Discounts still a major factor in LTL pricing
By Ray Bohman -- Logistics Management, 7/1/2004
For well over two decades now, discounting off of less-than-truckload (LTL) motor carrier class rates has been a major factor in pricing in this sector of the trucking industry, and that continues to be the case to this day. In fact, it's unusual to find a shipper these days that isn't receiving some type of discount on their LTL rates.
When discounts first took root in the early 1980s they were pretty modest, with many starting at around 5 percent. But as time went on and competition for shippers' business became stiffer, discounts began to escalate to 10, 20, 30, 40 percent and even higher. Now it's commonplace to see many shippers enjoying discounts in the high 50-percent to low 60-percent range.
To get an idea of the range of discounts that are currently being offered by LTL carriers, all you need to do is look at the annual reports that regional motor carrier rate bureaus are required to file with the Surface Transportation Board (STB). These annual reports list the range of discounts the rate bureaus' collective members have established with their customers.
Here are the ranges for discounts that were just recently filed with the STB by the nation's six major rate bureaus:
- EC-MAC Motor Carriers Association— from 20 percent to 76 percent
- North American Transportation Council— from 5 percent to 85 percent
- Middlewest Motor Freight Bureau—from 25 percent to 85 percent
- Pacific Inland Tariff Bureau—from 30 percent to 76 percent
- Rocky Mountain Tariff Bureau—from 30 percent to 76 percent
- Southern Motor Carriers Rate Conference—from 20 percent to 83 percent
Many readers may be surprised by those high-end numbers. Before you ask your carrier for such deep discounts, however, let me caution you that they are reserved for only the very largest companies. Shippers commanding discounts in the 70- and 80-percent ranges are rare birds indeed.
If you're already enjoying discounts and those discounts haven't changed in some time, there's nothing to stop you from sitting down with your carriers and working out some sort of upward adjustment. Carriers are free to make any revisions to their pricing they may wish, and they don't need to seek prior approval from any rate bureau or governmental agency. All that's necessary is for both sides to come to an agreement. (Of course every shipper should make certain it gets something in writing—what many shippers and carriers refer to as a "pricing agreement"—that sets forth the full terms of the deal and is signed by an officer of the carrier.)
Stay vigilant by watching the rate bureaus' annual reports and you'll be sure to keep up with the pack when it comes to discounts.
| Author Information |
| Ray Bohman, a well-known consultant and author, is editor of several highly successful newsletters on transportation and is a consultant to a number of national trade associations. He is president of The Bohman Group, consultants and publishers in the freight-transportation field. His offices are located at 27 Bay Lane, Chatham, MA 02633. Phone: (508) 945-2272. |























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