As we all know the economy has not been the greatest in recent years and everyone has seen the effects of the recession. Therefore, companies that are willing to outsource their shipping needs to a 3PL can save a substantial amount of money on their freight cost.
No matter what the need of a company might be, 3PL’s have the ability to establish set pricing with a multitude of carriers in order to fit the needs of companies they work with. A 3PL has the ability to take your needs, as a company, and find a carrier that will fit those needs at the most cost effective approach. There are a few basic reasons why 3PL’s are valuable for a company no matter what their needs may be.
- Personal Needs and Wants: Every company has certain specifications as to how they deliver their freight to their clients. Whether it is residential delivery, lift gate pick-up or delivery, inside delivery, appointment delivery and so forth. Any special services that the company may need, 3PL’s have the ability to narrow your choices down to the best carriers for your needs without you having to empty out your pockets for the services.
- Quality vs. Quantity: 3PL’s have the ability to know the type of service each of the carriers provides based on previous experiences. If you have a shipment that is time critical, depending on the carrier, you might want to spend the $20 extra and go with the more reliable carrier that will get it to its destination within the transit time. Although some carriers seem to have the best pricing, it does not always mean that their service is the best. 3PL’s have the experience to help our customers make the best decision based on their needs.
- “In Case of An Emergency”: Working with a 3PL that has access to a multitude of carriers can take a bad situation and turn it around. If a company schedules a critical shipment with a carrier and it comes to find out they will not be able to make the pick-up. 3PL’s have access to a plethora of other carriers so one quick phone call could turn the situation around and get your shipment out in a timely manner.
No matter what the need, want, or situation of a company may be, 3PL’s have the ability to meet those needs due to their ability to work closely with a large number of carriers. The three reasons listed above are just a tiny piece of what a 3PL can offer a company looking to save money on freight costs, but not lose out on customer service.
When it comes to moving Less-than-Truckload shipments from point A to point B, one of the first things to consider is how the product is defined by the trucking industry. In the world of shipping, different types of products are defined according to their makeup. Each product definition is called a classification. The class of freight plays a prominent role in calculating how much the carrier will charge you for transporting it. How many classes are there?
There are 18 different classes LTL freight can ship under: 50, 55, 60, 65, 70, 77.5, 85, 92.5, 100, 110, 125, 150, 175, 200, 250, 300, 400 and 500. The higher the class, the higher the rate for every hundred pounds you ship. How do you find the class? The many definitions or classes of freight are listed in the National Motor Freight Classification tariff, commonly referred to as the NMFC. The NMFC is a publication for motor carriers containing rules, descriptions, and ratings of all commodities. The publication is used to classify freight for freight bill rating purposes. Besides defining the classes of shipping commodities, the NMFC also assigns item numbers to each type of commodity. The item number is related not only to the commodity itself, but to its packaging, the material from which the commodity is made, and other considerations. Item numbers are associated with rates as well as commodity classifications. PLS Logistics Services’ LTL department is very familiar with the NMFC classification and can help you determine the proper class of your item. How are freight classes determined? Before a class can be determined, there are some characteristics about the freight that need to be identified. You need to know how dense the freight is, the stow- ability, how it’s handled, and what type of liability it assumes. The definitions for each are as follows:
- Density and Value: Density guidelines assign classification 50 to freight that weighs 50 pounds per cubic foot. The Commodity Classification Standards Board (CCSB) assigns classifications 70, 92.5, 175 and 400 to freight with densities of 15, 10.5, 5, and 1 pound per cubic foot, respectively. Freight less dense than 1 pound per cubic foot is classified as 500. The density is the space the item occupies in relation to its weight. The density is calculated by dividing the weight of the item in pounds by its volume in cubic feet. Your item’s volume in cubic feet is Length x Width x Height/1,728, where all dimensions are measured in inches. The density of your item = Weight/Volume, where Weight is measured in pounds and Volume is measured in cubic feet.
- Stow-ability: Most freight stows well in trucks, trains and boats, but some articles are regulated by the government or carrier policies. Some items cannot be loaded together. Hazardous materials are transported in specific manners. Excessive weight, length or protrusions can make freight impossible to load with other freight. The absence of load-bearing surfaces makes freight impossible to stack. A quantifiable stow-ability classification represents the difficulty in loading and carrying these items.
- Handling: Most freight is loaded with mechanical equipment and poses no handling difficulties, but some freight, due to weight, shape, fragility or hazardous properties, requires special attention. A classification that represents ease or difficulty of loading and carrying the freight is assigned to the items.
- Liability: Liability is probability of freight theft or damage, or damage to adjacent freight. Perishable cargo or cargo prone to spontaneous combustion or explosion is classified based on liability and assigned a value per pound, which is a fraction of the carrier’s liability. When classification is based on liability, density must also be considered.
In conclusion, the class of your freight plays a prominent role in calculating how much the carrier will charge you for transporting it. Knowing the characteristics of the freight is very important. If a product is misclassed, then the payer of the shipping charges runs the risk of: (1) Paying too much or (2) Could violate transportation law which could lead to hefty fines if caught trying to pay a cheaper rate.
Over the years since federal deregulation in the late 1970’s, LTL transportation has morphed from a heavily unionized group of carriers operating in a largely non- competitive environment into today’s high tech, cost-effective and service-oriented transportation industry. Today’s national, regional, and inter-modal providers must vie for their share of a 30 billion dollar market.
Leaders of this pack rely heavily on anticipating the needs of customers who are savvier than ever before.LTL carriers have made tremendous strides in technology and service through state-of-the-art website functionality, instant electronic dispatch, paperless tender and billing, and real-time verification of status through to delivery. Many carriers are now also offering smart phone apps so customers can stay in touch anytime, anywhere.
In addition to pushing the boundaries of service with abilities to cover more distance per day than ever, LTL carriers now offer imaginative and flexible value-added options that appeal to a new generation of shippers. Here are a few examples:
- Guaranteed Service- for a nominal fee, shippers can have the money-back assurance that the carrier will meet published service expectations.
- Time-Definite Service- many carriers are now offering service options that work around your schedule with customized transportation services that adhere specifically to customer’s requirements.
- Sealed Trailer Space- shippers can now reserve exclusive trailer space where goods can be packed in various configurations and walled off from remaining trailer space, protecting the shipment from other freight, excessive handling, loss or damage through to final delivery.
- Carrier Shipping Units- many carriers now offer pre-fabricated shipping containers for easy shipping of mixed commodities, personal effects, even entire households. Containers range from small folding crates to full size storage containers that are loaded and unloaded at customer-specified locations. These, as well as many other industry-specific service offerings have allowed LTL carriers to maximize market share, giving shippers numerous options for service and cost that are not available with full truckload, air, or other surface modes of transportation.
We are in a market where LTL carriers continue to aggressively seek methods to improve their yield, reduce their operating ratios, and filter out poor performing business in their portfolios. As a result, shippers need to consistently differentiate themselves from the pack and improve their attractiveness to carriers.
The days of simply blasting LTL bids out to multiple carriers annually with wide ranging FAK requirements, a laundry list of accessorial waivers, and capped fuel programs and expecting that the carriers will beat a path to your door have ended. Today carriers want more from shippers in exchange for that competitive pricing.
- Know your annualized freight spend and be able to support it with complete shipment data. Shipment level data should include ship dates, origin & destination zip codes, actual freight class, weight, and ideally also detail the accessorials encountered, number of pallets, pallet dimensions, NMFC’s, and shipment density. With more complete information at the carriers’ disposal, there will be less guesswork and perceived risk on their part and as a result they will be more inclined to offer a more competitive pricing proposal.
- Have pictures available. Pictures can be worth several additional thousands of dollars in savings. Provide multiple photos of common outgoing/incoming LTL shipments on your dock as well as the corresponding weight and dimensions of the shipments depicted in those photos. Also, if you plan to improve packaging in future, make carriers aware of that also as the photos make not convey that message on their own.
- If you don’t need it, don’t ask for it! Outlining aggressive pricing requirements in your carrier bid packages would seem to always make good business sense. However, making unrealistic FAK demands and asking for waivers and concessions on infrequent accessorials can come back to haunt some shippers. For example a carrier may grant a waiver on a lift gate charge or extend a FAK 50 (55-250), but may also reduce the discount and/or increase the minimum charge thus negatively impacting all of your business. Negotiations should target the most frequently encountered accessorials and shippers should be prepared to stay flexible with carriers on secondary accessorials by accepting lower flat fee charges or accepting at the rules tariff value.
- Highlight your best assets, but be transparent. Disclose your historical frequency of guaranteed service, volume shipments, shipments to/from Canada, and don’t forget to tout a low frequency of claims if that applies. Don’t hide from your shortfalls either. Electing to hide information from a carrier in fear of less competitive pricing may ultimately lead a shipper to experience an out of cycle GRI or worse yet, have a carrier pull their pricing from the shipper completely causing major service disruptions.
- Be in tune with the latest trends. Ask your carriers to bid using a current CzarLite tariff rate basis and using a standardized market competitive fuel surcharge programs. Current CzarLite tariffs take into account industry wide changes in carrier networks, equipment, capacity, and demand side economics. Carriers are more apt to provide a more competitively balanced bid response if they know that the base rates are more reflective of the today’s market. Employing standardized fuel schedules and tariffs will also make it easier to analyze the results of the bid.
- Enlist the assistance of a 3rd party logistics provider with extensive LTL experience. Shippers can benefit from leveraging the 3PL’s expertise, buying power, technology, analytical tools, carrier relationships, and back office support without the fixed expense of managing in-house.