Should your Palletized Freight Business Introduce Cube & Weigh Automation?

Big money revenue leakage as a result of customers’ mis-declaring the dimensions and weight of their parcels is a core challenge for express freight providers. However, the same also holds true – on an even bigger scale - for many shippers of palletised freight.  

At first glance it would seem that LCL (less than container load), LTL (less than truck load), and other palletised freight service providers should cube (measure the length, width, height) and weigh the freight items that they transport. After all, what they are selling is, essentially, finite space in trucks, trailers, planes, or other fixed areas and some how they need to ensure they are paid correctly for the space they sell.   

Many freight companies will tell you that they currently do perform this vital measurement task but perhaps not as well as they should. In many cases the methods being used reflect habits or procedures that are decades old, (eg waving a long stick), despite the fact that advanced cubing and weighing automation technologies are rapidly being taken up in many parts of the world.  

And the automation is not just about the actual cubing and weighing of freight. It is also about the automatic export in near real time of the data collected: the dimensions, weight, and identification- typically by bar-code number, of the freight item; and, last but not least, a digital image of the freight item with bar-code, date, time, weight and dimensions superimposed.

Most automated systems are plugged in to the user’s network and can also be accessed remotely for diagnosis or troubleshooting or deeper statistical analysis. And all of this automation eliminates any operator intervention in the measurement process, as well as creating a permanent digital record. So the benefits beyond just revenue recovery are many.

To Cube or not to Cube, the Seven Key Criteria. 

So, is the introduction of cubing and weighing automation right for your palletised freight business? It might be and depends on how you answer the questions below:

1.    If your pricing model means that you charge by the greater of the weight or cube according to a dim-weight formula.

2.    If you have existing practices in place for back-charging for under declared freight items.

3.    If you have a decent proportion of freight that is irregular or ugly in shape.

4.    If you are using bar-codes to identify freight items, in particular at item level.

5.    If you are an interstate carrier such that your pallet rates are of a reasonable sale value.

6.    If you have sufficient freight volumes. Even 150 unique items per depot of origin can be enough to justify investment.

7.    If you are willing or able to change your current processes to enable automation to work effectively. This pertains to both your cross-dock operations and your IT operations.

1. The Pricing Model -and the Million Dollars Left on the Table.

In most cases the charge invoiced to the shipper is usually based on a formula of 1m3 equals x-number of kilos (i.e. 250 or 333) at a particular price per kilo rate (i.e. 80 cents depending on distance); and increasingly today more and more freight is “cubing out” or being charged by the cube and not the dead weight.

Say you charge for non-contract LTL palletised freight at 1m3 = 250kgs. And as an example say the freight is going from Melbourne (MEL) GPO to Brisbane (BNE) GPO via road express.Let’s use the simple example of 100 cents per chargeable kg and a crate with these dimensions:

100 x 100 x 100 cms LWH = 1.00m3 = x 250 kgs = $250 + gst at a dimensional (dim) weight of 250kgs

But what if the actual measurements were: (I’ll leave gst out of the calculations)

110 x 115 x 120 cms LWH = 1.518m3 x 250 kgs – this would equate to a dim weight of 379 kgs and (x $1.00) the price for the same job would be $379 – a difference of + $129!

But that’s clearly a stand out example, (or is it?). And the actual price per kilo isn't the point for now it’s more about the concept.

Here is an example that is perhaps more interesting. Take a normal palletised item of freight that the sender did not measure accurately, not taking into account overhang and or an accurate height measurement. The declared dimensions are 120 x 120 x 120 cms LWH and both the dim-weight and the dead weight are 432 kgs - (1.2m x 1.2m x 1.2m = 1.728m3 x 250kg = 432kg). Price for this job is $432.

However, the actual dimensions according to the automatic pallet cuber are: 125 x 130 x 135 cms LWH – and the dead weight is still 432 kgs. Not such an unusual variation. 

But this now means that the dim weight is 548 kgs and the price for this theoretical job is now $548 instead of $432, or a difference of +$116! It would not have been that hard for this larger item to float under the radar and get invoiced at its declared dimensions either.

Clearly not all items will deliver these types of revenue increases. But some overall net averages are predictable. Averages of anywhere from $15/pallet to 15% per invoice are not unheard of. Remember, these are averages; some will be more, others less.

