PLS’ Houston, TX Facility Reflects Growth and National Expansion Plans.
PLS today announced that it will open a new office in Houston, TX on May 28, 2013. The new office is consistent with management’s strategy to penetrate new markets and further enhance market share in North America.
“PLS is excited about the opening of our new Houston Branch,” says Greg Burns, PLS’ Chairman & CEO. “We feel that Houston, with it’s strong economic growth and status as a global headquarters for the energy sector, is a good fit with PLS’ industrial shipper and carrier base. Additionally, we believe that Houston has much to offer in terms of sales talent, and we look forward to expanding our presence there.”
The new office in Houston will consist of seven experienced employees from the firm’s Cranberry, PA location, combined with nine initial hires from the Houston area. PLS expects to hire an additional 100 employees from the Houston market over the next two years. Interested candidates can apply online by visiting http://plslogistics.com/careers.
Today’s ground transportation environment has seen the impact of not only a lackluster economy but also the effects of other factors leading to increased cost of Less-Than-Truckload common carrier transportation services. As a result, carriers are focused on margin retention and improvement and sacrificing market share by culling low margin business. We should expect to see increases in prices within the next few months as trucking companies ensure their prices are compensatory to the services they provide.
Just as we are seeing in the deregulated airline industry, fares differ by carrier and many additional services or conveniences such as checked luggage or food come at an additional expense. As a result, finding a low airfare to board one plane may, overall, end up costing more when you add a checked luggage fee and business class seating, than a higher airfare with lower or waived luggage and business class fees.
Carrier rate bases can vary significantly, depending on their lane balance needs and the cost of performing standard services in their geographic service regions. LTL discount percentages can mean little at face value as most rate bases vary considerably from carrier to carrier. In addition to class less discount rates, carrier accessorial charges will vary, some significantly, allowing a quote with a low base rate to end considerably higher with the addition of accessorial charges such as fuel surcharges, limited access fees, residential delivery fees, weight and class change fees, over length, hazardous material or lift gate charges as well as many other requested services. These accessorial charges often lead to surprises on carrier invoices. These charges can be found in a carrier’s rules tariff and buyers will find that rules tariffs are lengthy and subject to change without notice.
Here are a few examples of surprises that shippers find on their freight invoices:
- Limited Access – Limited access fees can be assessed on both commercial and non-commercial delivery sites. A flat or per hundred weight charge may apply. Generally speaking, a limited access location is defined as meeting any of the following conditions:
- Not open to the walk-in public during normal business hours.
- Not having personnel readily available to assist with the delivery or pickup function.
- Not having access to loading dock or platform.
- Sites where carriers are delayed with security related inspections and processes prior to freight tender.
- Examples would be private residences, camps, churches, government facilities, farms, schools, prisons, carnivals, mini-storage facilities, nursing homes, outpatient medical facilities and other such locations.
- Over-Dimensional or Excessive Length Charges – Varies by carrier rules tarrif and can apply on shipments with a single handling unit with lengths generally in excess of 10 linear feet. These charges are subject to a minimum fee and can increase depending on the length of the product.
- Weight Change Charges – Shipments subject to a weight change after inspection may be assessed a flat fee to cover the cost of carrier invoice changes in addition to the increased cost associated with the higher shipment weight .
As a result of the wide variances of rate bases and accessorial fees, it is important to evaluate carrier options prior to tendering shipments to an LTL carrier. Short of checking each quoted carrier’s rules tariff for accessorial price application, the most practical tool available is a transportation management system (TMS) that houses a comprehensive listing of additional fees. Accessorial charges such as limited access, over-dimensional or excessive length, and weight change charges may not be known at time of carrier tender. However, you have the ability to control the costs that you know up front. Consequently, whichever method you choose to utilize, accessorial and special service charges can add up and potentially cost more than a shipper may anticipate. A good 3PL and TMS can help you navigate through the myriad of additional charges and protect your margin by helping you with quote your shipments accurately.
PLS’ 2nd Annual Liquefied Natural Gas (LNG) Motor Carrier Survey Indicates Growing Interest.
PLS has announced the results of its 2nd annual survey of industrial freight carriers on the use of liquefied natural gas (LNG) powered trucks.
Natural gas production is becoming big business in North America. According to the Energy Information Administration, demand for this cheaper, cleaner energy source will drive a steady rise in natural gas usage for years to come – for usage in homes, businesses and industrial plants. The question remains, will LNG vehicles become a significant factor in long-haul freight?
