How many tactics is your company employing to save on less-than-truckload (LTL) shipments? How many tactics do you think there are in total; 10, 20, 50? Inbound Logistics magazine suggests there are at least five major areas where you can save on LTL shipments. That’s from its recently published September issue.
The magazine talked with scores of carriers and 3PLs to develop its list of tactics to save on LTL shipments. The ideas and tips are organized into five major categories:
- Carrier selection
Over the next several weeks, we’ll take each one of these tactics and analyze it for you. With each article you’ll have actionable ideas and tips you can immediately employ within your shipping and logistics operations.
This week, we begin with pricing.
Most shippers think the top methods to save on LTL shipments are to simply negotiate lower rates with carriers and third-party (3PL) logistics companies. According to Inbound Logistics, “LTL is an important business for carriers, one that saw revenues increase 7.5 percent in 2014 but drop 1 percent in 2015 to $35 billion, according to a study by SJ Consulting Group. That drop was due to a decrease in fuel prices, not shipping volume, according to Satish Jindel, president of SJ Consulting.”
In addition, small and midsize businesses move a large percentage of LTL traffic, which also means the smaller firms don’t have focused logistics groups with sophisticated technology to help them negotiate lower rates.
LTL pricing is complex, often involving a slew of surcharges and fees that are added after an estimate has already been accepted. Items that factor in to prices include:
- Shipping distance—Generally, the farther the distance the more expensive your goods are to ship, but well-travelled routes between distant cities can be less than rural deliveries going a short distance.
- Weight—If it’s heavy, it will cost you, even though your price per pound will be less on very heavy loads.
- Dimensions—Ever since UPS, FedEx and DHL have transitioned to dimensional pricing, the controversial practice has picked up steam industry wide. These carriers insist they sell space and not weight.
- Freight classification—Depending on the density of the items you ship they get assigned one of 18 classes, which are numerical codes between 50 and 500.
- Carrier Shipping Minimums—Most LTL shipments are subject to minimum prices, regardless of actual weight.
- Carrier Discounts—Naturally, high volume shippers can receive discounted rates from carriers. Make sure you’re getting your maximum discount.
Here are five ideas for saving on your LTL shipments through pricing:
- Avoid surprises by knowing as much about your shipment as the carrier does: As noted above, carriers use specialized equipment to weigh and measure every pallet. If specs—weigh and measurements—do not match the shippers estimates, you are charged an administrative fee to correct it. Make sure your measurements are perfect.
- Focus on net cost: When you are comparing costs between carriers, make sure you include all additional fees in the final cost and not just the discounted rate. It can vary widely. Think about the fees that get added to your airline ticket when you buy it. Fees, taxes, airport surcharges, baggage fees. It’s the same when shipping freight.
- Look for a carrier with simple pricing: Complex pricing leads to confusion and expensive rework when documentation has to be altered. Look for carriers with simple fee structures and flat rates.
- Understand the carrier’s rules as they apply to pricing: Every carrier has its own set of rules, and when you have a shipment that violates those rules it will cost you.
- Go outside a carrier contract to look for potentially less-expensive spot pricing: Make it a habit to frequently look on the spot market for cheaper loads or lanes. Carriers make price changes frequently due to the ebb and flow of supply and demand.