Summary
Con-way just announced a new Less-Than-Truckload (LTL) pricing model - True LTL - that caps the price of shipments at that of Truckload (TL) for heavier LTL shipments in certain traffic lanes. Con-way says that their new LTL pricing model will transform the trucking industry. I’d say it’ll probably have an impact within the LTL dry community, but not so much the rest of the transport industry. I still like it!
Analysis
From a freight-planner’s standpoint (and for our personal stuff), we like simplicity - and hate those extra charges and fees. Additionally when one looks specifically at LTL tariffs, it’s enough to cause to one to pull their hair out.
The United States Postal Service (USPS) is heavily advertising their new parcel program where “if it fits in the box, it goes at a set rate.” The referenced Conway program has similarities albeit in much larger boxes (i.e. trailers). It’s kinda like what Arkansas Best Freight does for those wanting to use them for household moving, although against a different price basis.
Within the freight market, some shippers are waiting and shipping what would have been LTL loads as larger loads to take advantage of TL rates today. In several LTL markets, this approach has been utilized for years by much smaller trucking companies especially in the food and other specialty sectors. We did it with the LTL Asian Food Company we owned and priced it similarly, although we copied from another carrier’s model.
Con-way does have far better data from which to price their model, along with considerable flexibility in addressing it. First, they can leverage the knowledge of their extremely well-run TL subsidiary - the old Contract Freighters. Then there is all of the planning capabilities within Con-way, an area that has allowed other TL and logistics folks to get into the large LTL shipment segment. The other key issue is that they are targeting certain traffic-lanes, where they can reconcile them to their benefit.
Quoting is simple - similar to TL-based which is mostly off of distance. The revenue won’t be too far off of the LTL model, as a good per mile planning number for the over-the-road segment of a LTL move is double that of TL. Since they limit the amount of freight to one 28-foot pup trailer (appx. 20,000 lbs or less), the math works well. One can stay away from cross-docking and those added costs, but could fill out a trailer if the opportunity exists.
Also, one LTL load has half the fuel surcharge to recover versus TL (because they will pull double 28-footers), so rates can be lower than TL. Also, most profits come from improved utilization, so there is upside from that too.
This is mostly about marketing to customers - addressing pricing, simplicity and service! It’s a smart move!