To determine the potential of LNG vehicle use for industrial freight, PLS Logistics Services surveyed senior executives at 100 large industrial freight carriers. PLS survey respondents represent key decision makers at some of the largest industrial trucking companies in the United States.
Highlights from the Survey:
- There has been a significant increase in respondents who plan to purchase LNG vehicles compared to the previous year’s results.
- There has been a major shift in attitude among the majority of respondents, who now believe LNG is a viable alternative to diesel.
- Large carriers appear to be leading the industry with plans to adopt LNG technology while smaller operators are more resistant.
- Potential barriers to the use of LNG remain, with refueling infrastructure still a key issue, followed closely by the higher cost of LNG compatible engines.
- Both 2013 and 2012 survey results indicate that heavy-haul carriers are receiving little pressure from customers to provide a natural gas shipping option, despite the potential cost advantages.
Commenting on the survey results, PLS Logistics Services’ Chairman and CEO Greg Burns noted:
“The results of our latest survey show significant movement within the trucking industry toward adoption of LNG technology. PLS believes LNG has an important role to play as a U.S. energy source, and our future surveys will track adoption rates and attitudes towards this alternative fuel in the future. “
More detailed survey results are available via PLS’ website:
PLS 2nd Annual LNG Motor Carrier Survey Results
LTL shipments typically weigh between 151 and 20,000 lbs. LTL carriers will usually apply a discount on shipments starting at 151 lbs on one pallet and up to 5,000 lbs on 5 pallets. Shipments larger than 5 pallets can still ship with an LTL carrier but these moves are normally considered volume moves and are spot quoted by the carrier’s rate department.
LTL rates can be very confusing. Unlike truckload which has rates usually based on a per-mile rate or a price per-hundred weight plus a fuel charge, many factors regulate LTL rates which will most definitely impact the cost of a shipment.
Less-than-truckload (LTL) mode of shipping is used for smaller shipments that are too large to be sent as parcel but too small to fill an entire truckload. LTL carriers collect freight from various shippers and consolidate that freight onto trailers for line-haul to the delivering terminal or to a hub terminal where the freight will be further sorted and consolidated for additional line-hauls.
In most cases, drivers start the day by loading up and heading out to make deliveries first, then begin making pickups once the trailer has been emptied for return to the terminal for sorting and delivery next day; thus, most pickups are made in the afternoon and most deliveries are performed in the morning.
Here are 7 factors that determine LTL pricing:
- Minimums. The pricing that is increasing the fastest with LTL carriers is the absolute minimum charge (AMC). This minimum charge is the charge below which a carrier simply will not go. Carriers are constantly requesting a 2-3% increase on contract rates, but $5 increases in the minimum charge. If the minimum charge is $70.00, a $5 increase equates to a 7.1% increase. Carriers are doing this because the costs a carrier experiences for a minimum charge shipment far exceeds the costs they experience for heavier shipments
- Distance. Typically, the longer the haul, the higher the price per-hundred weight will be. Many LTL carriers only serve a specific geographic region so you must consider how many zip codes a carrier services directly. If a shipment is sent to a location outside a carrier’s normal service area, the trucking company will transfer the shipment to another LTL carrier for final delivery. This is called interlining, a practice that may result in higher costs due to lower discounts and higher minimum charges.
- Base Rates. All LTL carriers establish their own base rates. These rates are quoted per 100 pounds (aka – CWT), and will vary from carrier to carrier and from lane to lane. The CWT calculation is based on the freight classification. A good fact to point out is carriers will modify their base rate depending on their need for additional volume and increase gross costs for lanes where they have a good balance between trucks and freight.
- Freight All Kinds (FAK). Freight all kinds is an arrangement between the client and the carrier that enables multiple products with different classes to be shipped and billed at the same freight class. For example, a client that ships multiple commodities ranging from 50 to 100 could negotiate an FAK with the carrier to rate all items at class 70. This can be a source of significant savings for clients by reducing the amount paid on higher class shipments.
- Weight. Rates are structured so that the more a shipment weights, the less you pay per hundred pounds. As the weight of the LTL shipment increases and approaches the lowest weight in the next heaviest weight group, it will be rated at the lowest weight category and rate in that weight group.
- Classification of Freight. Every piece of freight has a classification within the LTL world. Classes are published by National Motor Freight Classification (NMFC). NMFC has established 18 different classes ranging from 50 to 500. The class is determined by product density, value, stow-ability, handling and liability. Lower classes represent very dense freight that is difficult to damage and is easy to handle. Lower classes have lower rates. Conversely, higher classes represent lighter / less dense freight that typically takes up more space. The higher the class, the higher the rate will be. For additional information on freight classification see our post – 4 Characteristics that Determine Your LTL Freight Class.
- Accessorials. Accessorial charges stem from extra services performed by the carrier that goes beyond the typical dock to dock / business to business pick up and deliveries. Common examples of these charges are lift gate service, residential pickup or delivery, limited access locations (i.e. jails, prisons, churches, schools, storage units) and inside delivery. Accessorial charges can be negotiated to a flat rate or even waived altogether. A fuel surcharge is the most common accessorial as it’s typically factored in on every shipment.
If you lack the specifics of your freight as it relates to the above information, it could lead to a 25-40% increase in your freight charge. Fortunately, the unnecessary costs are avoidable. Getting to know these 7 characteristics of an LTL freight rate will help you control costs.
What do you think? Are there any other factors that affect LTL pricing? Leave your comments below!
Many companies today are working in an environment of fierce competition and razor sharp profit margins. What separates the top performing companies from the rest of the pack is how well they are able to adhere to standard operating procedures and continue to improve upon those processes. One example of this is how companies control the carrier selection decisions that are made by their suppliers and how these suppliers are being utilized. When there are hundreds or even thousands of vendors to reign in, this can be a daunting task for many companies to manage. How can companies ensure they optimize savings opportunities without experiencing a reduction in service levels?
- Understand your supplier network: Determine where your key suppliers are located and how often are they shipping product to your facilities. Could shipment order quantities be increased to reduce the frequency of LTL shipments? Reducing the frequency of shipments will reduce the occurrence of minimum charges and ultimately yield larger freight savings and lower cost per pound over the course of the year.
- Create visibility into your freight expenditures: By developing reporting that captures where you are spending your LTL transportation dollars at the vendor level, a company can better understand where there may be opportunities to reduce cost. Which shipments do you pay the freight for and have control of today and are their opportunities to convert pay terms to maximize savings? A reputable third party logistics provider can capture this critical information with the use of a transportation management system (TMS).
- Consolidate your supplier base: Are there opportunities to buy more products from regional suppliers to reduce transportation expense? Companies do need to have redundant sources of supply as contingency and for leverage in negotiations, but key regional vendors can be established in many cases. Reducing the length of haul can enable you to use more regional LTL carriers and in turn, potentially reduce your transportation expense while simultaneously improving your average transit times. Generally speaking, regional LTL carriers’ networks are better positioned to provide more reliable and faster transit times than their national LTL carrier counterparts.
- Monitor & enforce vendor compliance: Are your vendors sticking to the plan? Vendors need to understand and be held accountable for their carrier selection decision. If vendors are not selecting the least cost carrier, have they been given the authorization to do so? If a vendor violates the rules for carrier selection, hold them accountable by enforcing chargeback penalties. Having a single point of contact for your vendors will help to reduce the chances of incurring unnecessary expenses. Consider outsourcing the vendor compliance and carrier selection process to a third party LTL provider that has a robust LTL TMS. This will remove the expense and burden from the shoulders of in-house staffing as these third parties can provide flexible resource levels to handle surges in incoming requests.
- Communicate with your vendor base: Distribute a vendor instruction letter. To ensure an efficient transaction, this letter should detail who to contact to request an LTL shipment and what information will be required such as purchase order numbers, origin/destination contact information, freight class, and weight. When a shipment needs to be expedited or a carrier other than the least cost option needs to be selected for service reasons, ensure the vendors are aware of the proper procedure for authorizing these additional expenses in advance. Remember to provide feedback to your vendor base on their carrier selection performance- both positive and negative. Solid reporting at the vendor level that quantifies the cost of these lost LTL freight savings will help to change behaviors and provide negotiating power at supplier negotiation time.
Incorporating these behaviors into your vendor assessments will enable your company to monitor your vendor network, leverage opportunities for shipment consolidation, maximize vendor compliance to preferred carrier routing, and ensure vendors are aware of your standard operating procedures.