Part 6 of 22 Ways To Reduce LTL Costs That Don’t Involve A Price Reduction: Reduce Carrier Risk
6. Reduce Carrier Risk
Risk: Possibility of loss or injury; something that creates or suggests a hazard.
We all face risk. We all face risk with the decisions that we make every day. If I stop for that sausage biscuit before work this morning, will I be late? Do I get gas at the next gas station I see, or wait until I find a station with a cheaper price for gas?
LTL carriers are no different. They face risk every time they make the decision to pick up your freight. Carriers do their best to control risk. They train their employees. They keep equipment in good condition. They capture and utilize data or making informed decisions. But they can only do so much. And for that risk which they cannot control, they must properly account for it within their pricing to ensure profitability.
Take damage claims for example. If you are new to an LTL carrier, they are not going to automatically assume you have zero risk for loss/damage claims. That would be foolish to assume. Instead, they will likely assume a cost, or risk, based upon averages across their freight mix. That average is what they will use when costing your freight, and ultimately determining your price.
But you can prove the carrier wrong and thereby reduce their risk. If you do a superb job packaging your cargo, and damage claims are incredibly low, they will use your history when costing your freight. This lowers the calculated cost of servicing your business as you have effectively lowered the carrier’s risk. This opens the door for you to benefit from reducing carrier risk. Conversely, if you have a high rate of damage, that increases risk and ultimately increases the price you pay.
This scenario plays out in many other ways. LTL carriers are going to account for risk in virtually every cost category they have. It is your job to show them there is minimal to no risk, that you and your freight is a solid investment so to speak. What are other ways you can reduce carrier risk such that you can benefit long-term?
Excessive time at pickup or delivery: This is a huge cost for carriers. Delays during a pickup or delivery limit the number of other pickups and deliveries that drive can make. These delays can ultimately lead to a pickup or delivery failure. Every been stuck in a drive-thru where the customer in front of you could not decide what they wanted? Show your carriers that you will get their drivers in and out quickly when servicing your freight.
Non-commercial locations: LTL carriers operate most efficiently when they can pick up and delivery at commercial facilities with docks. Non-commercial locations often do not have freight docks, thus requiring a liftgate. If you have freight going to such locations, such as residences, ensure the carriers you select want and are fully capable of handling this type of freight. And ensure you clearly note requirements on the BOL. Failing to advise that a liftgate is needed or a delivery is residential can lead to a delivery failure, and a shipment bringback. That is a huge cost to the carrier, so eliminate the risk.
Incorrect weights on the BOL: Inaccurate weights are a big risk for carriers as LTL pricing today is still largely computed from weight. Carriers invest significant time and money verifying shipper weights, so prove to them that your weights are accurate. This minimizes the administrative expense of managing your business and reduces both friction and risk for everyone involved.
No dims on BOL: The vast majority of LTL freight today is classified based upon density. To compute density, you must know your shipment weight and dimensions. All BOLs have a spot for weight, but not all provide a spot for dimensions. Make sure you are capturing this data, as without it you run the risk of an invoice surprise. And giving the carriers accurate dimensional data helps them ensure they can cost and price your freight accurately, thereby reducing their risk.
Incorrect or missing BOL information: Beyond weights and dimensions, ensure all other attributes on your BOL are correct. Include the full name and address of your consignee. Note all services required. Provide a proper description with NMF item-sub and class. Give the carrier all the information they need to properly bill your shipment.
FAK: Many shippers today still think that an FAK (Freight All Kinds) classification saves them money. It does not. An FAK, or really any form of class exception, amounts to risk to the carrier. Think about it. If you expect your favorite steakhouse to charge you the same price for a hamburger patty or a ribeye, what will their price be? Will they base their price on the cost of the hamburger patty? Carriers don’t want the risk of moving a high-cost shipment for low revenue. So don’t force that risk upon them.
Slow to pay: Carriers have to pay their bills and their employees just like everyone else. The last thing they want to do is not get paid or have to fight their customer to be paid. Don’t be that customer. Show the carrier that you expect them to be a carrier and not a bank.
Unidentified freight: LTL carriers handle tens of thousands of shipments per day. Stuff happens, and a pallet may get mis-routed on its journey. Properly labelling every pallet you give to a carrier ensures they can always identify your freight.
High Maintenance: Personal relationships are invaluable in LTL. While it is important for you and your carrier to stay in synch on important matters, limit the personal engagements, both phone and email, as much as possible for the mundane tasks. Use a quality TMS to eliminate track and trace phone calls, and reduce invoice surprises and disputes. Don’t be a high maintenance customer.
Communication: While it is important to not be perceived as high maintenance, it is equally important that you communicate. Any significant changes such as a sudden spike or drop in shipment count, or a change in freight mix, should be communicated. Your carrier is a partner, so stay in touch to eliminate any surprises and disruptions.
These are just a small number of the many ways that you the LTL shipper can reduce risk for your carriers. Can you think of any other suggestions I may have omitted?