Post on 24-Dec-2015
transcript
Transportation PricingTransportation Pricing
Character-of-Shipment Rates• Special rates related to the size or character of the
shipment• Carriers generally have certain fixed costs for each
shipment• Includes:
– LTL/TL Rates– Multiple-car Rates– Incentive Rates– Unit-train Rates– Per-car & Per-truckload Rates– Any-quantity Rates– Density Rates
Character-of-Shipment Rates
• LTL/TL Rates– LTL shipments require multiple handlings– Each handling requires dock personnel, materials-
handling equipment, terminal investment & additional communications/tracking efforts
– Thus, higher rates for LTL shipments– TL shipments are generally loaded by the shipper, moved
intact to destination, & unloaded by consignee.– No intermediate handlings required– No intermediate terminals required– Thus, lower rates for TL shipments
Character-of-Shipment Rates• Multiple-car Rates
– Railroad special rate
– Volume discount for moves of more than one carload that are shipped as a single string of cars from one point to another
– Cost of moving multiple cars in single shipment proportionally less than cost of each car moved singly
– Multiple cars can be handled by same effort as a single-car shipment
• Empty car drop-off
• Pickup
• Delivery efforts
• Documentation
– Only basic difference is the additional weight moved
Character-of-Shipment Rates• Incentive Rates
– Rate designed to induce shipper to load existing movements and equipment more fully
– Usually apply only to weight or units loaded over and above normally shipped quantities
– Fewer cars and moves are required over the course of a year, though same actual volume is shipped
– Example• Appliance manufacturer typically ships carload quantities that
only fill car to 80% of capacity• Minimum carload rate is 40,000 lbs; capacity 60,000 lbs• Manufacturer normally only loads 48,000 lbs.• Incentive rate would apply to the additional 12,000 lbs.
Character-of-Shipment Rates
• Unit-train Rates– Integrated movements between an origin & destination– Trains usually avoid terminals & do not require
intermediate switching or handling of individual cars– Shipper or consignee typically provides the railcars
Character-of-Shipment Rates
• Per-car & Per-truckload rates– Single-charge rates for specific origin-destination moves
regardless of shipment commodity or weight– Also apply to container movements where carriers’ costs
of movement dominated by moving the equipment & not specifically by shipment weight
Character-of-Shipment Rates
• Any-quantity Rates– AQ rates provide no discount or rate-break for larger
movements• LTL rates exist but no TL rates for large shipments
– Apply to any weight in a shipment– Usually used for shipment of large, bulky commodities
such as boats, suitcases, and cages where no economies are realized by the carrier for larger shipments
Character-of-Shipment Rates
• Density Rates– Rates published by density of the shipment and its
weight, not by commodity or weight alone
– Common in air carrier shipments
– Applied when carrier assesses rates on basis of weight, but does not experience fewer costs for lighter-weight containers
Area, Location, or Route Rates
• Includes:– Local rates– Joint rates– Proportional rates– Differential rates– Per-mile rates– Terminal-to-Terminal rates– Blanket or Group rates
Area, Location, or Route Rates
• Local Rates– Apply to any rate between 2 points served by the
same carrier
– Include full-cost factors for pickup, documentation, rating, billing, and delivery
• Joint Rates– Single rates published from a point on one
carrier’s route to another carrier’s destination
– Usually lower in total charges than the combination of local rates
Area, Location, or Route Rates
• Proportional Rates– Some carriers at competitive disadvantage
when they compete with other more direct lines
– Carrier might publish a proportional or lower rate than its regular local rate that applies only to through moves to certain destination points beyond its line
Area, Location, or Route Rates
• Differential Rates– Published rate by a carrier that faces a
service time disadvantage compared to a faster carrier or mode• Water carriers often publish differential rates
lower than regular rates of railroads
– Lower rate offsets somewhat the longer transit time disadvantage
Area, Location, or Route Rates
• Per-mile Rates– Rates based purely upon the mileage
involved
– Generally used in situations in which weight of shipment of lower significance
• Terminal-to-Terminal Rates– Ramp-to-ramp rates that require shipper and
consignee to perform the traditional pickup and delivery functions
Area, Location, or Route Rates
• Blanket or Group Rates– Apply to or from whole regions rather than points
– All shipments coming from (going to) a region are treated as coming from (going to) the same point of origin (destination)
– Example• All lumber shipments from Oregon & Washington are
treated as having the same origin• Food shipments from California & Florida treated
similarly
Time/Service Rates
• Generally dependent on the transit time performance of the carrier in a particular service
• Shipper pays a higher rate for faster service & lower rate for slower– Reduced rates offered for certain minimum tonnage
shipped over a specified period– Deferred delivery contracts in which carrier charges
lower rate for privilege of deferring arrival time of shipment
• Air expresses companies offer 25% discount or more for second- or third-day delivery as opposed to next-day delivery
• Gives carrier more operating flexibility
Other Rate Structures
• Corporate Volume Rates– Discounted rate for each LTL shipment that
is related to the total volume of LTL shipments that a firm ships via a specific carrier from all shipping points
– More volume shipper tenders to a particular carrier, the greater the discount
– Not widely used today
Other Rate Structures• Discounts
– LTL shipments of a specific commodity class moving between given origins and destinations
• Loading Allowances– Reduced rate or discount granted if shipper loads LTL
shipments into carrier’s vehicle
• Aggregate Tender Rates– Reduced rate or discount granted if shipper tenders 2 or
more class-rated shipments to the carrier at one time– Aggregate usually must equal 5000 lbs minimum– Tender of 2 or more reduces number of times carrier goes
to shipper’s facility to pickup cargo
Other Rate Structures
• FAK Rates– All-commodity rates expressed in cents per
hundredweight or total cost per shipment
– Rate based on cost of service, not the commodity hauled
– Involves mixed commodities shipments
– Generally used in shipment of groceries
Other Rate Structures• Empty-haul Rates
– Charge for moving empty rail or motor equipment that is owned or leased by or assigned to a particular shipper
– Induces shipper to fully load all miles of the equipment movements
• 2-way or 3-way Rates– Apply to rates that are constructed and charged
when backhaul or triangular moves can be made– Intent is to tie a fronthaul move with what would
have been another firm’s backhaul.
Other Rate Structures• Spot-Market Rates
– Special rate offered to facilitate movement of equipment or product
– Generally used if excess supply of empty trailers begins accumulating in a geographic region
• Menu Pricing– Allows a shipper to pick and choose those
services the carrier should perform– Requires the carrier to understand and know its
costs of providing various services on the “menu.”