Old Dominion Freight Line Inc. has initiated a trial program in which it offers LTL shippers a single all-in fee before their freight is picked up, a step the carrier claims represents a significant development in the conventional processes of costing, and pricing, and paying for LTL transportation.
Todd Polen, the company’s vice president of pricing services, told FreightWaves on Friday that Old Dominion (NASDAQ: ODFL) is testing the One Rate, One Time initiative with one of its third-party logistics provider customers.
Testing will continue for several months as Old Dominion expands its partner universe and sorts out the expected flaws, according to Polen, who highlighted that the program has been in development for three to four years.
Shippers will be responsible for digitally reporting cargo information to Old Dominion under the scheme. The carrier will then validate the data and provide a single invoice prior to pick up that includes the base rate as well as all applicable accessorial costs for services beyond the basic linehaul.
Except for “consignment” charges, which occur when the first consignee declines to accept a package and it must be rerouted, all accessorials would be baked into the fee, according to Polen.
Shippers who can execute will be rewarded with higher pricing as a result of increased usage of effective digitizing tools, according to Polen. They will also avoid the uncomfortable scenario of getting charged with higher carrier charges after the fact owing to erroneous information, followed by a battle with the carrier over differences of opinion about the shipment profile.
One of the initiative’s aims, according to Polen, is to develop granular address information so that addresses may be properly confirmed before shipments are bid. Address validation, he said, is the “greatest pain point” for shippers and carriers. According to Old Dominion, around 10% of all shipment information contains incorrect address information. Shippers are providing nonexistent addresses in an increasing number of cases, according to the report.
Polen stated that Old Dominion will not need shippers to buy into the initiative and will not use the proverbial stick to encourage them to bite into the carrot. “Our goal is not to drive away from our clients,” he explained. He stated that the major goal is to employ more automation to reach a fair price that is communicated in a straightforward manner.
Polen stated that the program is not intended to replace the 87-year-old formula that rates commodities depending on how they are categorized according to specified criteria. Polen stated that the previous technique, which is still effective for many of its customers, can coexist with the new program.
According to him, the all-in initiative will help shippers look for an all-inclusive price approach that, if agreed, eliminates any post-shipment issues.
Parallel worlds
A consumer in practically every aspect of American life receives an all-in price from a supplier prior to purchasing a product or service and either accepts or rejects the offer as a condition of the transaction. However, the $50 billion-a-year LTL sector exists in a parallel realm.
Shippers must disclose information about their loads on bills of lading. However, it is the carrier’s responsibility to check the consignment and all associated documents to confirm that it corresponds to the information on the BOL. Any differences, which could only be discovered through some carrier research, frequently result in time-consuming and sometimes trust-eroding wrangling with the shipper. The existing paradigm has given rise to profitable cottage industries in pre-and post-auditing services.
Polen compares the existing process to a supermarket buyer telling the cashier what they bought and how much it cost and then leaving it up to the cashier to inspect each item to ensure that the customer is speaking the truth. “We are the only industry on the planet that operates in this manner,” he claims. He described LTL’s current operations as “ineffective and inefficient.”
According to Polen, truckload and package carriers would never consider doing business in this manner. They don’t because, as a result of larger shipper spending on truckload and parcel, there is a much stronger shipper emphasis on investing in automation, he explained.
“We’re the last transportation industry that hasn’t gone digital,” Polen remarked.
Based in Thomasville, North Carolina Almost everyone who follows LTL considers Old Dominion to be the industry’s best-run carrier. The operational ratio of Old Dominion is in the mid-70 percent range (the ratio of expenses to revenue dollars earned). This indicates that it spends approximately 70 cents for every dollar of income. In a high-fixed-cost business like LTL, such a ratio is exceptional.
Old Dominion has also been at the forefront of using dimensioning devices to accurately capture the physical characteristics of a shipment. This assists the carrier in accurately pricing the freight that flows out its trailers. Most LTL shippers lack such technology and therefore rely on tape measures to calculate the size of their freight.
