Logistics & Supply Chain

Pure Chemical Transport Cost Benchmark

Fraunhofer SCS Freight-Price-Index Benchmarking for European Chemical Land Transports

21.06.2013 -

In most companies the major part of logistics costs are transport costs. Therefore, well conducted negotiations with service providers can lead to enormous cost reductions. But how can a transport purchaser know if his negotiated prices correspond to market prices and his competitors do not pay less for the same services? Tender responses of logistics suppliers may show different price levels but the decisive difference in freight prices is due to negotiating skills that can't be measured.

Participating companies cover around 80% of European market share
Therefore, Fraunhofer Center for Applied Research on Supply Chain Services SCS has developed a benchmarking methodology that indicates on the one hand an absolute freight rate index and on the other hand freight rate developments for German and foreign transport lanes. The market index represents the average market price of all participants. Thus, all relevant transport lanes in Europe are included in the benchmark. Fraunhofer proposes the following possible business segments:

  • Bulk Tank
  • Bulk Silo
  • Packaged Goods: FTL, LTL (2 and 7.5to)
  • Rail

Within the business segments different indices are calculated for dedicated and non-dedicated as well as intermodal and road transports. Especially for chemical transports there are quite a lot of specific transport requirements that have to be considered within a benchmark, otherwise a meaningful benchmark is not possible. Therefore a definite freight rate definition is necessary. Fraunhofer works closely with the participating companies in order to improve and enlarge the benchmarking scope.
For all business segments mentioned, a benchmark for more than 250 transport lanes is possible. Transport lanes are country to country routes, e.g. Germany to France or France to Switzerland, etc. Thus, companies are able to compare their company specific freight rate level to market. For reasons of anonymity for all participants of the benchmarking group, results are shown if a minimum number of companies are guaranteed. Fraunhofer's methodology takes all relevant cost drivers into consideration such as additional requirements in case of hazardous goods, dedicated and non-dedicated transports, transport volumes as well as weight and type of goods. The aggregated and anonymous freight rate benchmark has already existed since 2005. Participating companies receive benchmarking results twice a year. Currently the benchmarking community consists of 18 companies that cover around 80% of the European market share.
The aim of the benchmark is to provide a profound understanding of the market situation that guarantees a company a competitive advantage in purchase negotiations.

Fraunhofer's Benchmarking Methodology and Results
Fraunhofer defines the relevant transport lanes with every company in a one-on-one meeting. The companies are provided with data gathering sheets by Fraunhofer in which they have to fill in their transport costs, transport volumes and additional information for their tours. Fraunhofer then reviews all data together with the participating companies and neutralizes tour data of different lengths. Neutralization is important in order to compare different lanes. Therefore, only high quality information is imported into the database, which automatically calculates the results specific to each company. The companies receive their specific results twice a year. The "Detailed Report" includes all country-specific results whereas the "Summary Report" represents more general and market-based changes.

On-going Benchmark Development
Thanks to a steering committee consisting of Fraunhofer, five participating companies and an antitrust lawyer, the benchmark is in continuous development. At the annual meeting of all participants in Frankfurt, improvements are defined by all members and implemented by the steering committee over the course of the following year.
Antitrust lawyer assistance - a key requirement

Legal compliance is an absolute must for Fraunhofer SCS. Also, for the participating companies legal compliance is extremely important because of purchasing competition. Therefore, an antitrust lawyer is present at all meetings and checks all documents in advance. Fraunhofer organizes an annual meeting in which all participating companies take part. The cartel lawyer assists in the annual meeting as well as in the task force meetings in order to monitor antitrust regulations. Furthermore, the antitrust lawyer provides legal advice for the summary and detailed report.

Contact

IIS Fraunhofer Institut für Integrierte Schaltungen

Nordostpark 93
90411 Nürnberg
Germany