Open Pricer Version 10 Empowers Logistics Groups with New Volume Scenario Feature

We are thrilled to announce the release of Open Pricer version 10, the culmination of over 70 man-years of research and development, and significant user feedback integration. This latest version empowers logistics groups to optimize their entire pricing process, encompassing price setting, execution (quotes and rating), and monitoring.

One of the key highlights of v10 is the introduction of the Volume Scenarios feature. This innovative tool addresses a critical challenge faced by carriers in today’s competitive landscape: achieving a balance between price and volume when formulating new business offers or negotiating rate increases.

Understanding the Volume Challenge

In the world of parcel and freight transportation, quotes are typically tied to promised volumes. Carriers plan capacity and incur costs based on these anticipated volumes. However, discrepancies often arise between promised and actual volumes. If a customer consistently ships only half of the promised volume (e.g., 5,000 parcels per month instead of 10,000), the carrier’s planned capacity remains underutilized. This translates to increased costs per parcel and reduced margins.

Traditional contracts rarely account for such volume shortfalls, leading to profit leakage for carriers.

Volume Scenarios: A Win-Win Solution

The Volume Scenarios feature empowers carriers to address this challenge by simulating costs at different volume levels. This allows for the calculation of surcharges that offset potential shortfalls. For instance, in the example above (promised volume of 10,000 parcels/month, actual volume of 5,000 parcels/month), the system can calculate the necessary surcharge to maintain profitability.

Furthermore, Volume Scenarios allow for the inclusion of minimum surcharges based on pre-defined pricing policies (target price or target margin). With this information, carriers can then determine the most strategic approach for contract structuring. Here are a few possibilities:

  • Price based on promised volume with surcharges for lower volumes: This approach establishes the price based on the committed volume (10,000 parcels/month) and incorporates surcharges if volumes fall below specified thresholds (e.g., 8,000 and 5,000 parcels/month).
  • Price based on lowest volume with volume incentives: This strategy sets the price based on the minimum volume (5,000 parcels/month) and offers conditional discounts for exceeding pre-determined volume targets (e.g., 8,000 and 10,000 parcels/month).
  • Price based on mid-range volume with incentives and surcharges: The price can also be established based on a mid-range volume (e.g., 8,000 parcels/month) with incentives offered for exceeding the highest target (10,000 parcels/month) and surcharges applied for falling below the minimum threshold (5,000 parcels/month).

By introducing volume-based pricing variability, carriers can mitigate the risk on their margin and discourage over-promising from customers. Additionally, this approach enables more accurate capacity planning.

Volume Scenarios for Rate Negotiations

The Volume Scenarios feature also proves valuable during rate increase negotiations. Sales teams often encounter resistance when proposing higher prices due to cost inflation. In the context of multi-carrier shippers, volume agreements can be leveraged to lessen the impact of rate increases. These agreements involve a compromise between a lower rate increase and a higher volume commitment.

Here again, Volume Scenarios empower sales teams to justify potential reductions in rate increases in exchange for increased volume commitments. This allows for the creation of conditional discounts that result in a win-win scenario for both the carrier and the customer.

Beyond Volume: Incentive Agreements

For specific customer segments (e.g., large retailers), Incentive Agreements can be implemented. These agreements go beyond volume and consider factors that reduce carrier costs, such as lower peak shipping periods and improved shipment predictability. When combined with Volume Scenarios, Incentive Agreements provide a powerful suite of tools for bolstering negotiating power.

Contact us to learn more about Open Pricer version 10 and how it can revolutionize your pricing strategy.