1. Transportation Pricing

2. Character-of-Shipment Rates
Special rates related to the size or character of the shipment
Carriers generally have certain fixed costs for each shipment
Includes:
LTL/TL Rates
Multiple-car Rates
Incentive Rates
Unit-train Rates
Per-car & Per-truckload Rates
Any-quantity Rates
Density Rates

3. Character-of-Shipment Rates
LTL/TL Rates
LTL shipments require multiple handlings
Each handling requires dock personnel, materials-handling equipment, terminal investment & additional communications/tracking efforts
Thus, higher rates for LTL shipments
TL shipments are generally loaded by the shipper, moved intact to destination, & unloaded by consignee.
No intermediate handlings required
No intermediate terminals required
Thus, lower rates for TL shipments

4. Character-of-Shipment Rates
Multiple-car Rates
Railroad special rate
Volume discount for moves of more than one carload that are shipped as a single string of cars from one point to another
Cost of moving multiple cars in single shipment proportionally less than cost of each car moved singly
Multiple cars can be handled by same effort as a single-car shipment
Empty car drop-off
Pickup
Delivery efforts
Documentation
Only basic difference is the additional weight moved

5. Character-of-Shipment Rates
Incentive Rates
Rate designed to induce shipper to load existing movements and equipment more fully
Usually apply only to weight or units loaded over and above normally shipped quantities
Fewer cars and moves are required over the course of a year, though same actual volume is shipped
Example
Appliance manufacturer typically ships carload quantities that only fill car to 80% of capacity
Minimum carload rate is 40,000 lbs; capacity 60,000 lbs
Manufacturer normally only loads 48,000 lbs.
Incentive rate would apply to the additional 12,000 lbs.

6. Character-of-Shipment Rates
Unit-train Rates
Integrated movements between an origin & destination
Trains usually avoid terminals & do not require intermediate switching or handling of individual cars
Shipper or consignee typically provides the railcars

7. Character-of-Shipment Rates
Per-car & Per-truckload rates
Single-charge rates for specific origin-destination moves regardless of shipment commodity or weight
Also apply to container movements where carriers’ costs of movement dominated by moving the equipment & not specifically by shipment weight

8. Character-of-Shipment Rates
Any-quantity Rates
AQ rates provide no discount or rate-break for larger movements
LTL rates exist but no TL rates for large shipments
Apply to any weight in a shipment
Usually used for shipment of large, bulky commodities such as boats, suitcases, and cages where no economies are realized by the carrier for larger shipments

9. Character-of-Shipment Rates
Density Rates
Rates published by density of the shipment and its weight, not by commodity or weight alone
Common in air carrier shipments
Applied when carrier assesses rates on basis of weight, but does not experience fewer costs for lighter-weight containers

10. Area, Location, or Route Rates
Includes:
Local rates
Joint rates
Proportional rates
Differential rates
Per-mile rates
Terminal-to-Terminal rates
Blanket or Group rates

11. Area, Location, or Route Rates
Local Rates
Apply to any rate between 2 points served by the same carrier
Include full-cost factors for pickup, documentation, rating, billing, and delivery
Joint Rates
Single rates published from a point on one carrier’s route to another carrier’s destination
Usually lower in total charges than the combination of local rates

12. Area, Location, or Route Rates
Proportional Rates
Some carriers at competitive disadvantage when they compete with other more direct lines
Carrier might publish a proportional or lower rate than its regular local rate that applies only to through moves to certain destination points beyond its line

13. Area, Location, or Route Rates
Differential Rates
Published rate by a carrier that faces a service time disadvantage compared to a faster carrier or mode
Water carriers often publish differential rates lower than regular rates of railroads
Lower rate offsets somewhat the longer transit time disadvantage

14. Area, Location, or Route Rates
Per-mile Rates
Rates based purely upon the mileage involved
Generally used in situations in which weight of shipment of lower significance
Terminal-to-Terminal Rates
Ramp-to-ramp rates that require shipper and consignee to perform the traditional pickup and delivery functions

15. Area, Location, or Route Rates
Blanket or Group Rates
Apply to or from whole regions rather than points
All shipments coming from (going to) a region are treated as coming from (going to) the same point of origin (destination)
Example
All lumber shipments from Oregon & Washington are treated as having the same origin
Food shipments from California & Florida treated similarly

16. Time/Service Rates
Generally dependent on the transit time performance of the carrier in a particular service
Shipper pays a higher rate for faster service & lower rate for slower
Reduced rates offered for certain minimum tonnage shipped over a specified period
Deferred delivery contracts in which carrier charges lower rate for privilege of deferring arrival time of shipment
Air expresses companies offer 25% discount or more for second- or third-day delivery as opposed to next-day delivery
Gives carrier more operating flexibility

17. Other Rate Structures Corporate Volume Rates
Discounted rate for each LTL shipment that is related to the total volume of LTL shipments that a firm ships via a specific carrier from all shipping points
More volume shipper tenders to a particular carrier, the greater the discount
Not widely used today

18. Other Rate Structures Discounts Loading Allowances
LTL shipments of a specific commodity class moving between given origins and destinations
Loading Allowances
Reduced rate or discount granted if shipper loads LTL shipments into carrier’s vehicle
Aggregate Tender Rates
Reduced rate or discount granted if shipper tenders 2 or more class-rated shipments to the carrier at one time
Aggregate usually must equal 5000 lbs minimum
Tender of 2 or more reduces number of times carrier goes to shipper’s facility to pickup cargo

19. Other Rate Structures FAK Rates
All-commodity rates expressed in cents per hundredweight or total cost per shipment
Rate based on cost of service, not the commodity hauled
Involves mixed commodities shipments
Generally used in shipment of groceries

20. Other Rate Structures Empty-haul Rates 2-way or 3-way Rates
Charge for moving empty rail or motor equipment that is owned or leased by or assigned to a particular shipper
Induces shipper to fully load all miles of the equipment movements
2-way or 3-way Rates
Apply to rates that are constructed and charged when backhaul or triangular moves can be made
Intent is to tie a fronthaul move with what would have been another firm’s backhaul.

21. Other Rate Structures Spot-Market Rates Menu Pricing
Special rate offered to facilitate movement of equipment or product
Generally used if excess supply of empty trailers begins accumulating in a geographic region
Menu Pricing
Allows a shipper to pick and choose those services the carrier should perform
Requires the carrier to understand and know its costs of providing various services on the “menu.”