Being a savvy domestic shipper often means being as attractive as possible to your carriers.
It’s not just about fostering good relationships that ensure capacity and service. Certain factors can directly affect rates, particularly on the less-than-truckload (LTL) side, where a higher degree of capacity concentration means carriers can be choosier in the loads they accept.
LTL carriers look at their customers and make a simple profitability calculation: operating costs divided by customers revenue, and multiplied by 100, Brady Jahnke, manager of corporate LTL carrier relations for C.H. Robinson, wrote in the company’s blog
If the resulting number is larger than 100, it’s a loss for the carrier. Under 100, and the customer is profitable.
"When a customer’s processes result in inefficiencies for the carrier, their profitability evaporates,” Jahnke said. “Conversely, the more you do to reduce inefficiencies and help the carrier stay profitable with your business, the more potential exists to achieve greater rate stability and experience cost reductions.”
Jahnke said there are specific areas a shipper can address to make their loads more profitable, including the physical elements of the shipment (like ensuring the freight is secured well, and that it’s palletized rather than loose), and intangible elements (like transmitting shipment data via EDI or bundling bills into fewer shipments).
“The carrier has fixed costs when stopping for your shipments, whether there is one shipment ready for pickup or fifteen shipments at the same time,” he wrote. “With multiple bills, the carrier can spread their fixed costs over more shipments, increasing their efficiency. As an example, instead of shipping one shipment five days a week, can you ship five shipments once a week?
“Anything you do to reduce your carrier’s costs provides leverage for the next round of rate negotiations. While you may not always experience reduced costs as a result of the efficiencies gained, you may see increased rate stability and less drastic swings in prices.” - Eric Johnson