DC Velocity - October 2016

Few motor carriers have a better handle on their costs than less-than-truckload (LTL) carrier Old Dominion Freight Line Inc. So when its vice president of pricing said the carrier’s recent decision to raise tariff rates by an average of 4. 9 percent was as much a cost-recovery effort as anything else, it may resonate with the $35-billion-a-year LTL industry.

All rate increases are, to some degree, cost-recovery efforts. And Thomasville, N.C.-based Old Dominion, which has argu-ably been the nation’s most successful trucker for the past decade, is careful to emphasize that pricing is a strategic undertaking, not a tactical one. Yet it was clear from Todd Polen’s comments that the broad array of costs confronting all carriers these days is having a profound impact on the LTL sector. While much of the industry focuses on continued sluggish demand, the challenges on the cost side have been quietly escalating.

“I think the ‘barrier to entry’ has become
extremely high in LTL. This is why you
don’t see new players in the LTL space,”
Polen said in an e-mail.

Polen said Old Dominion’s philosophy behind its rate increases has shifted to position the hikes as recovery mechanisms of costs that he said have increased significantly over the past five years. Polen stressed, however, that Old Dominion’s pricing would not take on “Machiavellian” overtones, where the long-term end may justify the short-term means.

“Pricing is not ‘tactical’ in our view
of the customer,” he said in the e-mail.
“Tactical implies lots of words like ‘deceit-
ful,’ ‘unfair’—and once you treat someone
unfairly, the bridge has been burned.”
Old Dominion’s statement seemed craft-
ed to emphasize the escalating expenses it
faces and how it would have trouble execut-
ing in such an operating climate without a
rate hike. The rate increase is “intended to
partially offset the rising costs of new equip-
ment, real estate, technology investments,
and competitive employee wage and benefit
packages,” Polen said in the statement.

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