All-In Rate Strategy for Predictable Freight Costs

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 blog post, 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 you ship goods, there are tons of different costs that can accumulate to create massive headaches. For instance, you 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 you if you work internationally. These costs may not be high for a one time shipment, but the costs certainly add up over time.

• Surcharges

  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 may have created havoc for you over the years.

• Accessorial Fees

  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 a consistent freight invoice audit critical for catching and disputing 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, you may be looking for a pricing model that won’t leave you 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, you can better find cost-saving methods for your 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 you tend to have a less cumbersome job when performing deliveries. You are able to have some assurance that all of the extra costs will be handled under this strategy, enabling you to find other ways to save money for your 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 you 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 you truly be able to save your 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.

Final Thoughts

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, you 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.

Ready to explore how an all-in rate strategy could work for your business? Contact Redwood Logistics today to discuss your shipping needs.