A surge in the number of less-than-truckload (LTL) tariffs over the past few years could be weakening the ability of LTL carriers to price their services competitively. The average LTL carrier now has between 200 and 300 active tariffs, according to the results of a survey conducted by Norbridge Inc., a consulting firm in Concord, Mass. The study, based on responses from pricing and marketing directors and vice presidents at 14 leading LTL carriers, outlines current LTL tariff usage and expected pricing trends.

For most respondents, the number of active tariffs they work with has significantly increased in the past five years, due in large part to a trend toward more shipper-specific tariffs. Although using a single tariff makes life easier for the shipper and simplifies bid comparisons, carriers contend that the proliferation of individual, customized tariffs makes business more complex on their end. The problem, says Norbridge Senior Partner Lee Clair, is that as shippers attempt to better understand their own logistics operations and decide what they should be paying for freight, they are using techniques that undermine a carrier's ability to be competitive.

"To create comparability, shippers are creating their own tariffs, or they're picking some 'foreign' tariff and calling it a standard," he says. "Then they invite the carriers to bid on their business as a discount off that stated tariff." But that may not get them the best rates, he says. "Because the carriers are bidding off tariffs they don't know as well and aren't contoured to their networks, they're not able to give their most competitive prices," he explains.

The growing use of shipper and third-party tariffs also appears to be costly for the carriers. Just one-third of respondents' revenues come from tariffs devised by shippers, third-party logistics companies (3PLs), and other motor carriers, even though they represent nearly two-thirds (63 percent) of tariffs currently in use. By contrast, respondents reported that 50 percent of their revenues come from shipments moved under their own tariffs, even though they represent only 11 percent of active tariffs.

In addition, the growing number of single-user tariffs is raising administrative costs for carriers. Although computer systems ease that burden somewhat, carriers still say that the manpower requirements for handling the additional workload are having a significant impact. Typically, 85 to 95 percent of tariffs can be auto-rated or analyzed through a common systems interface, but applying rates to aberrations requires "significant manual effort," respondents said. The increase in the use of "foreign" tariffs, moreover, requires additional investment in computer systems and servers. "The companies who are being affected less have invested a lot of money in systems to handle this, while other carriers haven't or can't afford to," says Clair. "It's more of a burden to smaller and mid-size carriers."

The carriers interviewed for the Norbridge study agreed that the number of individual tariffs are likely to grow as more shippers try to control their costs. Standardization or a significant reduction in the number of tariffs, therefore, isn't likely anytime soon, they said. Several respondents, though, suggested that increased use of CzarLite, the LTL base-rate software sold by the SMC3 rate bureau, could help to limit the number of tariffs.

While that may indeed make a difference, Clair says, the only way to resolve the problem of proliferating tariffs is for the industry as a whole to change the way it approaches pricing. "It's going to take an industry initiative," he says. "No single shipper or carrier is going to change it."

Complete results of the tariff study are available in PDF format at Norbridge's Web site, www.norbridgeinc.com.