Subscribe to our free, weekly email newsletter!


ODFL announces rate hike

By Jeff Berman, Group News Editor
July 24, 2012

North Carolina-based Old Dominion Freight Line (ODFL) became the latest less-than-truckload (LTL) carrier to roll out a general rate increase.

Effective August 6, ODFL said its base rates will increase 4.9 percent, adding that the exact increase may differ for customers due to different factors, including lanes utilized and the distance shipments move. The company added that the tariffs affected by the increase are the ODFL 559/555 and the 505 Canadian tariffs. The rate increase will also provide for a nominal increase in intrastate, interstate or cross-border lane charges, as well as being used to offset increasing costs.

“We’re naturally sensitive to our customers’ budgets,” said Todd Polen, Old Dominion’s vice president of pricing, in a statement. “Raising our rates is something we do reluctantly and after considerable analysis. We’re taking this action to ensure that our services remain best-in-class. We continually reinvest in our business. This modest increase will enable us to absorb the rising cost of new equipment and escalating insurance costs while maintaining competitive wages and benefits for our employees.”

This announcement by ODFL follows similar ones by many of its LTL brethren, including: a 6.9 percent increase by UPS Freight, effective August 1; a 6.9 percent increase by ABF Freight System, effective July 25; a 6.9 percent increase by YRC Freight, which took effect July 9; and a 6.9 percent increase by Con-way Freight, effective August 1.

These non-contractual rate increases typically account for roughly 20-to-40 percent of LTL freight, according to industry estimates.

Satish Jindel, president of Pittsburgh-based SJ Consulting, recently told LM that these rate increases are a good thing, because the LTL industry needs to become more profitable.
“The market is getting tighter, and it is a good time for this,” he said. “Capacity is part of this in terms of the two types of capacity the industry deals with: one being fixed capacity and the other being variable capacity.”

Regarding the latter, Jindel said it is very tight at the moment, as it involves driver availability, which is very challenging at the moment.

While raising rates is seen as key for recovering revenues lost during the recession, Jindel said there are other effective ways to address this situation. One way is for LTL carriers to charge for what they actually handle.

“If a carrier is charging for 760 pounds and the Bill of Lading says 740 pounds, charge for the extra 20 pounds,” said Jindel. “About 4 percent of industry margins would improve if carriers did that. This is a bad industry practice from years ago.”

Another thing that can help LTL margins, according to Jindel, is freight classification and using FAK (Freight All Kinds) rates for average pricing. Leveraging both these practices would improve margins without rate hikes, said Jindel.

As LM reported during the fourth quarter of last year, anecdotal evidence suggested that many LTL carriers are seeing rates recover and are turning their attention to rate increases, following a challenging 2009 for the sector in which LTL carriers to a degree were highly focused on driving volume gains with pricing power largely diminished.

LTL carriers are also seeing marked improvements in pricing, volume, and weight per shipment in recent months, according to analyst reports.

An LTL executive told LM 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 in place.

Ed Wolfe, analyst at Wolfe Trahan & Co, wrote in a research note that while LTL capacity still is much more available than LTL, LTL pricing is “going in the right direction as the largest carriers remain very focused on improving rates.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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

Over $2 billion dollars in carrier overcharges go uncollected each year as shippers do not have the time or resources to collect refunds.

Last year at this time, retailers were relieved to learn that a tentative agreement on a new labor contract had been reached by dockside labor and management on the U.S. East and Gulf coasts. But not without considerable blood on the floor.

The National Retail Federation is encouraging maritime management and the union representing dockworkers along the U.S. West Coast ports to expedite pending contract negotiations and reach agreement on a new deal well in advance of the expiration of the current contract this summer.

SAP AG announced the availability of a new application to help centralize processing trade activities, SAP Global Trade Services, processing trade in China. 



Did you know that Supplier Portals can help companies reduce risk, improve compliance and enhance product availability? Download Amber Road's latest research report featuring research from Gartner.

Article Topics

News · LTL · ODFL · Less-Than-Truckload · All topics

Comments

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


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA