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

Seasonally-adjusted (SA) for-hire truck tonnage in October at 135.7 (2000=100) was up 1.9 percent compared to September’s 133.1, and the ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment was 139.8 in October, which was 0.9 percent ahead of September.

The average price per gallon of diesel gasoline fell 3.7 cents to $2.445 per gallon, according to data issued today by the Department of Energy’s Energy Information Administration (EIA). This marks the lowest weekly price for diesel since June 1, 2009, when it was at $2.352 per gallon.

In its report, entitled “Grey is the new Black,” JLL takes a close look at supply chain-related trends that can influence retailers’ approaches to Black Friday.

This year, it's all about the digital supply network. In this virtual conference, we will define the challenges currently facing supply chain organizations and offer solutions designed to transform linear operations into dynamic, automated networks that offer seamless communication, visibility, and the ability to respond and optimize processes at any given time.

In his opening comments assessing the economy at last week’s RailTrends conference hosted by Progressive Railroading magazine and independent railroad analyst Tony Hatch, FTR Senior analyst Larry Gross said the economy continues to slog ahead at a relatively tepid pace, coupled with some volatility in terms of overall GDP growth. And amid that slogging, Gross said there is currently an economic hand-off occurring between the industrial sector and the consumer sector.


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