AFS Exchange - June 2024

BREAKING NEWS

FASTEN YOUR SEATBELTS FOR MAJOR FREIGHT RECLASSIFICATIONS

If you like switching things up, you’ll love the latest from the National Motor Freight Traffic Association.?

On June 12, the organization announced that major changes to its National Motor Freight Classification would take effect in early 2025.

According to the NMFTA’s director of operations the changes will simplify the classification system by employing a standardized approach based on factors such as handling, density, stowability and liability so that users will be able to use and understand the NMFC more easily – and “classify freight accurately on the first try.”

The NMFTA added that it hopes the timing of the changes will “reduce any friction between carriers, shippers and 3PLs” – and that it would be hosting several listening sessions in August to help get the shipping community ready.

We’ll be covering the particulars of this announcement and providing more details about the specifics of these changes in upcoming newsletters and blogs, so stay tuned. Meanwhile, for more information about the listening session that will be most useful for you or your organization, go to: https://nmfta.org/newsroom-articles/major-nmfc-changes-to-take-effect-in-2025/

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STAT'S INCREDIBLE

TWO FUELISH REASONS WHY YOUR PARCEL PRICES ARE STILL INCREASING

Are you hot under the collar about parcel carriers’ continuing price increases? It’s probably not because of the weather. Check out these uncool findings about fuel surcharges – and their effect on parcel costs – from the latest release of the TD Cowen/AFS Freight Index.

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ASK AFS

WHEN – AND WHY – DID LTL ACCESSORIALS GET SO COMPLICATED?

Is it just me, or has staying on top of LTLs’ latest rules tariffs gotten a lot more challenging? Sometimes I feel like I need an abacus in order to keep up.

Unfortunately it’s not just you.

Once upon a time, most LTL carriers’ rules tariffs clocked in at a couple of pages. By contrast, today’s rules tariffs routinely exceed 70 pages, and some have become as long as 200 pages.

Is that because accessorial charges have become more complex or because LTL carriers have added so many new accessorials?

Both. Many LTLs have begun providing a greater level of detail about when shipments will trigger a particular accessorial and how that accessorial will be applied. However most LTLS have also introduced a lot of new accessorials – all while also significantly increasing charges for several existing ones. As a result, accessorials have gone from representing about 6% of LTL shippers’ total spend to about 8%.

That’s a big jump. What gives?

Part of it has to do with making each shipment pay its own way. In the past, carriers were willing to operate unprofitable lanes or carry less profitable freight because they knew it would be balanced out by the extra profit margin they were earning on more lucrative lanes and shipments. Such is not the case anymore.

Some of it also has to do with the fact that a growing number of LTL shipments are going to residential addresses or business locations that don’t have loading docks, which means their deliveries are more work-intensive (read: more expensive) for LTLs. These extra costs have to be covered somewhere, which is why these types of accessorial charges are becoming more common.

And part of it has to do with the fact that no carrier wants to be the one who is saddled with everyone’s more awkwardly sized, work-intensive freight. So if one LTL decides to add a new accessorial – or significantly increase an existing one – to discourage companies who send the former, most other LTLs will immediately follow suit in order to make sure the playing field stays level.?

We could go on. But you get the idea. Ultimately, today’s LTLs have become much more diligent about making sure each company bankrolls its own shipments, not someone else’s, and that the cost of each shipment more precisely reflects the time, effort and complexity associated with it.

Is there anything my company can do?

It depends on the accessorial.

A few, like detention accessorials, can be minimized by engaging in fewer of the inefficient behaviors that trigger them.

Others, like the surcharges for overlength shipments, might be avoidable by shipping your items as components in smaller-sized packages (possibly in more than one shipment) instead of sending them fully assembled. However some LTLs have begun getting wise to this tactic – and exercising their right to reinspect, reassess and reclassify some shipments in order to extract their pound of flesh another way.

But many accessorials, like limited access, are simply inevitable if your shipments and deliveries require more time, space or brainpower to execute.

Come on man! You can do better than that!

Well, you CAN make sure that each accessorial charge on your LTL invoices has been accurately assessed – and ensure that it’s been applied only once, bearing in mind that freight billing mistakes and misclassifications are not uncommon.

You also can avoid sticker shock by making sure that someone at your company or 3PL of choice is watching each carrier’s rules tariffs like a hawk. These rules can change on a dime and unless carriers are contractually obliged to do so, they won’t necessarily notify you about a new or different charge before the meter starts running.

Finally, if you’re a shipper with a lot of accessorial charges, you should consider negotiating lower or fewer of them instead of focusing solely on the linehaul rate – or work with a 3PL that has already succeeded in securing lower accessorial charges for its clients.?

We discuss these things and more in our new LTL white paper, which we encourage you to download today. Meanwhile if you have any additional questions, don’t hesitate to reach out to us at www.afs.net. We’ve been eating, sleeping and drinking these accessorial charges for years, and we’re always happy to talk shop.

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“Everyone wants predictability – even carriers. ?In fact, carriers in particular want to know what to expect. Unpleasant surprises cut both ways.” — ?JEFF TROMBLY, CLINICAL ASSISTANT PROFESSOR OF SUPPLY CHAIN MANAGEMENT, THE UNIVERSITY OF TENNESSEE