What Is Volume and How Is It Calculated?
What is volume?
Volume is a number of containers shipped on one lane in a given timeframe. It allows customers to compare their amount of spend to the market’s low, high, and average prices.
The unit of measurement is provided in TEU (20-foot equivalent). TEUs provide the baseline figure for the entire amount of product being shipped on a specific trade lane, regardless of individual container size. For example, two 20’ containers equal two TEUs, whereas one 40’ container also equals two TEUs. The purpose of this specific unit of measurement is to provide the representation of an actual amount of volume of a product before the product has been allocated to individual container sizes for shipment. Ultimately, TEUs allow Xeneta to provide a comprehensive figure for total spend.
What is spend?
Spend is calculated as cost per TEU shipped multiplied by the number of TEUs shipped in each trade lane. This figure is then used to aggregate and sum up all savings potentials (cost reductions) for the customer if they are performing at the market’s low, average, and high spend levels in the trade lanes they are currently operating in. These figures are provided via the negotiated price, not the actual paid price. Additionally, these prices are provided per lane, not per contract ID/supplier.
What is coverage?
Coverage illustrates the percentage of lanes Xeneta can provide price comparisons for with the customers’ volumes. This allows the customer to compare their levels of volume and spend to the rest of the market within their trade lanes. When coverage is provided in the customer’s trade lane by Xeneta, the customer can then compare their spend to the market low, market average, and market high figures to determine their overall spending performance and cost-effectiveness. The amount of coverage is affected by whether “Region-Level Benchmarks” are utilized or not.
What are Region-Level Benchmarks?
Region-Level benchmarks are a method to provide customers with prices from the next level up in the geographic hierarchy if no port-to-port coverage is available. For example, if the customer is shipping from Tokyo, Japan to Boston, USA but Xeneta does not provide coverage for that specific port-to-port trade lane, pricing information will be aggregated from “Japan Main” to “US North East Coast” instead.
How are volume data points stored/structured in the Xeneta database?
Volume data points (or “objects”) are sorted in the Xeneta database by their validity date (valid from – valid to) as well as their initial import date, then filtered by company. Additionally, other relevant values such as the company ID, destination, origin, equipment type, and supplier ID are also contained in each object. This means that each volume object is only tied to a single company within the database.
How are similar/identical volume objects handled?
When two volume objects contain similar constraint values but are not duplicates, their volume amounts are summed and stored as a single value in the database. For example, if two volume objects are imported with the same date, origin, destination, equipment type, and supplier IDs, but contain values of 10 and 15 for their volume, they will then be stored as a single object entry containing the summed value of 25 and the remaining values from the newest created object.
During different imports, however, the volume with the newest creation date will be chosen. For example, if a volume in “Import A” is 50 and the volume contained in “Import B” is 100 (all other constraints matching), the volume from “Import B” will the one chosen for allocation.
What is allocation and how does it function?
Allocation is the process of matching a rate to the origin, destination, equipment type, and supplier within the volume object’s validity period. Volumes and rates are not linked, initially. The most recently added rate will be chosen if multiple rates are available.
Volume objects are stored separately and used within the allocation process to map which volume object is assigned to which rate. This also means that updates can be made to the rates without affecting the currently active volume objects. When the rate has been linked to the volume, it is considered allocated.
What is “Cheapest Supplier”
Cheapest Supplier is typically used for:
- Tenders when a client assigns multiple volumes on different suppliers for different lanes.
- Historical data, for when the supplier used is uncertain.
- Value assessment, where it might be more appropriate to use the cheapest supplier in today’s market compared to what was used before.
The supplier is initially set to an empty value. Xeneta will find the cheapest available rate for any combination of the customer’s rates on a given lane. At this point, the system allocates the volume to the cheapest supplier currently being used by the customer. As rates/volumes are added, modified, or deleted in the system, the rate/supplier allocation will change. The cheapest supplier is not calculated per import time, but rather at any given point in time.