Could New All-In Rate Strategy Ease Some Accessorial Headaches?
Shipping companies are always on the hunt for ways to cut costs on shipping prices while still providing excellent service for their clients. As a result, some of these businesses have begun to experiment with new rate strategies. One such rate strategy is known as an “all-in” approach.
In this article, we will provide an overview of all-in rates and discuss some of the potential pros and cons inherent in this method.
What Is an All-In Rate Strategy?
When shipping goods, there are tons of different costs that can accumulate to create massive headaches for shippers. For instance, shippers have to consider the costs associated with the following items listed below.
Currency Adjustment Factors (CAF)
Because there are always ebbs and flows within currency exchange rates, currency adjustment factors can often impose hefty fees on shippers who work internationally. These costs may not be high for a one time shipment, but the costs certainly add up over time.
The base rate for shipping at item rarely takes into account the various surcharges that will come up throughout the transportation process. Fees for services such as weekend deliveries, fuel costs and many others have created havoc for shippers over the years.
Perhaps the most frustrating of all excess charges are accessorial fees. These costs are often impossible to predict, as they can vary between shipments. They are often even added onto the bill after the delivery has been made, making it impossible to negotiate or dispute these costs. In general, these are fees that exceed the original, agreed-upon rate when the agreement was made.
So, with all of these extra fees and relatively hidden costs, some shippers have decided to devise a pricing model that won’t leave them high and dry during deliveries. Thus, the all-in pricing model was born.
The all-in model essentially consolidates all of the extra fees associated with shipping goods into one standard rate. This way, shippers can better find cost-saving methods for their clients while not being bogged down with exorbitant charges.
All of that being said, however, there are certainly some pros and cons that are worth discussing with regard to this strategy. Let’s take a look.
Potential Benefits To Using an All-In Rates Strategy
Likely the greatest benefit inherent in this strategy is that shippers tend to have a less cumbersome job when performing deliveries. They are able to have some assurance that all of the extra costs will be handled under this strategy, enabling these companies to find other ways to save money for their clients.
At the same time, clients can have a better, more transparent picture of what they will be paying for each shipment.
Potential Drawbacks To Using an All-In Rates Strategy
Most of the potential drawbacks to this strategy hinge around the fact that this is uncharted territory. Few companies have pursued an all-in strategy in the past. This means that there is little data from which we can speculate as to how much money this will save or cost in the long run.
What could be the downstream impact of using such a method? Will shippers truly be able to save their clients money, as expected? Only time will tell.
Getting Started with an All-In Rate Strategy
If you’re interested in experimenting with an all-in rate strategy, you need a solid plan.
First, you’ll need to examine whether switching to an all-in model is the right decision for you. If you’re not feeling the strain of surcharges and extra fees, you may not even need to make the switch. But if you’re noticing that the extra charges are piling up, it is probably time to pursue a different strategy.
Secondly, you’ll want to determine if your customers will stick around if you change your shipping rate strategy. Long time customers may be taken aback if you suddenly indicate you will be shifting your rate strategy. For this reason, you’ll want to have straightforward and honest conversations about how this change will affect both yourself and the client.
Third, you’ll want to closely evaluate how well your new strategy is working both for you and your clients. You should define clear metrics that will demonstrate the potential benefits and potential downsides that resulted from the change.
New shipping rate strategies have come and gone over time. The all-in methodology could potentially solve many of the issues shippers are facing these days. Challenges such as high surcharge fees, accessorials, and other extra costs could become more digestible. However, it remains unclear whether or not all of these fees will provide significant benefit to both shippers and clients.
As time goes by, more and more shippers are likely to take advantage of all-in rate programs. As this happens, we will be better able to see whether or not the all-in rate tactic is the best option available. Shipping prices have led to razor-thin margins for many companies. Therefore, any strategy that can help improve costs needs to be investigated.