When you think about logistics service providers (LSPs) and the different ways they can differentiate themselves and create value, customer billing and pricing is probably not the first thing that comes to mind. But when you dive deeper into the topic, you realize that enabling and managing customer billing and pricing in smart and efficient ways does indeed create value for both LSPs and their customers.
“Every customer wants something different in terms of pricing and billing, which is a big challenge for logistics service providers,” said Salvucci-Favier. “Some customers want to be billed at the order level, some customers want to be billed at the consolidated shipment level, others at the load level…When you get into pricing, some customers might want to impose the carrier or mode choices that their billing will be based on, whereas other will leave it wide open…Every customer wants the best possible rate, yet not every customer is able to give the LSP the data they need upfront to really put together a compelling pricing program for all of their needs. Maybe they can provide great data on their highest volume lanes or their most important customers, but they can’t provide data on infrequent or unpredictable lanes, which limits the LSP’s ability to put together a comprehensive pricing program that covers all of the customer’s business.”
Simply put, when it comes to customer billing and pricing, there is no one-size-fits-all approach. In a guest commentary earlier this year, Salvucci-Favier outlined a variety of pricing programs for customer billing, which she also discussed during the episode — along with why having a flexible transportation management system (TMS) to support this diversity is important.
“The devil is in the details,” says Salvucci-Favier, “and when you get down into those details, there’s really not a lot of robustness or flexibility built into the pricing and billing capabilities of many TMS solutions, especially when it comes to sell-side rating capabilities. In many cases, the setup and maintenance of those pricing programs is just a nightmare, which requires a lot of overhead to maintain and results in longer customer onboarding times.”
“Historically, the LSPs that have overcome these limitations have either made huge investments in custom, in-house developed applications or they have made large investments in people who can really walk through the pricing and billing process,” added Salvucci-Favier. “Both are very expensive propositions, which might work if you’re a very large logistics service provider, but it makes it much more difficult for smaller LSPs to compete.”
I encourage you to watch the rest of my conversation with Dawn for additional insights and advice on this topic, including the link between customer billing and pricing and what’s happening with omni-channel retailing and the Amazon Effect.
What questions should LSPs ask themselves to assess whether they have the right capabilities in place to leverage customer billing and pricing as a differentiator? Salvucci-Favier provided a few, including this final one as a way to wrap up:
“What additional value could I be creating for my company and for my customers if I were able to remove all of the obstacles I face with customer billing and pricing, whether it’s being able to co-optimize my customers’ freight or even with just normal billing practices by having greater flexibility and easier setup and maintenance?”
After watching the episode, post a question or comment and keep the conversation going!