Improving Less Than Truckload (LTL) Decisions

Remember:

·         All freight is negotiable.

·         Carriers use high pricing and then discount heavily.

·         A low volume shipper generally receives a minimum 60-72% discount.

·         Larger shippers (1M+) should be in the 85-90% discount range.

Know your carriers and what motivates them to gain more of your business. N2TMS will aid you in providing data for your carrier to increase your discounting.

Develop a relationship with your carrier so you work to improve your discounts. Carriers are willing to improve their discounts if they can prove that the amount of business will warrant an increase in tariffs.

Carriers need to see shipments and usage by other carriers to increase their discounting for your company. Use the report from the N2TMS program to show carrier percentages.

Each year, carriers have a GRI (general rate increase) which is a percentage increase amongst all lanes which they service. In the last few years, this increase has been 6-8%. This is why negotiating discount increases throughout the year is imperative. 

Apply the effective date from your tariff to ensure you know when your tariff was last modified. Meetings should be set with carriers on a three month basis or sooner.

Understanding Tariffs

Tariffs are broken down into three parts:

By origination/destination

·         Outbound

·         Inbound

·         Third Party

In each part, discounts may also be applied using the two methods:

·         Weight Discounts – this is generally applied when you have a standard product which is easily handled.

·         State by State discounts: Choose the states that each discount applies. Many carriers are trending toward this method to secure regional areas and lessen the distance their drivers have to return within an area. It is broken into:

o   Interstate Discount

o   Intrastate Discount - Within home state (If applicable) discount

Classification Structures

Understand your class structures. If you are using several classes, it may be necessary build a classification sheet to have your classes and weights consolidated for the N2TMS system. This helps in ensuring that each person completing freight follows the same classification system for your company and ensures that all billing can easily and quickly verified using either NMFC (National Motor Freight Classification system) or reclassed items using FAKS (Freight of All Kinds).

Volume Quotes

Classes 150+ are generally volume quoted when the number of pallets is greater than 5.

Most carriers use 7,500 lbs as the break for which a volume quote should be applied. Some carriers can use lesser weights. Know what the minimum weight to call for volumes. This saves money.

Minimum Charges

Minimum Charges – AMC also known as Absolute Minimum Charge. The minimum amount a carrier will charge for a shipment. This may also apply to an accessorial charge called single shipment for shipments under 300 lbs.

Managing Accessorials

Accessorials are special needs applied to your freight to ensure shipping; these include but are not limited to notifications fees, marking and tagging, single shipments, sort and segregating, etc.

Waived Accessorials (Special Needs Rates) – shippers who have higher volume and recurring accessorials such as notification fees should have certain fess waived.

Negotiating Fuel Surcharges

With the rising price of Fuel, many carriers have applied FSC charts to compensate for changes in the price of diesel. Fuel surcharges can be used as a negotiable point when carriers are unable or unwilling to provide lower discounted rates.

Using N2TMS makes your decisions simpler by providing immediate pricing for all of your routes. Designed with shippers goals in mind of controlling their process and to maximize pricing strength while ensuring timeliness, quality of the carrier and keeping claims to a minimum.

Getting Better Freight Rates

Controlling Transportation Costs

If you are in the freight industry, you know that transportation has changed dramatically in the last twenty years. Shippers now realize that they must control their costs through analysis used to help them in the decision making process.

Companies now have the option to truly control transportation management. Most companies research and perform pricing on the basis of a percentage of sales associated with freight. But why not use true numbers? Using your own tariffs and using comparisons of all of your shippers as a basis for pricing. It is now possible for any sized company to truly manage their costs without a huge investment in Information Technology.

Most financial methods look at freight transportation as a fixed cost, and therefore apply constant financial measurements to apply to expenses. However, Freight has always been random, dynamically changing due to conditions, without regard to whether costs are too high or managing claims issues, brokers and 3 PL hidden costs. Many executives look at Freight as a service to sales, but not controllable.

Transportation Managers have always had to struggle with the different modes and control associated with the fundamental changes in freight, discounts, (regional, interregional, direct and indirect), negotiable and non negotiable accessorials, fuel surcharges, freight of all kinds and how to properly manage them. Some transportation departments call carriers all day trying to get the best pricing and spend enormous amounts of labor to achieve possible $100 in savings.

Brokers and 3 PLs use this confusion to “benchmark” pricing and receive large compensation for each of your shipments. They do this through the expense of auditing, but most billing has to be re-audited internally to insure true discounts is applied. Another expense which is not accounted for. But wait, didn’t you pay for this?

How about end of month control? Are you shipping heavier at the end of the month to ensure you are reaching budget? Is the control in place to get the pricing?

Finally there is a solution to truly control your transportation costs. N2TMS is a software company, designed with the shipper in mind. Control of the shipment begins at the shipper. The decision making process can be spread across the organization, ensuring consistency and low labor expense. Always choosing the lowest carrier based on a comparison of all of your carriers using your tariffs. The ranking is always provided based on least to highest for each shipment. Payables are lined up with spend to ensure freight expenses are in line with the cost side expectations.

Negotiations are enhanced with carriers to ensure shipping is easily tracked and decisions are made on analytics and not salesperson give-ways.

Isn’t it time to give your organization the control needed to know your freight and better handle your negotiations? Call N2TMS now, get a demo and find out how to truly control your freight costs.