Zone of Reasonableness
The zone of reasonableness is a special limit within which air carriers may change the rate without getting regulatory scrutiny. Under these circumstances, if the rate change falls within this limit, then it is presumed to be fair and reasonable. This concept is particularly important in the context of logistics, as it can affect multiple aspects of business operations including:
- pricing decisions,
- shipping costs,
- and efficiency of supply chain management processes.
Generally speaking, transportation providers that are able to keep their rates within this limit will have increased flexibility in making financial decisions while also minimizing potential risks. However, there are some factors that need to be considered when trying to determine whether a particular movement or shipment falls within the zone of reasonableness. These include:
- the relative importance or size of the item being shipped,
- the complexity of the route,
- and the time frame in which the shipment needs to be delivered.
Ultimately, it is up to the discretion of the air carrier to decide whether a given rate change falls within this limit. However, if they are found to be outside of the zone of reasonableness, they may face regulatory action.