It used to be that shippers could expect their LTL carrier rep to come in around October or November each year to inform the shipper of their annual general rate increase (GRI), which was typically scheduled to take effect on the first day of January of the coming calendar year. Justification for this increase was typically that “the price of everything” was going up, and so to remain competitive, they needed to increase their rates accordingly.
However, many LTL carriers came to the realization that “casting a broad GRI net” in hopes of ensuring profitability for the current operating year became dodgy as the economy became more unpredictable. Carriers began examining both their customer base and the freight mix and its impact on the predictability of ROI. Many LTL carriers have recently discovered that concentrating their assets in certain shipping lanes has allowed them to focus their sales efforts on those customers and products that provided the optimum utilization of their assets at a fair price, thereby improving financial and operating predictability and mitigating the effects of economic volatility. This is how “lane-based pricing” became a viable approach to LTL carrier pricing.
Lane-based pricing is somewhat akin to LTL contract rate pricing in that it is not tied to the old GRI pricing approach, it allows predictable pricing over longer periods, and it helps to promote close collaboration between carrier and shipper in exchanging detailed information on freight. It also allows the carrier to optimize their asset utilization and price the freight more realistically based on their capability in the specific lane. It is truly a winning proposition for both parties.
If you are a shipper, and you ship LTL, it is worth your while to take time to explore LTL, lane-based pricing to improve your ROI, avoid the hassle of the annual GRI dance, and truly develop your carrier as a partner in your Transportation Strategy and Tactics planning.