How MustDeliver Prices a Shipment
Author: Chris Dalton
If you know anything about MustDeliver, you know that transparency is at the core of everything we do. And if you know anything about the freight industry, you know that most players keep their cards very close to their chests, if not in their socks. You probably won’t find many digital freight brokers writing blog posts about how they set prices but that’s what this is. Just another way that MustDeliver is different.
A traditional freight broker gets paid based on the gross margin of the load. If the shipper pays the broker $2500 and the broker pays the carrier $2000, then the broker has a gross margin (profit before expenses) of $500. The shipper doesn’t know about the $2000 and the carrier doesn’t know about the $2500, which makes it all rather murky. Because the broker makes money based on the difference, he spends a lot of time trying to figure out how to push those two numbers farther apart — is the market softening?; will that carrier take $1950 this week? — and that effort doesn’t do anything to facilitate freight.
Our process for quoting a shipment starts with a neutral estimate of the going rate for a lane based on multiple sources of data including Freightwaves SONAR and signals from our own marketplace. We set a competitive price to the shipper, say $2400, charge a 10% flat fee for our services, then offer the load to our drivers for the other 90%, e.g. $2160. Next week the market price for the lane may be a little higher or a little lower but our fee is always 10%. And all these numbers are on the invoice for the shipper to see and in our driver app for the driver to see — so there are no mysteries!
Our fee is less than many transactions with a traditional freight broker but that’s fine with us, we can make a profit on that fee because our tech systems make us more efficient. Freight facilitation is easier when the shipper always knows where the truck is, updated every 5 minutes, and our people aren’t spending time on the phone trying to find another percent or two of margin. The graph doodle is how our business model looks on a napkin.
These numbers are of course illustrative but as we grow both shippers and carriers are finding our marketplace a very attractive place to do business. We’re always evolving and improving our processes and systems but what won’t change is our commitment to transparency: the driver knows what the shipper’s paying and the shipper knows what the driver’s getting. That’s the bottom line.