Pricing Structures Simplified – Understanding Freight

Posted by Marian
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Freight pricing structures differ to match the changing needs of today’s market. As the logistics industry continuously evolves, so do the pricing structures available to shippers today. Whether you’re just starting to ship freight, or you’ve been handling the transportation of goods for years, it’s important to explore all pricing and service options to ensure the structure meets your unique business goals and strategies.

Why Pricing Strategy Matters

Crop man paying with American dollars

Every business needs freight pricing structures or strategies that are streamlined to work for their target market or customers. Considering that every customer has varied freight or shipping needs, customizing price packages would definitely be the key to getting it right.

 At Zip Logistics, we recognize that one solution does not fit all, so we offer a variety of pricing models, shipping services, and industry-leading technologies that align with our clients’ transportation management strategies. We know that each shipper’s industry has its own complexities and each client’s supply chain total cost of ownership (TCO) can vary greatly. For example, certain sectors prioritize cost and are flexible in terms of service, while others require the highest level of service in order to prevent fines or chargebacks from consignees.

In addition, because the value of a shipper’s freight can impact their transportation cost as a percentage of revenue, this factor can often influence their choice of transportation cost structures.

Contract Rates

Contract rates are based on an agreement between a shipper and a transportation provider to move an estimated volume of freight from the specific origin and destination points. This has been pre-determined or pre-set for a customer depending on the regular volume of shipments made. Contract rates are determined by the shipper’s approximate freight volumes and a per-mile rate quoted by the carrier. Depending on the transportation needs of a shipper, a contract rate can be the best value. This type of rate would be a good option for a company that has consistent volumes and lanes.

These rates are usually non-binding agreements and can be adjusted at any time by either the shipper or the transportation provider. As the market starts to shift, contractual agreements can go through a rebidding process by either the shipper or the transportation provider depending on which way the supply and demand of trucking capacity move.

Given the recent volatility of the market, we’ve seen many large and small shippers transition their RFPs (request for proposal) to annual, semi-annual, or even quarterly rates to protect themselves from market swings that could increase rates and tender rejections.

Contract rates that are set for shorter time periods also offer carrier and broker partners the flexibility to adjust rates in the future to align more with the current market, should the market change over the course of the agreement. Overall, short-term pricing structures can be beneficial to shippers, carriers, and brokers, resulting in successful partnerships between these groups.

Spot Rates

A spot rate is a one-time rate based on current market conditions. Spot rates are ideal for shippers whose freight shipments change in volume, ship at different times, and head to various destinations. Once the freight is ready for transport, it is then matched with a truck and the shipper is charged according to the current market rate.

Spot rates are determined by the supply and demand for trucking capacity (the number of loads in the market compared to the number of trucks available). Spot rates usually rise when load volumes are high and truck capacity is tight. By contrast, spot rates typically decrease when load volumes decline and truck capacity increases. Depending on the market, spot rates can change over a few days or even from hour to hour.

Strategic Partnership

Whether you need to transport a single shipment or are looking for a strategic partner to handle your entire transportation network, we at Zip Logistics are equipped to handle your needs with our freight brokerage and Managed Transportation solutions.

We can meet your transactional shipping needs and create efficiencies in your supply chain across all major modes, including truckload, partial truckload, less than truckload (LTL), intermodal, and expedited. Through our Managed Transportation solution, we act as an extension of your team, handling all your shipping needs while optimizing your transportation strategy. We enhance your supply chain and reduce your costs through customized solutions and focus on continuous improvement, which can yield savings to clients on their annual freight spend.

Our Managed Transportation clients can take advantage of a cost-plus pricing structure. With this model, we handle all freight operations for a shipper, giving them more time to focus on their core business. For our service, the shipper agrees to pay us a percentage of the shipment cost.

Technology

Our best-in-class technology simplifies how shippers can access pricing options. For example, application programming interface (API) and electronic data interchange (EDI) enable the system-to-system transfer of data between a 3PL and its shipper partners.

We help automate rapid response price quoting and freight capacity for shippers. We can seamlessly integrate our proprietary pricing algorithms to provide our clients with instant capacity and pricing information while also offering our brokerage services to even more shippers.

At Zip Logistics, We Got You!

Stack of Intermodal Containers on a Sunny Day

With the many pricing models available to you, it can be difficult to know which option will work best for your business. At Zip Logistics, our aim is to take the complicated out of transportation management for you. We leverage our industry expertise, best-in-class technology, and a vast access to capacity to provide our clients with the pricing structures and transportation management solutions that meet their unique needs.

Zip Logistics services all modes of transportation, including truckload, partial truckload, LTL, intermodal, and expedited. Our team diligently monitors your shipments from origin to destination to ensure your freight delivers on time, safely, and within your budget.

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