LTL general rate increases (GRI) have or will be taking effect as we kick off 2020. The formula behind each one will vary by the carrier to include the approach the carrier takes with each individual account. The sophistication level of 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 a 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.
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 window may pose a challenge to on-time delivery performance.
Visibility to a carrier’s line-haul network is critical for shipments with an 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.
The universal KPIs remain true: length of haul, the average weight per shipment, the density of each shipment and potential revenue per shipment. In addition to the standard package, there are deeper operational KPIs that give the shipper a glimpse of the carrier’s business and how it may align with you as a customer. KPIs such as bills per stop; bills per trailer; % of Min charge shipments; % of accessorial; head haul/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 bidding discussions can deliver deeper insights into the carrier’s pricing model and approach, giving you a strong foundation for future negotiations.
Brad’s journey into logistics began as a Marine Officer and transitioned from the LTL docks to the non-asset side within the logistics service provider arena. As a co-founder of Rockfarm, Brad drives our business development efforts and delivery of our promise. An Arizona native, Brad enjoys spending time outdoors in his home state with his wife and family.
“Our approach to the market allowed us an opportunity to push forward in 2008 and enable our mission, “lower the cost to serve” to stand as a cornerstone to our company today.”