Less-Than-Truckload Carriers Could Use Rate Adjustments to Improve Yields

Freight Brokerage, Transportation Management
February 24, 2015

Last year was especially active for less-than-truckload carriers seeking rate adjustments, and the early activity seen so far leads us to believe it’s a similar story for 2015.  In 2014, Ryder saw 241 less-than-truckload (LTL) rate adjustments, the highest number in recent memory and it far surpasses the rate in previous years, which hovered near 175 requests.Less-Than-Truckload Carrier Rate Adjustment

A number of factors are driving the trend.  Carriers are seeking yield enhancement at a time when equipment and driver shortages continue to affect capacity.  Carriers seeking larger rate adjustments on headhaul lanes to improve profitability are turning to solutions like dimensioners to improve their ability to accurately calculate cost and operating ratios on a customer-by-customer basis.

Among the most common trends identified are:

  • Driver and equipment shortages.  Driver shortages were and will continue to be a huge influence on carrier capacity. New equipment purchased by LTL carriers was more of a replacement of dated equipment than an addition of new equipment.  This led to little to no net gain in capacity. Some carriers have begun introducing new equipment, but capacity remains tight.
  • Carrier review of cost drivers on a customer specific basis. These cost drivers may include but are not limited to claims activity, outstanding accounts receivables, freight handling characteristics, origin / destination pairs, freight density, loading and or unloading wait times, etc.
  • Identifying and strategically pricing headhaul/backhaul lanes.  LTL carriers are taking a more surgical approach when costing their business.  They are looking to offer pricing on a point to state, state to point basis.  By doing this they are identifying the headhaul/backhaul lanes that run specifically in their operation and their pricing requests are taking that information into account.
  • Use of dimensioners.  A growing number of LTL carriers are using dimensioners in service centers to accurately calculate the weight and dimensions of the freight being shipped.  The information from the dimensioners is uploaded into their costing system.  Moreover, the information allows carriers to better understand the freight’s density being shipped to accurately forecast the cost of handling this business.  Bottom line is that LTL carriers are finding the dimensioners more accurate than past density studies.

Other tactics being used by less-than-truckload carriers include mitigation, strategic bidding and the proposal of multi-year agreements by the LTL modal team to help offset the LTL carrier’s rate adjustments.

It’s unknown whether 2015 will follow 2014’s record for rate adjustments but early indications are trending in that direction.  As Ryder seeks to be a third party logistics partner of choice, the LTL modal team has achieved 88% completion of requested rate adjustment within our targeted 60 day time frame.

 

Written by Eric Osen. Eric Osen is a Manager, Global TSP Development with Ryder System, Inc. Before joining Ryder in 2001, Osen managed inside sales, local and national account pricing for an LTL carrier.

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