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The actual core of the logistics industry is based on a regular sophisticated supply-demand relationship. Each of the parties needs the other; shippers want secure transportation for their merchandise and, on the other hand, transport firms search for freight to occupy the empty space in their vehicles. Bridging this gap is the concept of a freight exchange. In other words, it is an interface through which this two-party can connect, negotiate, and complete mutually beneficial deals.
What is a freight exchange?
Freight exchange can be defined as a marketplace where shippers and carriers come together to trade transport capacity and demand for it. It brings together different players in the logistics world: carriers (the party with the commodities that require shipment such as manufacturers), vehicles (transport companies with trucks, vans, etc), and the individuals who manage the shipment of those goods which are referred to as freight forwarders.
This can be considered as a meeting point for these companies that are seeking their partners and clients using online platform. Independent shoppers can actually specify within the forum information about cargo, the place of origin and destination. The transporter can put updates on the vehicle capacity and any excess space that is available at the time when the truck is coming back to the depot with all the details. It then connects shippers to transporters for a discussion of the shipping arrangements and the substantiation of a contract.
What are the advantages and disadvantages of a freight exchange?
Freight exchange can be described as the virtual trading platforms unique for the supply chain sector. While they offer significant advantages, there are also some drawbacks to consider.
Advantages of freight exchange
Freight exchange is a good tool to improve efficiency. Freight exchanges are a structure that helps to save time or mechanism that assist in the search for means of transport. It enables shippers to easily post load offers with information regarding their consignment and carriers to post their trucks’ availabilities with empty space on the reverse trip. This does away with the occasions when one has to spend hours researching and making calls. Moreover, these platforms are major sources of carriers and shippers as an extensive network. This raises the prospect of meeting a suitable counterpart for a particular requirement; it could be when a shipper is in search of a good rate or when a carrier is in search of loads to fill empty vehicles on a return trip.
From the firms’ financial points, freight exchanges may improve profits for both shippers and transporters through better utilization of trucks and fewer empty runs. Shippers can potentially find lower rates through competition, and carriers can maximize profits by filling empty space.
Disadvantages of freight exchange
It's important to take into account such points as limited control, reliance on platform and membership fees.
Online freight exchange primarily deals with matching deals, so shippers may have less control over the transporters who handle their shipments than when they hire the transporters directly. Cargo exchange website's success depends with the quality and coverage of the particular freight exchange platform in use. A platform with a limited user base may not offer the best options for shippers or carriers. Some freight exchanges impose fees for the use of the exchange services and these can be a form of expense that may be considered especially for small businesses.
How to use the freight exchange?
Freight owners sign up on a leading freight exchange platform and place information on their shipment and freight forwarding such as point of loading, destination, type, and any requirements. It then links users to other transport companies composed of a network that can take the load. Carriers contact them and offer their quotations which are forwarded to the interested shippers, and each shipper has his choice dependent on the price, quality, and accessibility. Unlike shippers, shipping company can look for loads to fill up their capacity and desired routes. Users can make browsing of the live updates on the different freight postings in their area and can propose their rates to the shippers.
The exchanges of the freight have numerous advantages for the shippers as well as the transport companies. Shippers are able to optimize on the amount of money and time needed to complete shipment whilst avoiding empty miles. They also gain access to a wider network of transporters, increasing their options. Transport companies get value for their money by being able to find return loads easily or find another way of making optimum use of the vehicle. Additionally, many platforms conduct security checks to ensure peace of mind for all parties involved.
What are the types of transportation exchanges?
The most common type is a freight exchange website. This creates a marketplace where freight forwarders can post details of their freight loads (also called haulage loads) and shipping companies can search for freight that fits their available vehicle capacity.
Another way to categorize these exchanges is geographically. For instance, a European freight exchange would focus on connecting businesses and transport companies specifically within Europe.
Hence, transportation exchanges prove to be a benefit in the transport and logistics business. This is a boost for the freight forwarders as their goods reach their destination quicker, and at a possibly lower cost than before. On the side of the transport company, they can make extra earnings to maximum utilization of the empty truck.
What are the benefits of using a freight exchange?
The world of freight transportation is undergoing a transformation driven by technology. Exchanges of the freight are at the forefront of this change, offering a suite of features that streamline operations for both shippers and carriers.
Real-time monitoring of vehicles
Regarding the shippers, every freight exchange is connected to GPS tracking systems applied by the freight exchange members. This enables the owners of the consignments to monitor the location of his or her goods at any given time hence ensuring that they are relaxed throughout the process. Real-time tracking also eliminates the need for constant phone calls or emails to check on load status.
For carriers, access to available freight means that the carrier can quickly find return loads and that the efficient movement of freight is always available. This cuts down on a major cost drive in the transportation sector known as empty running. Loads are usually advertised in certain areas such as St Neots in the UK or even across Europe in order to help carriers to improve efficiency and fill available vehicle space. Also, matching with proper loads results in identifying and accepting new jobs more quickly, and thus, transporters have the opportunities to earn money with more potential.
Determining the route and calculating the cost
Exchanges enables the transporters to publish the available space that is in their trucks. Carriers can then look for load that fit the available space in the vehicle, so eliminating cases where the vehicle wastes most of its capacity or sometimes going after the haulage loads. That is why costs for both, the buyer and the seller, are considerably reduced.
One of the biggest advantages is opportunity to look for return loads. Load boards can be used to efficiently plan return trips since they display loads that are going back to the carrier’s home base. This serves a dual purpose of being efficient and enables one make a buck off something that perhaps would have been a one way ride to nowhere particularly on highways.
Cooperation with proven contractors
Interconnected via the internet, the different exchanges of the freight especially the European ones will link you to thousands of independent drivers and forwarders from the exchange. The ability to find and qualify transporters on your own is done away with, therefore saving your resources.
The majority of the freight exchanges has provision for detailed and comprehensive approval of it’s members. This implies that you shall be associating less risky contractors who have the tendency of delivering good services.