September 29 2016

Freight for Thought: LTL rate increases are on the way; are you prepared?

By Greg Brown, LTL Pricing Manager

By all accounts, 2016 has been a challenging year for LTL shipping; many of the largest LTL carriers have seen declines in tonnage, with many also seeing declines in shipment count and revenue.[1]

Despite the unfavorable market conditions, most LTL carriers have announced, or are expected to announce, rate increases for 2017.[2]

Though 2016 has been sluggish, carriers may be anticipating capacity to tighten overall in 2017, due to an aging driver force and expected improvement in the economy.[3]4.9% seems to be the magic number for general rate increases (GRIs) this year, with UPS Freight announcing a GRI at that level in early September and XPO, Old Dominion, FedEx Freight, and YRC following suit.[4]

While most medium to large volume shippers participate in customer-specific rate agreements that are not subject to GRI, shippers may see requests for increases from carriers on specific pricing. In addition to increases in freight rates, many carriers are also increasing accessorial charges, and some are adjusting fuel tables. Several carriers are increasing their high-cost delivery charges, perhaps in an effort to offset poorly performing areas of their networks. Shippers may see their costs increase if they frequently incur accessorial charges that aren’t named in their pricing agreement.

What can shippers due to counteract the trend of rising LTL costs?

  • Be flexible with carrier selection. While an incumbent carrier might be looking for a rate increase, many times there may be an alternative carrier who is interested in gaining business. Freight that might have been a bad fit for one carriers network may be attractive to another carrier.
  • Fix accessorial charges in pricing agreements. It’s always in a shipper’s interest to have the rates for common and frequently occurring accessorial charges set in their pricing agreement. This prevents these charges from being subject to a GRI. A carrier may still ask for an increase, but it will need to be negotiated and agreed too rather than being applied automatically.
  • Don’t be afraid to negotiate. A carrier may be asking for an increase, but a shipper doesn’t have to accept the carriers first proposal. Carriers are usually willing to negotiate on increases. Remember it’s a two-way street. Shippers need carriers, but carriers need freight also.

Navigating through the season of rate increases can be a challenge. Sunset Transportation has the market knowledge, carrier relationships, and analytical tools to help shippers make sure they are getting the best value for their transportation dollar. Contact your account representative to ensure your LTL is order!

[1] Cassidy, William B. “US LTL trucking revenue, volumes drop, but pricing holds.” JOC.com Accessed September 23, 2016 http://www.joc.com/trucking-logistics/ltl-shipping/ltl-trucking-revenue-volumes-drop-pricing-holds_20160801.html

[2] Cassidy, William B. “US LTL Trucking Firms Push for Fall Rate Hikes.” JOC.com. Accessed September 23, 2016. http://www.joc.com/trucking-logistics/ltl-shipping/old-dominion-freight-line/us-ltl-trucking-firms-push-fall-rate-hikes_20160913.html.

[3] Mongelluzzo, Bill. “ODFL warns truck capacity could buckle as soon as early 2017.” JOC.com Accessed September 23,2016. http://www.joc.com/trucking-logistics/ltl-shipping/old-dominion-freight-line/odfl-warns-truck-capacity-could-buckle-soon-early-2017_20160824.html

[4] Cassidy, William B. “US LTL Trucking Firms Push for Fall Rate Hikes.” JOC.com. Accessed September 23, 2016. http://www.joc.com/trucking-logistics/ltl-shipping/old-dominion-freight-line/us-ltl-trucking-firms-push-fall-rate-hikes_20160913.html.