Con-way Freight announces mid-year rate hike
June 12, 2013
Another day, another less-than-truckload carrier announcing a general rate increase (GRI), or so it seems anyhow.
The most recent one comes with today’s announcement that Con-way Freight, the LTL subsidiary of transportation and logistics services provider Con-way Inc., will implement a 5.9 percent GRI for non-contractual business that will take effect on June 24.
Con-way said that this GRI will be geared towards customers on its CNW 599 tariff and will apply to general LTL rates, minimum charges and accessorial or supplemental fees for special services associated with LTL shipments moving within the United States and Canada, as well as cross-border shipments moving between the United States, Puerto Rico and Canada.
“The effect of the rate increase will vary for individual customers and shipments based on characteristics such as geography, lane, product classification, weight and dimensions,” read a Con-way statement.
Other LTL players recently rolling out mid-year rate hikes include:
-FedEx Freight announcing a 4.5 percent GRI scheduled to take effect July 1;
-UPS Freight rolled out a GRI increase of 5.9 percent for non-contractual shipments in the United States, Canada, and Mexico, which went into effect on June 10. The company set this increase applies to minimum charge LTL and truckload rates and accessorial charges;
-ABF said that it is revising its general rates and charges for its freight division, with rates increasing by about 5.9 percent, effective May 28, noting that the effect on specific lanes and shipments will vary. Company officials said the new rates can be viewed at http://www.abf.com; and
-YRC Freight rate increase kicked in June 3 at 5.9 percent for all non-contractual shipments in the United States, domestic and cross-border Canada, and Mexico, with the company explaining that the GRI will offset cost pressures for things like driver shortages and also to allow for investment in technologies and processes for compliance with new hours of service legislation and CSA safety initiatives
And as LM has reported, there are many drivers contributing to the turnaround occurring in the LTL sector, including a sharp focus on yield management and contractual relationships, coupled with an ongoing commitment to service reliability. But even with this positive momentum, it is clear challenges still remain as volumes and the general economy remain below or near pre-recession levels seen in 2007 and earlier.
That situation, though, could also be changing, with the housing and automotive sectors showing signs of improvement, with consumer confidence also hitting higher levels, too.
A recent research note from Wolfe Trahan noted that while some LTL carriers have been asking for up to 6 percent rate increases, a shipper told the Wall Street firm that on average the increases have been closer to 2-3 percent year-to-date, due to the shipper’s consistent volumes, history with carriers, and her company’s short payment history.
Many LTL executives have told LM they view the current rate environment as “rational,” especially when compared to 2009-2010, when they were doing whatever they could to hold onto business while sacrificing price for volume to keep freight moving in their costly fixed network operations.
And other industry stakeholders have pointed out that there is no question that LTL rates are starting to firm up on the yield side and it has become a focus for carriers—with all having some sort of yield improvement process to raise rates.
Satish Jindel, president of Pittsbugh-based SJ Consulting, explained in a recent interview that while truckload and parcel carriers often see double-digit margins, LTL carriers are typically at the other end of the spectrum with low, single-digit margins.
“This is not because LTLs have a bad cost structure or because they are all bad operators,” said Jindel. “It is just that the industry has slacked some pricing discipline, and shippers have been able to leverage the multiple carriers they use in a way where they have been able to get lower pricing. Shippers may not like to hear this, but they don’t benefit from unprofitable carriers no matter which segment of the industry they are in.”
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