Get Smart with Dynamic Pricing
3 minute read
Is Your Contract Rate too Low?
JoAnne is a logistics manager for a midsize midwestern manufacturer. She’s been in logistics for a few years, so the ups and downs of the freight market aren’t new to her. But things are tough these days.
Her regular contract rate for a particular lane is $750.00. But she’s unable to get carriers to honor that rate. In fact, she’s been paying $1000.00 for that move for the past few months. And she’s worried. She wants to get a lock in on that $750.00 rate again.
We were talking to JoAnne because we think we could help her out on that lane, but not at $750.00. It’s just not possible right now. But we could lock in with us a higher rate for 30 days. And at the end of those 30 days, we’d reevaluate based on the current market.
We’re talking about dynamic pricing.
Here’s how it works. We couldn’t do the $750.00, but we could move her freight for 20% more. We’d do this for 30 days. We’d get excellent carriers moving her freight, and more than likely, we could renegotiate after 30 days based on the market and the volume she was giving us.
JoAnne didn’t like the idea to begin with. In her experience, the rate never gets lower, only higher with time. She wanted to push for the lower rate. She was stuck, but afraid that once we locked in a higher rate, she’d be done.
We assured her that we didn’t work that way. That after 30 days, we’d present her with freight market intelligence to keep everyone honest. If the market kept rising (and all indicators pointed to a continued rise) she would be set with a locked in and predictable rate for 30 days. And if the market dropped (very unlikely) we’d revisit and adjust when the 30 day contract was up.
Things have been tough for shippers lately; especially if you’re hanging onto the freight rates you were getting several months ago. Carriers are in the driver’s seat as far as rates go because there are more loads than trucks.
But JoAnne took a chance, and as we predicted, rates did rise during her first 30 days. But her rate stayed the same because she’d signed a 30 day contract. She’d made a good move for her company, and they were pleased with her ingenuity.
Dynamic Pricing vs. Yearly Bids
Now isn’t the time to look for yearly or even quarterly bids. The market is unpredictable right now, and your best bit is 30 day dynamic pricing arrangements. With 30 day dynamic pricing you lock in a reasonable rate for 30 days. This rate is yours no matter what the market does. At the end of 30 days, you can renegotiate the rate based on current market conditions.
Here at AM Transport Services, our customers and carriers are important to us. Doing the right thing is our maxim; we’re here to help you navigate this unprecedented time in the logistics market. In order to keep costs down and maintain a high level of service for your customers, you must create new strategies.
30 day dynamic pricing agreements with AM Transport Services can help stop the bleeding and provide you with the relief from the spot market.
Don’t waste time trying to make yesterday’s solutions work today. You need a provider who will help you think out of the box, who will give you creative solutions to the rising freight rates. Schedule a call with the professionals at AM Transport Services, and get smart with dynamic pricing today.