Less-than-truckload carriers are broadly dissatisfied with LTL pricing models, but not at all optimistic about changing to a new method for matching prices to freight.
That’s one of the findings of an LTL pricing survey conducted by Auburn University for SMC3 unveiled at the SMC3 Connections Conference in Coeur d’Alene, Idaho.
The survey conducted over the past year found 52 percent of LTL carriers were dissatisfied with the decades-old and much-maligned tariff and freight classification pricing model.
That compares with 25 percent of shippers and 38 percent of logistics providers who are unhappy with the densely complicated system, said Professor Joe Hanna, chair of Auburn’s supply chain management department.
The study, sponsored by SMC3, was launched last year after the collapse of LTL rates during the recession. It is the first LTL pricing study to include 3PLS, or freight brokers.
LTL rates have risen steadily over the past year, although not as quickly as truckload rates. But the financial strains from the economic downturn and competitive pressures from different wings of the domestic transport market have left truckers, shippers and 3PLs questioning whether the foundation for applying rates is antiquated and inflexible.
The trucker dissatisfaction reflects decades of discounting off base rates that divorced pricing from the actual costs of transporting LTL freight, Hanna said.
Carriers, 3PLs and shippers questioned in the survey’s first phase said discounts “are getting ridiculous, and as a result the base rates are ridiculous,” said Hanna.
Far fewer shippers were dissatisfied with the pricing model, but most said they had “adapted” to what they saw as an imperfect system.
“Is the marketplace ready for change? There’s no consensus,” said Hanna.
LTL truckers were the least optimistic that the shipping industry is ready to change.
More than 60 percent of the truckers surveyed in the second phase of the survey said the market isn’t ready for re-indexing base rates or a density-based pricing.
Shippers were more positive, with 60 percent saying they were ready for density-based pricing, and almost 60 percent saying they were ready for re-indexing.
Contact William B. Cassidy at firstname.lastname@example.org. Follow him on Twitter at @wbcassidy_joc