Optimizing LTL rate options
Maximizing savings in LTL shipping requires more than just negotiating better rates — it’s about understanding the pricing models available and making them work in your favor. Whether you choose negotiated rates (through contract rates or published tariffs) or quoted rates through dynamic pricing or other spot pricing, each option offers unique advantages that, when used strategically, can help control costs, improve flexibility and enhance service reliability.
The difference between contract rates, published tariffs and dynamic pricing
Each LTL pricing model serves a different purpose in a cost-management strategy. Knowing how they work can help you select the best option for each shipment.
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Contracted prices: Pricing negotiated directly with carriers based on a shipper’s volumes, lanes and service commitments.
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Tariffs: Universal base rates published by carriers, often with discounts available for different lanes and volumes.
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Dynamic rates: Pricing that fluctuates based on real-time market conditions, allowing for more flexible and responsive rate adjustments.
Typically, high-volume shippers benefit from contract rates, while businesses with variable shipping needs may leverage tariffs or dynamic pricing for better savings. However, a blended approach can often yield the best results.
Creating an effective pricing strategy
Relying on a single LTL pricing model may limit your ability to control costs and adapt to change. The challenge lies in knowing how to make the different options work together to fit your business goals.
Here’s how to get started.
Establish a foundation with negotiated rates
Contract rates provide stability for core shipping needs and should serve as the anchor of your pricing strategy. Start by analyzing your shipment history to identify your most frequent and consistent lanes. Focusing negotiations on these lanes can lock in stable rates that support your ongoing shipping needs.
Suggested read: Guide to LTL Carrier Negotiations
Leverage tariffs for unplanned shipments
Published tariffs are an important tool for handling unexpected or irregular shipments. While they may not provide the same cost savings as contract rates, they offer a reliable option when your contracted carriers are unavailable or when you need to move freight on non-standard lanes.
To use tariffs effectively, identify carriers with favorable rates in the regions where you may occasionally need coverage. Keeping these carriers in mind allows you to respond quickly when contract rates aren’t applicable. They can also be a helpful backup plan during busy seasons, weather disruptions or unexpected capacity constraints.
Use dynamic pricing to take advantage of market changes
Dynamic pricing offers a flexible way to save on shipping costs when market conditions allow. While this model requires more active monitoring than the others, it can unlock significant savings. For example, if your shipment isn't time-sensitive, holding off for a day or two may allow you to capture lower rates.
The key here is to be flexible and agile. Closely monitoring capacity trends can help you identify the right times to take advantage of dynamic pricing, but you need to have internal processes ready to help you do so. Shifting some shipments to this model during periods of lower demand can result in substantial savings.
Monitoring and optimizing the impact
While these guidelines work for many businesses, it’s important to regularly review your pricing data and shipment patterns to identify trends and adjust your strategy. Key steps include:
- Monitoring carrier performance to ensure contract terms are being met
- Tracking market trends to take advantage of dynamic rates
- Analyzing shipment data to identify opportunities to shift lanes between models for improved savings
Ready to discuss your rates?
By understanding the strengths of each LTL pricing model, you can create a well-rounded approach that adapts to changing market conditions and shipment needs.
ArcBest is here to help you find the right strategy. Use our LTL quote tool to see multiple pricing options, including your ABF Freight published pricing, ABF dynamic quotes and rates from our LTL brokerage network.
