LTL general rate increases (GRI) have or will be taking effect as we kick off 2020. The formula behind each one will vary by carrier to include the approach the carrier takes with each individual account. The sophistication level with each carrier and how they apply their own “secret sauce” to pricing your business is actually very similar among the majority of the larger carriers. In fact, many of the larger carriers will deploy the same pricing platform and blend in their specific attributes to price out your business specific to their network.
Let’s first talk about the carrier base. The old adage, not all things are created equal, holds true for carriers as well. The specific business model should be a component of the vetting process prior to going to bid. The business model will include number of attributes that characterize the carrier and its ability to succeed with your business. Those attributes include:
This attribute not only includes tractors and trailer types but also facility equipment. If your company is a carpet manufacturer, facility equipment such as a carpet pole would be a requirement for effectively handling shipments. If a carrier has limited lift gates and all your deliveries require lift gates the carrier will be operationally strained to service your customers.
2) Terminal Locations
Are your customer locations in major metro areas or in rural areas? Questions like this qualify each carrier and identify one aspect of a carrier’s business model. Do drivers have longer stem times to begin their routes? If so, an early AM delivery windows may pose a challenge to on time delivery performance.
3) Line-haul Network
Visibility to a carriers line-haul network is critical for shipments with extended length of hauls exceeding 500 miles. Questions that arise, “Does your LTL carrier use intermodal to dispatch line-haul trailers east to west or west to east?” “If so, which hub is used?” “Does your carrier use team drivers over 1000 miles?” “What are the terminal dispatch windows or ‘cut times’ for each terminal serving your shipping locations?” These questions and more can begin to formulate if the potential LTL carrier is a fit, and if they are not, this may help explain why pricing is not in line with other carriers.
4) Business KPI’s
The universal KPI’s remain true: length of haul, average weight per shipment, density of each shipment and potential revenue per shipment. In addition to the standard package, there are deeper operational KPI’s that give you the shipper a glimpse of the carriers business and how it may align to you as a customer. KPI’s such as bills per stop; bills per trailer; % of Min charge shipments; % of accessorial; headhaul/backhaul adjustments; and line-haul touch points.
Using the above becomes a basis to align the carrier business model with your business to give you the strongest alignment of service to your customer base. Profiling the carrier prior to bid discussions can deliver deeper insights into the carriers pricing model and approach, giving you a strong foundation for future negotiations.