LTL pricing So what is a small shipper to do?

If you wanted to create a pricing system that is confusing, Less Than Truckload ( LTL )  pricing probably would be it.   So let’s decode the complexity, lets use a little history. After that, let’s discuss what is coming down the pike in LTL pricing.

Since commercial trucking began to take a hold, a tariff was developed based on a similar railroad tariff that broke all commodities into various classification. That classification was based not only the product size and density but also its relative value to other items. Thus it would cost more to ship an equal weight of televisions than salt, because televisions have a higher market value. The current book which is the standard LTL classification book is the National Motor Freight Classification tariff. Prior to deregulation, there were regional rate groups who built joint mileages tariffs based on those classifications. Added an another level of complexity

It was complicated enough to figure out the the correct LTL classification, then in 1980 it got harder.   Trucking rate deregulation took hold. The LTL carriers, comfortable with the classification did not want to change that. But to compete, discounts were given to the larger customers some ranging into the upper 80% rate for the largest shippers. Small shippers received discounts but at a lower amount. Soon organizations such as Southern Motor Carriers (SMC) were offering a mileage tariff to cover the country, which changed year to year. So if your firm used SMC tariff base, your firm would have a x discount based on SMC’s LTL tariff in a given year.

Now there is a push to eliminate LTL classifications and just use density pricing as a basis for pricing.

So what is a small shipper to do?  Using LTL consolidators will likely lower cost since the consolidator volume to a a carrier will lower ones costs.  Another strategy is minimize the amount of LTL shipping.  Send a truckload to a distribution center near your customers and you may save money.

Small shippers are the most vulnerable to density pricing due to their little sway in the marketplace. So if this change is unfavorable to the company find contractors who will handle the things the old fashion way at less total cost. There is likely for some to around.

 

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