Market Analysis – 78141504 – Supplier or vendor managed freight and rebilling

Market Analysis Brief: Supplier-Managed Freight & Rebilling (UNSPSC 78141504)

Executive Summary

The global market for supplier-managed freight, a pass-through cost model, represents an estimated $1.8 trillion in annual logistics spend. This market is projected to grow at a 4.2% CAGR over the next three years, driven by supply chain complexity and the desire for simplified procurement. However, this model's inherent lack of transparency presents the single biggest threat to our cost-control efforts. The primary opportunity lies in leveraging technology and strategic sourcing tactics to gain visibility and unbundle freight costs from the supplier's product price, thereby mitigating hidden markups and driving savings.

Market Size & Growth

The Total Addressable Market (TAM) for freight services managed and rebilled by suppliers is a significant subset of the overall global logistics market. This model is most prevalent in B2B transactions where the end customer seeks a single-invoice solution. Growth is directly correlated with global trade, industrial production, and the increasing complexity of supply chains, which pushes non-logistics experts to outsource this function to their product suppliers. The largest geographic markets mirror global economic hubs, with Asia-Pacific leading due to its manufacturing dominance.

Top 3 Geographic Markets: 1. Asia-Pacific 2. North America 3. Europe

Key Drivers & Constraints

1. Driver - Supply Chain Complexity: Increasing globalization, multi-modal shipping needs, and customs requirements drive companies to offload logistics management to their suppliers for operational simplicity.
2. Driver - Supplier Volume Leverage: Product suppliers can often leverage their total outbound shipping volume to secure more favorable freight rates than a single, smaller-volume customer could achieve independently.
3. Constraint - Cost Opacity: The primary drawback is the lack of transparency. End customers have little to no visibility into the actual carrier cost, fuel surcharges, accessorials, or the supplier's administrative markup, creating significant risk of margin stacking.
4. Constraint - Digital Disruption: The rise of digital freight marketplaces and real-time visibility platforms (e.g., project44, FourKites) empowers buyers to gain direct market intelligence, challenging the value proposition of a non-transparent, supplier-managed model.
5. Constraint - Lack of Control: Buyers relinquish control over carrier selection, service levels, transit times, and risk management (e.g., insurance, claims), which can negatively impact downstream operations.

Competitive Landscape

The "competitors" in this model are the underlying logistics service providers (LSPs) that suppliers utilize. The supplier's choice of LSP directly impacts the cost, service, and visibility passed through to the end customer.

⮕ Tier 1 Leaders (Providers enabling this model at scale) * Kuehne + Nagel: Differentiator: Unmatched global network and capacity in high-value sea and air freight. * DHL Supply Chain: Differentiator: Deep expertise in integrated contract logistics, offering end-to-end solutions for suppliers. * C.H. Robinson: Differentiator: Dominant North American freight brokerage network and powerful TMS platform (Navisphere). * DSV: Differentiator: Aggressive growth via M&A, providing a comprehensive global footprint with strong operational integration.

⮕ Emerging/Niche Players * Flexport: Digital-first freight forwarder focused on user experience and data visibility. * Uber Freight: Technology platform disrupting domestic truckload brokerage with dynamic pricing. * Forto: European-based digital forwarder focused on sustainable shipping options.

Barriers to Entry: High. Success requires immense capital, a dense global network of carrier relationships, advanced IT and visibility infrastructure, and the scale to manage customs and regulatory compliance.

Pricing Mechanics

The price rebilled to the end customer is a bundled cost, typically constructed from several layers. The foundation is the base freight rate charged by the actual asset-based carrier or 3PL. To this, a variable Fuel Surcharge (FSC) is added, which fluctuates with diesel or bunker fuel indices. Finally, any accessorial charges (e.g., liftgate service, detention, residential delivery) are included.

The critical, and most opaque, layer is the supplier's own fee. This can be a transparent "cost-plus" management fee (e.g., cost + 5%) or, more commonly, a hidden markup blended into the base rate or other components. This lack of standardization makes direct price comparisons difficult and exposes the buyer to paying above-market rates.

Most Volatile Cost Elements (Last 12 Months): 1. Ocean Spot Rates (Asia-US): +150% due to Red Sea diversions and early peak season demand [Source - Drewry, May 2024]. 2. US Truckload Spot Rates: -20% as capacity loosened and demand softened from post-pandemic highs [Source - DAT Freight & Analytics, Apr 2024]. 3. Diesel Fuel Surcharges: -12% on average, following the decline in national diesel prices from prior-year highs [Source - U.S. EIA, May 2024].

Recent Trends & Innovation

• Real-Time Visibility as a Standard (2023-2024): Shippers are increasingly demanding that their suppliers provide API access to real-time transportation visibility platforms (e.g., project44, FourKites), regardless of who manages the freight. This allows buyers to track in-transit inventory and monitor carrier performance directly.
• Scope 3 Emissions Reporting Mandates (2022-Present): Growing regulatory and investor pressure for accurate Scope 3 GHG emissions reporting is forcing a reckoning with this model. Buyers now require detailed data on freight mode, distance, and carrier from their suppliers, which is difficult to obtain in opaque arrangements.
• AI-Powered Freight Auditing (2023-2024): Emergence of AI-driven audit and payment services that can analyze freight invoices (even pass-through ones) against market data, carrier tariffs, and contract terms to automatically identify billing errors and hidden markups, recovering significant spend.

Supplier Landscape

This table profiles the major logistics providers that form the backbone of supplier-managed freight programs.

Regional Focus: North Carolina (USA)

North Carolina presents a high-demand, robust-capacity environment for freight. As a top-10 state by population and a major hub for manufacturing (aerospace, automotive), life sciences, and finance, outbound and inbound freight volumes are consistently strong. The state is served by major interstates (I-95, I-85, I-40), Class I railroads, the expanding Port of Wilmington, and the critical Charlotte Inland Port. While carrier capacity is generally available, it is subject to national pressures like driver shortages and seasonal demand spikes. From a regulatory standpoint, North Carolina's environment is stable and generally pro-business, with fuel taxes and vehicle regulations that are in line with regional averages. The outlook is for sustained, strong demand for freight services.

Risk Outlook

Actionable Sourcing Recommendations

1. Mandate Cost Transparency. For all new and renewed contracts with significant pass-through freight, mandate an "open-book" or "cost-plus" pricing model. Require suppliers to itemize the carrier's base rate, fuel, and accessorials, separate from their management fee. This will enable benchmarking against market indices (e.g., DAT, Cass) to identify and eliminate hidden markups, targeting a 5-8% reduction in total pass-through freight spend.

2. Pilot a "Bring Your Own Carrier" (BYOC) Program. For the top 10% of suppliers by freight spend, identify high-volume, repetitive lanes. Nominate our core carriers and provide our pre-negotiated rates to the supplier for execution. This leverages our consolidated spend, ensures service levels, and provides direct data for ESG and performance tracking. This can drive 10-15% cost avoidance on strategic lanes while increasing supply chain control.