LTL Carriers Revamp Rate Increases

LTL Carriers Revamp Rate Increases

Copyright 2004, Traffic World, Inc.

Trucking companies are showing shippers there''s more than one way to raise rates. While some LTL carriers are taking general rate increases earlier than usual this year, others are eschewing across-the-board hikes to focus on pricing for specific lanes or services.

Pitt Ohio and Old Dominion Freight Line are among truckers that just announced that they will raise prices in various ways but not use impose general rate increases.

"Why have a GRI on discounted rates? It never made a lot of sense," said Pitt Ohio Express President Chuck Hammel.

Usually the first out of the box with a midyear general rate increase, Pitt Ohio will instead examine every shipper on a lane-by-lane basis and adjust rates individually, Hammel said.

With only 30 percent of its business moving on tariff not under contract, the GRI seemed a holdover from regulated days, Hammel said. "It''s a throwback. Even McDonald''s doesn''t raise the price of hamburgers every year. What makes us continue to think we can ask for rate increases?"

LTL giant FedEx Freight is sticking to the tried and true method, raising rates 5.9 percent across the board June 14 while allowing for "additional adjustments" for select lanes and services. Higher costs for everything from health insurance to new low emissions engines justify the hike, said Dennie Carey, senior vice president of marketing at FedEx Freight.

The Memphis-based carrier made "significant investments" in technology this past year, adding strategic service centers and expanding its fleet with more than 1,800 new tractors and trailers, said Carey, noting that some of those investments cost more than in the past - low emissions engines in particular.

"With additional EPA requirements slated for 2006, 2007 and 2010, this trend is likely to continue," said Carey.

Old Dominion, Thomasville, N.C., will use length of haul to determine how much it will increase base rates this year. The shorter the length of haul, the smaller the rate increase, the company said.

"The increase is necessary to offset higher costs as a result of new equipment, new service centers, technology, insurance costs as well as wages and benefits," said Chip Overbey, vice president of national accounts and marketing for Old Dominion. The carrier also will provide a single through discount from and to points in Mexico and develop a new minimum charge rate structure for direct shipments between the United States and Canada, Overbey said.

Higher costs, reduced capacity and inflationary pressure in the overall economy are raising the pricing floor this year, shippers and carriers say.

"I see carriers trying to hit you for every little charge that they can," said Henry Giese, vice president of transportation logistics for CompuCom, a $1.45 billion technology services provider in Virginia Beach, Va. "That''s legitimate, they''re trying to capture back every penny."