Part 7 of 22 Ways To Reduce LTL Costs That Don’t Involve A Price Reduction – Watch Your Accessorials!
- Watch Your Accessorials
Probably one of the most under-utilized yet most-effective way to reduce your LTL freight spend is to manage your accessorials. I run across examples literally every day where a small amount of vigilance can pay off with a large amount of unnecessary cost removal.
What is an accessorial? It basically amounts to a charge for any service outside of a normal pickup and delivery plus linehaul. Some accessorials like Inside Delivery or Sorting/Segregating are optional; they are requested by the customer. Other accessorials are compulsory; they are self-evident based upon the freight itself, the origin, and/or the destination. Think Residential Delivery, Hazardous shipment, or High Cost Delivery based upon zip code. And then there are accessorials designed to compensate the carrier for a mistake or error. These would include Redelivery, Reweigh, or Detention. When things work perfectly, these accessorials do not arise. These accessorials are not designed not just to compensate the carrier, but also to encourage the customer from eliminating these “services”.
A challenge with accessorials is that some can be considered discretionary in nature, or leave room for interpretation by both carrier and customer. Liftgate is an example. A shipper or consignee may not ask for a Liftgate Delivery, but the carrier may believe they have no option for delivering that bulky 75 pound BBQ grill without use of a Liftgate. Sure, the driver could manually pull the BBQ grill off the back of the truck and set it down on the curb. But would you want to do that, and risk straining your back?
Application of accessorials can negatively impact a shipper in several different ways:
- Not being aware of an assessment: If you don’t expect the accessorial to be applied, you probably are not passing that cost on to your customer. That means you are probably eating that cost. Audit your quotes against invoices to ensure you are properly including all applicable accessorials on the quote, and the BOL.
- Receiving an accessorial service you do not need: Are you requesting an accessorial service you do not need, or did not truly ask for? Do you really need that Guaranteed or Expedited delivery, or are you requesting this service due to internal delays that create emergencies? Are inadvertent notations with phone numbers and delivery dates auto-triggering services like appointments, notifications, or guaranteed/expedited deliveries?
- Being assessed an incorrect amount for an accessorial. Most accessorials are weight-based or shipment-based. Others may be computed from time, or piece count, or other factors. Pay close attention to piece count as it is common to mix up handling pieces with individual pieces. Or to list the sum of total pieces in the cartons. Think about a pallet of 24 cartons, each containing 30 items. If you require Sort/Seg, don’t list the piece count as 24 * 30 = 720 pieces or you may be in for a shock.
- Not eliminating accessorials you can prevent: You as a shipper should never be assessed for a reweigh, reclass, detention, reconsignment, or redelivery. When you are assessed, it is because of an internal error on your behalf. Don’t ask the carrier to waive these fees to eliminate your problem. Fix the root cause.
- Negotiate reduced charges where appropriate: Simply put, the accessorials published in carrier rules tariffs are designed, and expected, to be negotiated for the right situation. If you have a significant amount of Liftgate and/or Residential deliveries, you should be negotiating a fair charge that compensates the carrier while allowing you to properly model shipping costs for your customers who do or don’t require these services. If you have an extremely accurate bol such that reweighs and reclasses rarely happen, ask for a reduction to these charges based upon your high compliance.
- Keep an eye out for heavy hitters: Some accessorials are notorious for getting out of whack quickly based upon weight or time or piece count. A shipment that need storage for 2 days at $50/day may only cost you $100. But if storage goes to 30 days, that is a whopping $1,500 charge! If you know you need lengthy storage services, pre-negotiate. Services like Redelivery have a per-hundredweight charge but may not have a maximum charge. That $7.00/cwt fee may lead to a charge of $140 if you cause a Redelivery to happen on your 200-lb shipment. But if it is a 2,000 lb shipment, the $1,400 in Redelivery charges could dwarf the original cost. Keep any eye out for any accessorial that crosses a threshold of $500 or $1,000, and have a conversation with your carrier about any applications, quickly. Don’t wait for months after the fact.
- Select the right carriers for the services you require: LTL carriers are not all built the same. Yes, they all handle LTL freight. But the similarities often stop right there. Some are very good with grocery warehouses and will offer charges for services like Sort/Seg and Appointments that are appropriate for that business. Others abstain from such business, and price these fees accordingly to act as a deterrent. Same goes with Liftgate, Residential, Hazardous, and really any optional service. If you require an optional accessorial service, make sure you are routing that freight to carriers who truly wish to perform such services, and have the equipment. Be mindful of carriers whose liftgates are only on 48’ vans and that equipment may not be suitable for some of your customers.
Having a solid TMS is critical to managing your accessorial spend. Having a solid auditing process is also key. Those paying the freight bills must communicate with those generating the BOLs and running the quotes. Outliers and pockets of high spend must be researched and discussed. Take a closer look at your accessorial spend. That 5% cost reduction you think you need could right in front of you. Go get it!