As 2017 progresses, we continue to see more signs of aggressive price increases within the LTL market. Carriers have invested a significant amount of money implementing new technology to ensure all shipments moving through their terminals are priced accurately which can translate into reweighs and reclassifications for shippers. According to multiple national LTL carrier sources, capacity is tightening rapidly and many are looking to implement “take it or leave it” increases upwards of 20+%. This is a sure sign the economy is changing and price increases are not going away anytime soon.
Recently a carrier rep told us their president mandated a 20% increase in revenue per bill and instructed reps to walk away from bad business. Another mentioned they are pushing for a 91% OR (operating ratio) no matter what it takes. Last year, according to YRC CEO James Welch, he said ”Our contractual pricing has continued to increase between 3 and 5 percent. We’re going to continue to stay very committed to our strategy of pricing for profitability, and making that our number-one priority versus market share.” It’s been nearly a year now, and we’re finding they are staying true to their word. Combined with price increases, we’re seeing carriers are pushing to charge for accessorials such as notifications, appointments, inspection fees, etc. We have always been able to help our customers waive these fees during the rate negotiations process, but carriers have employed sophisticated financial models to push for better ORs and we are finding it increasingly difficult to waive such fees.
Though the economy is changing, there are still ways shippers can save on their freight spend. Two important factors are enlisting the services of a TMS and accurately describing freight characteristics of each shipment before it leaves the dock. A TMS not only houses a history of past shipments, but also saves freight characteristics including the correct description, NMFCs with their corresponding sub numbers, freight classes, and customer-specific requirements to help minimize potential changes in rates. Having accurate shipment information included on the original bill of lading at the time a shipment is picked up is also crucial. Carriers are less likely to take an increase because they are spending less time weighing and classifying freight at their terminals; they know that what’s on the BOL is what they are actually picking up. There is certainly something to be said as well for the time that’s saved on the shipper’s side of things by not having to dispute reweighs and reclasses. That may be even more valuable than the actual dollars! Using this information is key while walking through yearly rate negotiations to highlight opportunities and losses. Recon analyzes information to strategically work with carriers to identify new revenue streams for them, while discovering new ways for our customers to save money.
Recon, as always, looks to mitigate increases as best as possible by using various analysis tools. As issues arise, our team works hard to look into possible alternatives and how the LTL market will impact businesses.