Is There an LTL Pricing Revolution Ahead?
Nov 7, 2019
It’s no surprise that technology is disrupting the logistics industry. But have LTL shippers really looked at how quickly this technology could impact their rates?
I addressed this topic at the recent Journal of Commerce Inland Distribution Conference. Subsequent to the conference, the Journal of Commerce shared my thoughts in their article: "Technology to spur LTL price hikes". Well, the article lit up the scoreboard, and I heard from several shippers who wanted more information.
In response, this week we are looking at some important issues for LTL shippers to consider.
First, major LTL carriers have better data than shippers about the freight that is being put on their trucks and how those trucks are being used. Make no mistake about it, the carriers are using that data to set rates that improve the utilization of their assets.
With dimensionalizers, carriers can measure your freight in inches, determining exactly how much fits on their trailers. Now that they can determine freight density, you can’t help but wonder about the need for freight classes as published in the National Motor Freight Classification (NMFC).
With ELDs now standard, they can also measure how much time it takes move in to and out of your facilities (as well as your suppliers' and customers' facilities) down to the very minute. If trucks aren’t turned in a prompt manner, shippers can expect to see more detention charges.
Overall, for shippers who are still wondering why LTL rates aren’t falling like truckload rates, it’s because the LTL carriers have demonstrated that they are using their data to usher in a new era of pricing discipline.
There is good news—it just requires a new era for shippers as well—in terms of using a strategic sourcing model. That can be problematic, because many shippers have a Corporate DNA which favors the traditional, procurement-based sourcing model. This is outdated, and based on our experience, this approach is guaranteed to leave money on the table—especially now that carriers have better data than ever before!
So if you’re interested in learning about how your company can conduct more effective transportation sourcing events, to get help conducting a sourcing event or benchmark your rates, give us a call at 630-833-0890 or send us an email. We've been involved in LTL sourcing for decades and we're here to help you navigate these changes.