Accurate and Reliable Base Rates are a Cornerstone to LTL Transportation
Authored by SMC³ on February 18, 2021
Less-than-truckload pricing success begins with a solid rating foundation, and for shippers, 3PLs and carriers, the first building block is a neutral, third-party base rate.
The LTL transportation economy is fueled by base rates; carriers can use their own personalized baseline rates, but these are skewed toward each carrier’s individual network design. With neutral base rates, shippers and 3PLs guarantee that they will always start price negotiations on even ground. Then carriers can target business that best fits their network through strategic discounting resulting in a true win-win for all parties involved.
Neutral base rates aren’t created in a vacuum, and base rates aren’t about creating the best price for shippers and 3PLs. Through extensive analysis and market review, tariffs in a base rate are structured to be fair and balanced, while keeping in mind the need to fairly compensate carriers. The rates themselves aren’t weighted toward any one side of the carrier-shipper equation. The most accurate systems for base rate information development support the macroeconomic issues of LTL carriers without yielding to the micro-level operating and marketing issues of any individual carrier. Simply put, base rates level the LTL transportation playing field, guaranteeing that all parties in the supply chain equation are using the same sets of rating data.
Accurate, dependable benchmark rates are derived through robust pricing studies of the dynamic domestic LTL market — products of exhaustive market analysis, carefully crafted equations, expert data science and decades of LTL experience. These continually updated base rates provide the entire marketplace with simple contract rate maintenance. A baseline rate enables shippers to process rates offered by a wide range of motor carriers, maintaining control of their internal pricing system. Large and small shippers also benefit from base rates through uninterrupted access to instant and easily verifiable rate information, a critical factor in negotiating competitive pricing with their carriers.
It’s been proven over time that the savviest shippers, the companies that consistently secure the best rates from carriers, utilize rate baselines. Shippers and 3PLs are not the only beneficiaries of base rates. Carriers can use neutral base rate benchmarks to check their customer-level pricing against a baseline, monitoring price changes across time and comparing the uniformity of individual pricing programs across various customer segments.
Successful price negotiations can only occur when both parties are working from a trusted, reliable benchmark. Base rates lead to informed discussions about supply chain and transportation strategy, giving shippers, carriers and other supply chain stakeholders the confidence that their transportation strategies are backed by extensive data analysis and business intelligence.