Tariff Practices Add Complexity For Carriers

April 5, 2003
Technology has been a boon in helping carriers manage the increasing number of tariffs, but the proliferation of foreign tariffs decreases the carrier's

Technology has been a boon in helping carriers manage the increasing number of tariffs, but the proliferation of foreign tariffs decreases the carrier's ability to balance lane volume and traffic flow because the carrier is less able to set rates by lane on foreign tariffs, reported Norbridge Inc. in its study, "LTL Pricing Effectiveness." The study was conducted across 14 major LTL carriers during the Fall of 2002.

All 14 carriers surveyed indicated the number of tariffs they deal with has remained the same (one response) or increased. While technology has helped carriers cope, shippers have become more sophisticated in their use of tariffs in order to simplify comparison of carrier bids. However, says the study, this increases complexity for carriers.

Industry-wide tariffs such as CzarLite, provide a carrier neutral tariff for the shipper, but use of these types of tariff are presently limited to about 15-20% of carrier revenues. (About 50% of carrier revenues come from their own tariffs.)

Some findings on tariff structures included the fact that most tariffs follow the standard distance, weight, and class categories. Tariffs often don't account for differences within a geographic zone -- such as deliveries inside a major metro area or deliveries to rural locations -- especially when using three-digit ZIP Codes. The typical analytical process to set a discount begins with determining the cost of the moves. The carrier then determines the revenue necessary to cover costs. The carrier must then determine the blended discount or tiered discounts necessary to make a profit in aggregate across the entire set of moves (taking into account expected shipment lanes and volumes).

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