Blanket Pricing vs. Customer Specific Pricing in LTL
Carrier Tariffs and Discounts on LTL Shipments
LTL shipments are rated according to tariffs published annually by carriers. A tariff, or rate base, is a system that identifies hundredweight rates based on a shipment’s weight and freight class as well as its origin and destination zip codes. Tariffs may vary from carrier to carrier, depending on the nature and scope of the carrier’s service. For instance, regional carriers may offer better rates on certain local short-haul shipping lanes, while national carriers may offer better rates for national long-haul shipping lanes. Carriers often offer discounts on certain tariffs, and using a 3PL is a great way to secure better rates from carriers for your LTL shipment. Depending on which carrier you use and the nature and volume of the freight you are moving, there are two distinct options for obtaining the best rates and discounts available from carriers.
Because rates and discounts are often negotiable, 3PLs can hugely benefit shippers looking to maximize savings per shipment. Carriers partnered with 3PLs will agree to basic pricing discounts that the 3PL can offer to all potential shippers. These rates are known as blanket pricing and are offered to 3PLs because of the volume 3PLs bring to the carrier. By working through a 3PL, shippers benefit from the relationship between the 3PL and the carrier, resulting in better overall rates and higher discounts. Small and medium sized shippers benefit most from blanket pricing through 3PLs.
Customer Specific Pricing
The second way a shipper can benefit from volume shipping with a carrier through a 3PL is known as customer specific pricing, or CSP. Customer specific pricing refers to rates negotiated with an LTL carrier for one particular LTL shipper. These rates are explicitly customized for the shipper and are reserved for shippers that move a high volume of freight every month and require special competitive rates to secure their high volume of business. Though each carrier has its own specifications and requirements, due to the high volumes impacting the shipping industry right now, a shipper most likely must have at least $100,000 in monthly freight spending to qualify for the majority of customer specific pricing being offered in the market. In addition to meeting the minimum threshold of monthly freight spending, your 3PL will also require a signed letter of authorization permitting the 3PL to negotiate on behalf of the shipper, 60-90 days of shipping history including classes, prices, and locations, a list of commonly used accessorials, and information regarding carrier preferences. This information allows your 3PL to negotiate the best CSP prices with the carrier on your behalf.
How 3PLs Negotiate Customer Specific Pricing
Your 3PL will take your shipping specifications and send them out to your preferred carriers with which they have a relationship. Utilizing the shipping information you provide, the 3PL can negotiate better rates and more significant discounts specifically tailored to your shipping situation. Leveraging the volume of your shipments as well as the volume brought to the carrier by the 3PL’s clients combined, your 3PL can ensure that you receive the best deal available for your LTL shipping requirements. Often, 3PLs will include an FAK (Freight of All Kinds) to the CSP to reduce the cost of freight classification. When a shipper is moving differently classed goods within the same shipment or even on the same pallet, a 3PL can negotiate an FAK that averages all of the different classes of freight contained therein, streamlining the process and reaching a price point that is beneficial to the shipper. If your shipments commonly require certain accessorials, such as a liftgate or inside delivery, a CSP can be negotiated that waives or reduces the fees for those accessorials.
Win-Win for Shippers and CarriersCustomer specific pricing can be advantageous to both shippers and carriers. Shippers are able to negotiate reduced carrier tariffs and a better overall rate for their shipments and ensure that their particular shipping requirements are met at the best price possible. Carriers also benefit, as they can tailor their pricing around the shipper’s specific needs, become familiar with their freight profile, minimize unforeseen service adjustments or failures, and gain a consistent, high-volume customer. The key to negotiating the best CSP with carriers is knowing precisely how, what, and where you ship, and working with a 3PL that can leverage that information and the 3PL’s relationships with carriers to obtain the best consistent shipping rate that will benefit shipper and carrier alike. On average, it can take up to 4-6 weeks to receive a response regarding customer specific pricing, so if your business fits the profile for CSP, it is recommended that you contact a 3PL like Koho immediately in order to start the process toward getting the best LTL shipping rate available for your shipping needs.