A survey on how prices are established in the less-than-truckload (LTL) market found that shippers are making the process more complex for carriers, and perhaps inadvertently even raising the cost of LTL service.
“What’s happening today is that shippers are forcing carriers to use their rates to simplify business from their perspective,” said Lee Clair, senior partner at the Deerfield IL-based consulting firm Norbridge Inc.
“Shippers are using a single price structure they’ve developed for all of their carriers, but that’s increasing the complexity on the carrier’s side of the transaction,” Clair told Fleet Owner magazine. “That increased complexity in some cases constrains a shipper’s ability to get the best rates, as LTL carriers have a more limited ability to offer discounts on such ‘foreign tariffs’ in their networks.”
Norbridge’s LTL pricing study profiled 14 LTL carriers and found that shipper-set rates make up 89% of their business today, with 50% of the revenue those LTL carriers gain coming from those shipper rates. Also, the number of rates carriers must deal with has exploded in recent years, rising to between 200 and 300 today from less than 100 five years ago.
Clair said Norbridge’s study indicates this situation would only get worse as shippers and third-party logistics firms continue to develop more and more tariffs to get the best LTL price they can.