Subscribe to our free, weekly email newsletter!


Step up to lower LTL prices

Earlier this year i wrote about the winds of change affecting LTL pricing in North America. If shippers and carriers are going to take advantage of pricing deregulation then they have to work together to disaggregate, cooperate, and automate.

July 01, 2011

Earlier this year i wrote about the winds of change affecting LTL pricing in North America. If shippers and carriers are going to take advantage of pricing deregulation then they have to work together to disaggregate, cooperate, and automate.

If things were not complicated enough already, we now have new hours of service (HOS) rules and carbon footprints driving costs—more than the old National Motor Freight Classification (NMFC) was ever designed to handle. In fact, shippers and carriers are putting the NMFC out to pasture. 

These days, the best carriers are moving to differentiate their pricing through options from which shippers may choose. Examples include pallet cube, a.m.-delivery services, metro area options, fast payment, and backhaul. By doing this, the carrier can let the shipper customize a level of service while getting the best price; but the shipper has to step up their game and enable price selection based upon cube, day or week, special services, and insurance coverage.

A few shippers have recently told me that their transportation management system (TMS) just can’t handle this much variation in price and service selection. Well, I suggest a business case review to see what that old TMS is really costing you. This may lead to a new TMS that is not forcing you to dumb down the rates to a simple FAK rate table.

And if you’ve been paying maintenance fees (many in the 20 percent range) to your software provider and they haven’t been keeping up the research and development pace, then you and your CIO need to have a little chat. TMS is now a tool available as Software as a Service (SaaS) and for very low cost per shipment. 

But before you shake up the technology in house, make sure your carrier can handle dynamic pricing changes with their system. If either party does not have the ability to calculate landed price based on a variety of negotiated variables, the result will be invoice rejects and lots of money for the post-auditors as they clean up the mess. 

I have seen shippers and carriers share the same system for executing orders with a single dynamic rating engine loaded with rates that reflect the cost variables of insurance, cube, fuel by geographic area, day of week, and even time of day. Shippers report up to 15 percent savings utilizing such dynamic pricing engines.

In a related trend, we’re seeing collaboration between shippers and carriers to increase the geographic and load density of freight. This is allowing the carriers to optimize their utilization of equipment while complying with HOS rules. 

Today it’s routine for two or more shippers to discuss commitment to combined loads, cross docking, and regional consolidation. If you’re not in the game, call your industrial neighbors and ask them which carriers they use. Actually, I usually ask the drivers at the loading dock where else they are picking up today—that can be an eye opener.

First, call your carriers and ask them how you can help raise density in your market. Next, call your customers and suppliers and ask them about collaborating in helping optimize transportation for environmental and cost reasons. Be aware, not all carriers and shippers have the technology or skills to understand and have visibility to their network of loads. If your business partner does not, encourage them to step up their game so you can both benefit from the new dynamic pricing market in LTL freight.

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Transportation stakeholders reliant on North Carolina’s major seaports are welcoming news this week, which outlines plans to enhance the intermodal and cold chain network in the region.

The index ISM uses to measure non-manufacturing growth—known as the NMI—was 56.9 in February, which was 0.2 percent ahead of January and also 0.1 percent ahead of the 12-month average of 56.8. Economic activity in the non-manufacturing sector has grown for the last 61 months, according to ISM.

Non asset-based third-party logistics (3PL) services and logistics technology services provider Transplace said today that Brooks Bentz has joined the company in a newly-created role as president of Transplace Consulting in conjunction with the launch of the company’s new North American consulting services practice.

The advent of e-commerce continues to grow and gain increased traction over time. The many ways for consumers to order and purchase goods online continues to expand and leads to various subsequent byproducts of online purchases, including shopping through multiple channels, and delivery and payment options, among other things. These types of topics serve as the thesis in the second annual UPS Pulse of the Online Shopper Global Study issued this week by UPS and comScore Inc.

A major highlight of CEVA’s fourth quarter performance was its new business wins, which were up 14 percent for all of 2014, with Freight Management wins up 14 percent, and Ocean Freight and Air Freight wins up 30 percent and 14 percent, respectively, while Contract Logistics wins were up 2 percent.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA