"You want to be super detail oriented. It's not like truckload pricing or small parcels where you can kind of get an estimate, you know. Again, the T and LTL stands for technical." - Eric Burke

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Episode Transcript

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Sarah Williams 00:18

Hi. Welcome back to another episode of Future-Ready Freight. I'm Sarah, and I am the Marketing Manager here at Mariner, and today I'm joined by Eric Burke. He is our very young Transportation Procurement Manager. Eric, why don't you introduce the topics you wanted to talk about today?

Eric Burke  00:32

Yeah. Hey guys, Eric Burke here, Transportation Manager here at mariner. You know, there's a lot going on in the LTL industry. So I'd really love to cover a couple topics related to that. GRIs, we're talking about CSPs, and stuff like that. Yeah. So there's a lot going on right now. And I'd love to kind of talk through that for a little customer base and any other viewers out there.

Sarah Williams  00:51

So what I heard about GRIs recently is that the Saia's is like seven and a half percent.

Eric Burke  00:57

Yeah, absolutely. It's hefty. You know, this is really kind of impactful, what's happening with the Yellow situation, YRC. And we can kind of talk about that a little bit more in detail.

Sarah Williams  01:11

Okay, yeah, go into detail. Tell me about it.

Eric Burke  01:15

Well as we all know, Yellow has left the market after, I think, 60-Something plus years in business. So there were a lot, a lot, a lot of fine folks that worked at Yellow and Yellow family, and all their carriers that they owned. But yeah, when they left the market that left 10% of the LTL market trying to find a new home. That was like kind of a little, I don't want to say a little, it was a decent bomb going off in the LTL market where all these shippers suddenly have to find a new home new carrier partners, rely on their other carriers that they've been using with and give them more freight and capacity has just been shrinking. There's not enough space with all the carriers out there. It's kind of a mess right now.

Sarah Williams  01:51

So how did that impact your job specifically with Yellow leaving the market?

Eric Burke  01:55

Well, you know, it made it interesting. You know, we have to get in front of that with our carrier partners. So really, really what I try to do is have an open line of communication with our carrier partners and our representatives. And really, really what that kind of comes down to is, you know, getting ahead of these GRI announcements, getting ahead of what we can expect. So when it comes to Yellow, or I'm sorry, when it comes to Saia -that 7%, seven and a half percent GRI - it kind of reminds me, and it really is an indicator, of what's to come. But I like to think of the very famous car movie franchise, the Fast and Furious. "Oh, God. It's the first one." It's the first installment coming here. It's coming December 4. Yeah, it's a lot higher than expected. 

Sarah Williams  02:35

But I that they were supposed to start at the beginning of the year. Why is it coming in December?

Eric Burke  02:40

Well, that's that's the whole thing about the Yellow situation. They're trying to meet these costs and meet the demand that's out there, and trying to get new service centers, higher wages.

Sarah Williams  02:48

So do you think that we're going to see a similar rate increase from other carriers?

Eric Burke  02:53

I would expect somewhere in that ballpark. So early estimates were around nine to 12%. Yeah, really bad. Because, again, we didn't - no one really knew I was going to shake out and there was a pretty, pretty rough time to happen. I think it happened, what, like June and July. It is a big percentage. And you know, seven and a half is not as bad as it could have been. It’s not as bad as it could have been. It's still not great. It's not great. It's more than what we've seen historically. But it's still, I thought, going to be a little bit worse, to be honest. It's just the fact that it's coming earlier. Okay. It's typically like you'd like you to say it's January, middle January, end of January. It's December 4, and it was just recently announced. So they're trying to get this in place. And then we're gonna see what the rest of the carrier bases end up doing with it.

Sarah Williams  03:39

So do you think that they've kind of set the standard and other people are going to have to like - other carriers are going to try to be underneath that number, like for competition? Or you think that it's all up in the air right now?

Eric Burke  03:49

It's up in the air a little bit because you really have groupings of carriers. And here's the thing about the LTL market, I equate it to a little bit more competitive than the parcel industry, because like, for example, FedEx and UPS, they're your top two dogs. They essentially match each other's GRI year after year. Yeah, FedEx will say we want six and a half. UPS we'll do, "All right, we're gonna do six and a half too," or, "We're going to do 6.7." I don't know, whatever, just slightly more. In the LTL industry it's a little bit different because there are so many players in there where it's just more of a tier system. So a lot of these a lot of these competitors, take Saia, for example, they are considered the middle tier carriers.  Great carriers, great nationals, but you got to take into account regionals, super regionals, economy carriers, which are more of the, I don't want to say lower tier but just more of the economically-friendly tier. They're not necessarily high service, but pretty low cost. 

Sarah Williams  04:47

You're talking trash over here.

Eric Burke  04:49

Yeah, no, no trash. It's just we love our carrier partners, and the variety of carrier parts that you can have. Yeah, they're all in the market. I mean, I don't think it's any secret that Old Dominion is kind of the gold standard in terms of service, but they're also the most expensive, you know? So it's really a spectrum, right?

Sarah Williams  05:05

And it depends on what you're shipping, like how important it is for it to get there in one piece.

Eric Burke  05:09

Exactly. Yeah, it depends on what it is, I expect it to be a range, I expect to be an elevated range, seven and a half is rough. It's typically four, five, maybe 6%. Seven and a half right off the bat really early on, a little bit of a red flag going up in my head. So I'm just waiting to see what the rest do. So it will be interesting.

Sarah Williams  05:31

So let's take a step back, because you mentioned this, kind of briefly, about trying to prepare our shipping partners about the GRIs that we're gonna see. What conversations have you already had?

Eric Burke  05:44

Well, really, it comes down to our blanket shippers. So it's two groups. There's the CSP group, and we can touch on that later. I know you want to kind of talk about a little bit later. And then there's the blanket shippers. And, typically, a blanket shipper. Think about a blanket shipper, like transactional business. It's more of, you know, they're not super frequent shippers, not high spenders in LTL. They do LTL a decent amount, but it's not really at the threshold that will warrant a CSP or contracted rate, CSP, customer specific pricing for those out there that may not be familiar with it. Logistics 101. It's really about getting in touch with those customers and being like, "Hey, this is what you can expect in the market. You know, these dominoes are gonna start to fall. Again, they increase every year, but this year is going to be a lot higher than previous years. So I'm just trying to get ahead of that with our customer base. So they know what to expect.

Sarah Williams  06:33

What has their reaction been so far?

Eric Burke  06:34

I mean, it's understandable. Obviously, no one's thrilled with it. But that's the thing, is it's a general rate increase. So everyone is going to experience it. Yeah. Unless you have a contracted rate for that given customer or for any shipper there, they're going to experience this rate increase. Yeah.

Sarah Williams  06:51

Okay. Tell me about dynamic pricing. What's happening?

Eric Burke  06:55

So dynamic pricing. Dynamic Pricing is exactly what it sounds like. It's your pricing, your pricing agreements with a carrier, or carriers provide it to  3PLs or any other 4PLs, etc. But they're not contracted rates. They're dynamic, meaning they fluctuate day by day, based on carrier capacity. So what that means is it's - actually, to be honest, it's more in favor of the carriers. So that's why it's a growing trend. You're kind of seeing the spread, right. But it can be favorable to certain customers, and I group them into blanket shippers. So like, if you're transactional business, again, if you're under the threshold, when we get into CSPs - I know we can talk about it here in a second - but let's call it a 250k annual spend on an LTL. If you're under there, you're likely going to be a transactional shipper, for LTL. So this dynamic pricing is really going to come into play for them. Now, you can get contracted dynamic pricing. But that's a little bit more in the weeds.

Sarah Wiliams 07:51

How does that work? That makes no sense.

Eric Burke 07:52

Oh, I know, right? It's confusing, I know. So really, what you can do is you can solicit an offer from a carrier for a base discount that's subject to dynamic pricing, meaning you can expect this most of the time. But sometimes, in surcharges, it's going to go up. And in other times when I need capacity, it's going to go down. Okay, so long story short for dynamic pricing, it really fluctuates on what the carrier has available in their network and what needs they need to fill.

Sarah Williams  08:18

So if carriers are going this route, are shippers still working with those carriers? Are they preferring to go with other carriers?

Eric Burke  08:24

No, I mean, it again, and this is why LTL can be really confusing and challenging to navigate. It depends on the customer, it depends on the shipper and what their needs are and what best services them. So really, you know, the rise of dynamic pricing is not really something I totally welcomed at first, and don't necessarily do it for most of our customer base. But it does have its positives. And mainly, this is where we target the blanket shippers (transactional shippers) is with this dynamic pricing. You can expect some rate reductions across a carrier base, or whatever carriers have dynamic prices implemented. You'd expect some lower rates some of the time, higher rates some of the time. You're gonna get a wider range than what you would for a contracted rate that you know you're gonna get every time. And that's more for, again, CSP, strategic, you want to forecast what your freight spend is, all that, it's predictable. Dynamic pricing is not. It's what it is at the time, and it's only good for a certain amount of time. So you can quote the same - let's say you hit a button and quote a lane 10 times, 10 times in one day, same lane, same shipment. You're gonna see that costs start to rise gradually.

Sarah Williams  09:35

Okay, because of the network, there is not as much capacity. 

Eric Burke  09:39

They're registering, like, oh, we need to stop. This capacity to get filled up. So we meet supply demands. Classic economics. So get in there early. But that thing can't be too early because it's only good, for some carriers it's only good for 48 hours. Other carriers are good for seven days.

Sarah Williams  09:54

There are lots of rules here.

Eric Burke  09:55

There's a lot of rules. So that's why the T and LTL stands for technicality, or technical, right? Yeah, it's yeah, you really want to know what you're dealing with is what I'm getting at.

Sarah Williams  10:06

So, okay, in 2024, how can shippers be the most financially ready for their LTL shipments?

Eric Burke  10:16

iIwould 100% recommend running a CSP bid. And with that, I mean, want to run a bid. Typically, I like to recommend 90 days so these carriers can look at your shipment profile and kind of put together your customized pricing for you. So CSP stands for customer specific pricing, and really, what it does is it's tailoring these LTL carrier contracts specifically for you, you as the customer, right. So great example is if you ship rubber tires or something like that, you know, you can you can get specific pricing from your origin destination, or your origin and your destination, your facilities, whatever - inbound, outbound, wherever it would be - at aggressively reduced prices, rather than blanket transactional pricing, because it's contracted, right? So we would have to go with these carriers. And again, they'd offer some pretty aggressive concessions, including accessorials. Everything's negotiable in a CSP.

Sarah Williams  11:13

Right, so how does that play into dynamic pricing? We're gonna take it back a little.

Eric Burke  11:17

Sure, sure. So dynamic pricing. Everything fluctuates, right? It's not predictable.

Sarah Williams  11:22

So can you have CSPs and dynamic pricing? In, like, the same relationship?

Eric Burke  11:27

Can they coexist for a customer? Yeah. But the thing is, is for CSP carriers, you're giving them contracted freight at contracted rates from your point of business, your frequent shipping locations etc, and reduce accessorials. But in addition to that, if there's some excess volume, you can have dynamic pricing in the background and some days it may be a little bit cheaper than CSPs. I can promise 98% of the time, it won't be, because it's tailored specifically for you. But there are one-offs that maybe you don't ship to or ship from that, that you have aggressive pricing where the dynamic would be more competitive. It's more it's more of a targeted pricing structure that carriers offer to win freight.

Sarah Williams  12:12

So , what are other ways that a CSP is good for a shipper?

Eric Burke  12:18

I mean, really, it comes down to service to be honest, because if you get CSP contracted pricing, specific pricing, you get a predictable network, predictable carriers, predictable carrier partnerships. They know you, they know your freight, they know how to handle it. And it's at a much more aggressive cost. A general pricing or dynamic pricing model for transactional business, it's, it's literally, it's kind of like getting a tailored suit from  a tailor that knows you and knows you well, rather than just renting a suit and trying to look your best for your customers, right? You know, you want to get custom fit for it. And that's what we try to do.

Sarah Williams  12:54

Okay, so going full circle back to the GRIs. So with releasing this general rate increase in December, our customers who have CSPs and use Saia as a carrier, are they going to be affected by this general rate increase.

Eric Burke  13:09

Nope, protects them entirely. They have their own contracts that would be unaffected by this GRI. And that's the big thing this year. And that's what I've been trying to push your customer base to for those that are eligible. I strongly, strongly, strongly recommend getting on CSP. We did it for a number of our customers in the last several months, just in preparation. Because again, typically comes in January, so we know it's coming. This one's coming faster. But, really, what we try to do is just get ahead of it, you know, and protect them from it. I mean, they're on their own pricing structure, it's good for typically 12 months, then there's a renewal. Your renewal could be anywhere in pre-Yellow, pre YRC collapse days, at three to 6% of an increase. We'll see what happens because it's a network. But, again, if a carrier likes freight predictably, they love predictability, you should see a normal increase rather than being subjected to the hefty GRIs and stuff like that that would come across. So yeah.

Sarah Williams  14:04

Any other general words of wisdom to shippers out there with LTL shipments?

Eric Burke  14:08

I mean, you know, just be just careful on what you're shipping. You want to be super detail-oriented. It's not like truckload pricing or small parcels where you can kind of get an estimate, you know, again, the T and LTL stands for technical. So, they will weigh, they will measure, they will scan it with their little dimensional laser. It's super cool space age technology where they put in a little spot at the terminal and they shoot lasers from all sides. It'll tell you exactly how big it is and how much it weighs. Yeah,

Sarah Williams  14:36

Why don't you join the dev team. Let's go.

Eric Burke  14:37

I mean, honestly, I'm saying they'll charge you if you're off. I mean, you got to be somewhat somewhat dead-on with LTL. It's super specific. It's it's, it's, it's a very complex model that you want. You want to have good reliable partners you can trust in and you know, help them take care of that. And that's what we try to do here.

Sarah Williams  14:54

Shippers, always send dimensions and weight on LTL shipments to your provider, please. Well, that's all we have time for. Thanks for joining us. This has been another episode of future ready freight. And we'll see you next time. Stay safe.