For the past several months, these Two Minute Warnings have alerted shippers that things have changed. In today's freight environment where carrier networks are flush with freight, the carriers are making decisions that will impact your freight costs as well as your ability to move freight.
That is why it is critically important for shippers to understand that the carriers have more data than ever, have learned how to use it to assess the profitability of your freight, and they are using this data to determine how your freight "fits" in their network. If your freight is a good fit, you will get good pricing. If you have "ugly" freight, or if your freight doesn't "fit" well in a carrier's network, get ready for "sticker shock."
What does "sticker shock" look like? Well, recently my friend Bill Cassidy at the Journal of Commerce wrote an excellent article that highlighted the fact that Old Dominion really doesn't want your "over dimensional" freight and they are using their pricing to deliver that message. Specifically, Old Dominion sent an email to their customers letting them know that this "over dimensional" freight really doesn't fit in their networks. Accordingly, they have given their customers 30 day notice and effective November 1, 2021, they will begin charging a $1000 surcharge on freight over 8 feet.
But at least Old Dominion is giving their customers options. Other LTL carriers have decided that they will not even pick up "over dimensional" freight. These decisions highlight the fact that since the carriers are now armed with more data than ever before, they will have a different dialogue with their customers about how their freight impacts cost structures. Consequently shippers can expect to see more pricing changes or accessorial charges that enable carriers to charge more for freight they consider to be unprofitable or freight that doesn't meet their operating margin thresholds.
What should shippers do in this environment? Give TranzAct a call or send us an email! We are experts in the LTL pricing and sourcing arena and we can share some strategies and practices that can help you manage your LTL costs even in an environment where rates and accessorial charges are going up!
For example, we can help you implement the strategies that David Ross, EVP at Roadrunner Freight, recently shared with us in an outstanding interview. David stressed that if shippers want the lowest possible costs they need to make sure they are selecting carriers who have a good network fit:
“I would say the way we look at it and the way most carriers look at it is: how the freight fits into the network. And really rather than 'Ok, there’s 100 shipments a week coming our way', does it as a group make money or not….really evaluate it down at the lane level. Are we making money in all these individual lanes? Do we want all these individual lanes? Do they fit our network? […] Just as the carriers are looking to select the freight that fits their network, shippers should look to select the carriers who fit their network.”
Later in the interview he explained other critical factors that can impact your LTL freight costs. Having conducted billions of dollars in sourcing events for shippers, and being in the freight markets every day, TranzAct knows all about these critical factors and how addressing them can help shippers get the best possible rates.
After listening to the full interview with David, give us a call to discuss these insights and how they will impact your freight costs. Then visit our Resource Center to keep learning or get in touch to hear individualized advice.
P.S. Need help with escalating accessorial charges?
As noted above, we’ve seen a large increase in accessorial charges from LTL carriers as a result of the challenges with capacity.
At TranzAct we’re always working to get our customers the best rates and that is why we are looking at how to manage these new accessorial charges from carriers. One option to consider is giving us a call to see how our CSS group can give you some alternatives. You can contact them here:
Website: www.capacitytruckbrokerage.com
Phone number: (630) 912-9097
Email: csssales@tranzact.com
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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