Part 11 of 22 Ways To Reduce LTL Costs That Don’t Involve A Price Reduction – Fulfill Promised Volumes to Shippers
11. Fulfill Promised Volumes to Carriers
Promises, Promises. Some say they are made to be broken. But in LTL, like many other industries, integrity matters. Promises matter
When you think about business transactions, it is quite common for there to be an understood volume matched to an understood price. A case of sodas costs less per can than a six-pack, for example. But you have to commit to buying that case of soda to get the reduced rate per can. You can’t “promise” to buy the rest of the case next week and expect the grocery store to offer the lower price.
But in LTL, it is quite common for a carrier to offer pricing based upon an expected or promised amount of freight. If the shipper fails to honor that promise, and only routes a portion of the promised volumes, the carrier is left with an aggressive price that does not produce commensurate profit. This puts the carrier in the uncomfortable position of addressing the situation with a price increase. Its not an easy discussion.
It is always best to keep your carrier(s) informed. If you commit to rewarding a carrier with the majority of your business, do so. After all, they gave you a price based upon that promise. And if you have a need to pull back on that promise, have a conversation in advance with your carrier and explain why volumes will be reduced. That integrity will go a long way towards easing the pain for both sides.
And if you plan to share business with multiple carriers, don’t tell them otherwise, that they will get the lion’s share. They will eventually figure it out. Besides, these days post-Covid, it may make more sense to split your business to ensure high capacity levels than concentrating with one carrier.
Have an honest conversation with your carriers about how you intend to award and route business, and keep that promise.