Zone Based Pricing is the Future of LTL Shipping

FedEx Freight’s announcement of its zone-based pricing for all new accounts, effective January 4, 2016, is an industry game-changer for less-than-truckload (LTL) freight shippers.

To give context to this drastic change, think of the fact that there are roughly 43,000 zip codes in the United States and no two zip codes are exactly alike. This means there are different roads, unique terrains, and varying landscapes for freight shipping that lead to billions of combinations of lanes and rating. Prior to this change in the freight rating system, LTL rating was incredibly complex and convoluted, with many carriers hiding rates and surcharges. Zone-based pricing makes it easier for both retailers and consumers to understand the full cost of shipping their items.

Here’s how FedEx’s zone-based pricing alters the LTL landscape:

1. LTL rating moves away from the complex realm of carrier websites, rate CDs, rate bureaus, and 3PLs.

2. Technology companies can build better rating engines and make them readily available to retailers who can offer instant and accurate rates.

3. Customers that are being shipped their goods via freight will be able to understand their costs more transparently.

The success of small parcel using zone-based pricing shows there are methods to handling surcharges and special rates applied to specific zip codes, no matter whether the shipment is inbound or outbound. All freight shippers need to do is pull specific zip codes and apply special rates to them to cover any additional costs. With this zone-based pricing model for freight shipping eCommerce companies have a new competitive advantage. Now online retailers have the ability to put accurate rates in the cart at the point-of-sale both quickly and efficiently, without having to rely on third-party APIs.

Zone-based pricing not only gives retailers a huge advantage, it will also gives FedEx Freight an edge over carriers who don’t have this same rating system. Overall, there is only an upside for carriers to offer zone-based pricing and this is the first step toward a better and more efficient rating system for freight shippers.