How will dynamic pricing shape parcel’s future?

Whether it is booking an airline ticket, a rideshare or even groceries, dynamic pricing frequently intersects with our daily lives. At its most basic (or theoretical), dynamic — or surge — pricing matches prices with real-time supply and demand to endeavor to provide the most transparent discovery of current market conditions.

The less-than-truckload industry has adopted the model. The parcel-delivery industry, normally more of a first mover in pricing trends, has been slow to follow. One reason is that it is difficult to embed transactional pricing in a world dominated by contractual relationships.

Josh Taylor, senior director of professional services at consultancy Shipware LLC, spoke about dynamic pricing at the recent Parcel Forum in Nashville, Tennessee. In the following interview, he dives deeper into an issue that is bound to increase in relevance.

FREIGHTWAVES: Can you explain how the dynamic pricing model works in the parcel industry?

TAYLOR: A dynamic pricing model enables a carrier to charge less when it has excess network capacity and more as that capacity is filled. The FedEx Great Rates program for international shipments has followed this pricing model for years. It is the purest example of dynamic pricing I’ve seen from UPS or FedEx. Other parcel carriers have discussed implementing this model on a larger scale, which is already common among LTL providers.