Open Pricer v10 is here with a focus on Volume Scenarios

The Open Pricer platform version 10 is the fruit of 70+ man-years of R&D and capitalizes on improvements from users community feedback. It empowers logistics groups to manage and optimize all their pricing processes: price setting, execution (quote and rating) and monitoring.?

Volume Scenarios is one of the new features in v10. It was designed to help carriers meet one of their top challenges in today's competitive market: rationalize the trade-off between price and volume when submitting a new business offer or when negotiating a rate increase.

At quote time, as a parcel or freight carrier, you quote a price based on a volume promise. As a result, you plan capacity and incur costs to provide the transportation services that meet your customer's needs. If you price a customer for a volume of 10k parcels per month and that customer only ships 5k parcels/month, your planned capacity for that customer is only 50% utilized, which means that the average cost per parcel increases and your margin decreases accordingly. However, most contracts do not provide for automatic price revisions when actual volumes are lower than planned, resulting in profit leakage.?

The Volume Scenarios feature allows you to calculate the surcharge needed to offset this shortfall based on a simulation of costs at different volume points (e.g. 5k and 8k in the example above). It is also possible to include a minimum surcharge based on your price policy (target price or target margin). Then you can decide whether you frame the contract: (1) with the price corresponding to the promised volume (10k p/m) and include a surcharge if the volume falls below the thresholds of 8k and 5k; or (2) with the price corresponding to the lowest volume (5k p/m) and offer a volume incentive (conditional discount) if the 8k and 10k thresholds are reached. It is also possible to set a price based on a volume of 8k and offer an incentive if 10k is reached and a surcharge if volume falls below 5k.

Introducing such price variability based on actual volume limits the risk on your margin. This also limits over-promising from customers and allows you to plan capacity more accurately.

At rate increase time your sales teams face customer resistance when they try to pass on more aggressive price increases imposed by higher inflation in your costs.?

In the case of multi-carrier shippers, volume agreements can be used to mitigate the impact of the rate increase. They consist of a trade-off between a lower rate increase and a higher volume commitment. Here too, Volume Scenarios enable your sales team to rationalize the possible reduction of the rate increase in return for an increase in volume and to frame a conditional discount resulting in a win-win scenario for you and your customer.

Incentive Agreements may be limited to specific customer segments (e.g. Large Retailers) and may be based not only on volume, but also on shipping profiles that reduce your costs such as lower peak share and better shipping predictability. In combination with Volume Scenarios, these are very effective tools for increasing your negotiating power.

For more information on the Open Pricer platform, you can visit openpricer.com.