Accuracy is key to LTL fair pricing
Authored by SMC³ on August 2, 2024
For LTL, getting a grasp of what constitutes fair freight pricing goes a long way toward building better relationships between shippers and carriers. A recent session of the SMC³ LTL Online Education webinars asked the experts to zero in on some core fundamentals of pricing. Kevin Housley, Senior Director of LTL pricing at Scan Global Logistics and Clete Cordero, Director of Pricing at Southeastern Freight Lines, provided insights grounded in years of experience on all the factors that should go into LTL pricing in 2024.
One common thread of the conversation: complexity is on the rise. The increase of dynamic or dimensional pricing as well as the influx of more real-time freight data have made pricing agreements a minute-to-minute decision, informed by an ever-growing set of complicated variables. Despite this complexity, Housley and Cordero were able to bring out some key fundamentals that shippers should understand when entering pricing agreements.
- Accuracy is everything
The panelists noted that better pricing depends on more accurate costing of the account. Usually, this accuracy comes down to shippers giving better information on freight contents.
“When we get a bid from a shipper, what we love best is when they give us a data file and it’s got the exact dimensions by shipment. We can price accurately and not make assumptions,” said Cordero. “Every time we make assumptions, we must build in a margin of error and the price will get higher. [Shippers must remember that] our job is to allow our operations team to make a profit.”
But accuracy comes down to more than pure dimensions. It also comprises proper packing procedures and correct descriptions. When shippers do not know all the information, often a video call with the carrier or logistics provider or a simple visit to the dock to take measurements can help.
“I’m a big fan of having somebody on the dock to look at the freight and ask a lot of questions,” said Housley.
- Wisdom > Information
More data inputs are influencing pricing. But Housely and Cordero cautioned that information is not equal to knowledge. They celebrated the advancement of data technology and its ability to offer a more fine-grained pricing process. Yet they emphasized that the technology must be rooted in practical, years-long experience.
“There’s an art to pricing,” Housely explained. “Tech is a great tool. But people are what really help drive a solid pricing department to know what is moving in their network.
Once you have that overall sense, then pricing and costing make more sense.”
Part of this deeper wisdom also involves using the expansive data sets that shippers have available to make equally granular pricing decisions.
“Pricing takes more wisdom than before,” Cordero said. “We must spend a lot more time going granular now…Instead of spray painting, now we have to use a fine brush when pricing and dab in the details. We are looking at single lanes now, not a whole state.”
- Managing service versus cost
Relationships have become even more important than cost for shippers when choosing a carrier. Bidding keeps the industry healthy and competitive, but shippers need the judgment necessary to choose the right balance between the cost of moving their freight and the level of service they hope to receive.
Cordero compared the process to choosing a hotel for two separate purposes—one for a kid’s baseball game and the other for a wedding anniversary. For each scenario, a customer would prioritize varied factors and land in a different place on the service vs. cost spectrum. Similarly for freight, no single pricing scheme fits all needs.
In general, to keep costs lower, the panelists recommended learning how to leverage all the insights that new data tools can provide. Neither shippers nor carriers have caught up to the possibilities of efficiency that tools like dynamic pricing or AI can give. Learning these skill sets will help lower costs dramatically in the coming years.
As a final thought, both panelists returned to the importance of accuracy and commitment to not only improve pricing structures in LTL but to also improve carrier-shipper relationships generally.
“Be upfront and accurate if you don’t have answers,” Housely said.
Interested in joining LTL Hybrid Sessions? Register here: https://smc3.info/LTLedu