to update their routing guide. This forces carriers to provide an oftentimes padded rate to ensure ample profitability over the course of a year.

Understanding that 2-3 months of time go into creating RFPs and the manual effort required to update a routing guide, routing guides often fall “out-of-date,” and organizations may continue to select the suggested carrier listed, despite the fact that a competing carrier may offer a better price and transit.

When you use a routing guide to make carrier selections, you are missing the opportunity to save money with other carriers. For example, if another carrier enters a lane at a lower price than the carrier you were using, you wouldn’t know you could save on freight spend until months later when it comes time to do another RFP. In that time, you are losing money on each shipment because your routing guide isn’t up to date.

The moment a routing guide is published, it’s out of date and still leaking dollars.

 

3. You can’t easily work with your carriers

When operating off a routing guide, you’re managing your own spreadsheet in a world to which the carrier doesn’t have visibility. In this environment, shippers and carriers aren’t given the proper communication tools to collaborate, promote growth, and create shared efficiencies. 

Compare this to a system of live connectivity with your carriers, where you can work with your carriers to update or negotiate rates and terms depending on mutually beneficial factors. With live connectivity and the right technology platform, you can run meaningful reports to let your carriers know which lanes they can be more competitive on, therefore giving more business to that specific carrier, while improving your rates. This is possible with live connections because you have visibility to every facet of the freight management process.

 

4. You have no visibility to inbound freight

Shippers that operate off a routing guide for their outbound shipments will often create and manage a supplier or vendor routing guide to direct their suppliers to use certain carriers for all inbound shipments. Here’s why that’s not an effective method of freight management:

1. It’s yet another tool and manual process that falls between the cracks of the purchasing department and the traffic department, so it’s relatively unmanaged.

2. If it’s outdated (and it most likely is), then it’s another area that’s costing you savings.

3. Companies don’t leverage the additional volumes of inbound shipments to get better rates with your carriers for your outbound freight.

 

Many companies are not taking control of their inbound freight. The suppliers are picking whichever carrier they want, and are very likely passing that cost onto you (it’s not uncommon for suppliers to mark-up the cost of freight). We’ve seen savings of nearly 30% of a clients’ inbound freight expenses once they take control of their Inbound freight.

 

Conclusion

An industry defined by constant movement shouldn’t be held back by static rate tables or routing guides. The technology shift in the freight industry is changing everything about freight management. Shippers can now see quotes directly from each of their carriers on every shipment, and comparing quotes ensures you’re always getting the best price. No more averages or assumptions; you can see total costs from every carrier, every time. Live connectivity is no longer merely an option in freight management—it’s the new expectation. If you’re updating a routing guide this year, we are here to help.

 

If you would like to see how Banyan Technology can save you money on every shipment, request a demo.

If you want to learn more about planning your go-forward plan for live carrier connectivity, download our latest piece, Build vs. Buy: Considerations for establishing live API connectivity with your carriers.

 

 

Subscribe to the Banyan Blog to stay up-to-date with the latest in shipping technology: