On the Front
Category: LTL Rating
NMFC Rules and Requirements The National Motor Freight Classification (NMFC) is the freight "Bible" for motor carriers and contains rules, packaging requirements, approved freight descriptions, and freight class definitions for all commodities. Freight class of any commodity is determined based on the following: Density Load Ability and Handling Characteristics Value Susceptibility to Damage All carriers strictly require an accurate NMFC description, NMFC Item Number, and
Less-than-truckload (LTL) carriers are more aware of their operational costs than they have been in many years. Now that they have figured out how to control these operational costs, they are targeting how to get appropriate revenue for them. The most popular method used by LTL carriers to increase their revenue is to adjust their discounts or minimum charges. How does an LTL carrier decide how they will make these general rate changes? That is not an easy answer, but we can help you better understand your transportation costs. To begin, LTL carriers use the term Operational Ratio (O/R) to help determine the profitability of an account. For example, an O/R of 95 means that for every $1.00 in revenue the carrier is profitable by $0.05. A non-profitable O/R could be 110, which would mean that the carrier is losing $0.10 for every $1.00 in revenue.
Why is it that freight management often escapes C-level attention? Isn't cost reduction and enhancing profitability a C-level responsibility? Step 4 - Distribution of the RFP We've learned the critical importance of understanding your data and your process and have also learned how to construct the components of an RFP that will yield strong results. Now let's put those components together. A good RFP for LTL carrier procurement should include: - A comprehensive bid narrative. Describe the scope of your operations, how orders are communicated, how freight payment will work, your specific locations, carrier performance expectations, and details of your freight characteristics (average shipment size, freight class breakdown, packaging types,
There is a new solution today - In-Sourced Freight Management - and it's what you need to know to regain control over logistics. It is a team approach, a partnership, a collaboration. It's based on transparency and direct control over the carrier relationship. It's no hidden broker or 3PL mark-ups. It creates maximum value for your company and it's available today with Recon! This series explains what you can do to reduce freight. It's a roadmap to how brokers and 3PLs find ways to lower rates before they mark them up to you. So far we've learned the importance of knowing your data (step 1) and knowing your process (step 2). Now that you have your baseline and know where you are today, it's time to move into step 3 which is the RFP (Request for Proposal) process.
The LTL carriers are driving rates up at an alarming rate lately. Think this doesn't apply to you since your 85% discount has remained the same over the years? Think again. The new tactics carriers are using to raise pricing have to do with all the extra charges beyond the discounted base rate. Over the past year or so, LTL carriers have become increasingly militant at implementing price increases that are very difficult to address and resolve. Here are some of the new ways that LTL carriers are raising your rates without having to actually put in a price increase: Inspections and Re-Weighs. Carriers now employ workers whose sole job is to weigh and measure everything in order to increase shipment revenue. They are even compensated for what they find.
Step 1 of How to Reduce Freight Costs discussed the importance of gathering data and developing a deep understanding in order to determine your baseline. Step 2 will emphasize the process side of the equation so you can put the two together to move on to step 3. Let's jump right into it. Step 2 - KNOW YOUR PROCESS Now that you know your data - the details of your freight spend, characteristics of your freight, carriers, fuel surcharges, key metrics and so on - you need to know exactly how you are managing the process today. Start with the life of a customer order AND a purchase order. It is very important to understand how both outbound and inbound orders are managed! Too often these freight processes are separated and to reduce costs you must