Have you ever heard the age old adage: “Time is money?” Well, if you’re an LTL carrier you can modify that adage to: “Time and space is money!” Keeping this in mind will help you understand some of the significant changes we are seeing from LTL carriers.
In the wake of Yellow’s closure in August, we saw what happened when you eliminate 10% of the capacity in the LTL sector. Almost immediately thereafter a whole bunch of LTL carriers thought it would be a good idea to raise their rates. Practically speaking, since every motor carrier (both TL and LTL) has experienced sharp increases in their cost structures over the past two years, the ability to raise LTL rates has proven to be welcome relief for the LTL carriers.
But longer-term, there are some important trends that shippers need to be focused on. One of the things that we have learned from numerous conversations with C level executives at some of the largest motor carriers in the country is that virtually every one of them has a focus on how their respective companies can maximize the value of their assets. This goes beyond simply being able to raise rates in response to market conditions. The smart carriers are on a quest to optimize their pricing and earn the highest returns possible. As a result, here are three interesting trends that will have an impact on your LTL costs in 2024. And this is important because shippers who understand these trends can lower their costs; shippers who ignore these trends will see their costs go up.
One: Dynamic Pricing
The LTL carriers have talked about the need for a dynamic pricing model for several years. Specifically, since there is a lot of variability in their daily/weekly/monthly operating environment, the LTL carriers would like to be able to adjust their pricing as needed to address this variability. For example, the value of freight tendered on Monday can be different to a carrier than the value of freight tendered on Friday. As such, they’re looking at ways to adjust their rates to shift demand in ways that will improve their profitability.
Based on advancements in technology and communications, the move to dynamic pricing is becoming a reality. We are now seeing LTL carriers promote the fact that they can offer a type of "K-Mart Blue Light Specials” when their trailers have excess capacity. For example, in a recent advertisement, Averitt noted that if you have an API connection with them and meet other conditions, they can offer pricing incentives to try and capture some of your freight. Of course, TranzAct has the tools and technology to help you take advantage of these dynamic pricing opportunities.
Two: Activity Based Costing
We’re also seeing carriers become more vigorous about applying Activity Based Costing (ABC) practices to determine their rates. LTL executives want to be able to allocate the cost to serve their customers with greater precision, and charge customers for excessive waste or practices that result in higher costs. Every major carrier has the financial data to calculate the operating ratio for all of their customers and use this data to in essence “score” each shipper. One of the ways to improve your sourcing events, is to understand your scores with your carriers. We’d welcome the opportunity to share with you how valuable TranzAct’s Carrier Yield Test can be in helping you to determine your scores.
Three: Increased Digitization
A group called the Digital LTL Council has formed to address the digitization of transportation processes and increase adoption of an eBOL standard across the LTL industry. According to a press release from the NMFTA this summer, progress is underway, and several prominent LTL carriers representing 15% of the entire LTL market have agreed to adopt this standard and are closing in on full implementation. TranzAct can help your company adopt these eBOL standards and gain better data and lower rates going forward.
Looking for LTL help?
As recognized experts in helping shippers with their LTL rates and lowering costs, we encourage you to get in touch. We’ve done billions of dollars in negotiations and have several services to help you manage your LTL freight. Simply give us a call at 630-833-0890, send us an email or schedule a time to meet.