Based on this then, say you shift 400 items of palletised or oversize freight items or more per day. If on average you gained an extra $10 only per measured pallet that would equate to an extra $20,000 in revenue recovered per week. Averaged over 50 weeks per year that would be, wait for it…one million dollars.   

 2. Back Charging Business Rules are in place.

If you are already back charging customers amended invoice amounts for mis- or under-declarations, then introducing legal-for-trade methods that are actually approved by your country's regulator should not create any new complications.

However, in my experience, when customers do introduce these new technologies they also become more confident to send back charges because they can now prove their case beyond question:

“Mr Customer, is this your ugly freight - excuse me, I mean, your golf cart?” 

“Why, yes it is.” 

“Then, Sir, I am afraid the Cubing Machine has spoken. It has Cubed out.”

 Also, and here is another critical point: introducing automation gives you very precise metrics to better understand and manage customer behaviors. It gives you better, more fully informed options. There will be a range of dilemmas for many stakeholders in the business to grapple with including sales reps who do not wish to rock the customer boat. But these are better problems to have than grappling with the uncertainties that would otherwise be present.

3. “No Such Thing as Ugly Freight, Just Ugly Rates.”

I didn't coin the term but it’s a well-known phrase in the industry. And, if you have cubing automation in place this former truism will no longer apply to you!  Many companies shy away from ugly freight because they simply do not have best-practice procedures or technologies in place to manage the difficulties that irregular shaped items present.    

Many people also do not know that the only way that you can legally charge for the dimensional weight of an irregular shaped item is through the use of an NMI verified instrument, each of which, presently, incorporates some type of laser scanning technology.

A ‘dimensional weight’ value is a calculated value deemed to be a weight value obtained by applying a conversion factor to the object’s volume as calculated from the measured dimensions.

4. Got Item Level Bar-codes? Got Consignment Level Bar-codes?

It is not enough to just cube an item, or just weigh it, or even to cube and weigh it. Yes, you must do these tasks but you must also tie the dimensions to a unique identifier for the freight item – usually the bar-code on the connote label.

The task of automating the whole process of dimensioning freight is made much easier if the item has a unique item-level bar-code. Some companies spend years getting their customers to adopt new labelling procedures and to buy-in to this mutually beneficial exercise in improved custody.

But if you can get there it will definitely help pave the way to taking full advantage of item-level automation, in particular for dimensioning and weighing.

Consignment level bar-codes are okay too, automation is still possible and highly effective, especially if there is a piece count identifier in the bar-code. If you have this level of bar-coding in place it may very well be worth pursuing dimensioning and weighing automation.

5. The longer the haul, the higher the kilo rate. Sort of.

This section doesn't require too much elaboration and should be self-evident. It does and should cost more to send a pallet from Melbourne to Broome or Darwin than from Melbourne to Adelaide, although supply and demand for space on some return routes is also a pricing factor. Still, in other words, the higher the invoice value of an average pallet load the more revenue you might be leaking from under declared items.

This means that it might require lower actual pallet volumes to get a satisfactory ROI. This may apply in particular to traditional non-express carriers who travel long distances and who typically charge less per kilo than their famous-brand express counterparts.      

6. Have you got sufficient pallet volumes?

It might come as a surprise but an investment in automated dimensioning and weighing technology can be justified on relatively low freight volumes.

Related to item 5 above, much will depend on your average cost per kilo and average pallet prices. It really is a numbers game. An average increase of even $10 per pallet on volumes of 150 items per day (ie 750 pallets per week) will add up to $375,000 over a 50 week year. However, are you willing and able to amend your processes to achieve these outcomes?

7. Ask yourself: Are you willing to change the way you operate?

So, now that we've addressed the above challenges and have established that introducing automated dimensioning and weighing might be a good idea, there’s a catch. When it comes to cubing and weighing pallets for revenue assurance purposes there is no single perfect solution. Palletised cargo is by definition big and bulky, and ugly palletised freight is, well, particularly ugly. To automatically dimension or cube this type of freight you must be prepared to accept some compromises at least.

As with all pallet cubing methods the challenge is striking the right balance between maximising throughput of pallets in the depot and maximising revenue recovery. Time waits for no man – and neither do the planes or idling B-Doubles.

Introducing new technologies or processes into a busy and time sensitive environment will always require careful planning and patient managers and operations staff. This is a critical point. As with any type of change there can be push back from those persons who may be set in their ways and do not want to change.

But the pay-off can be huge and the ROI on the right new technology can be surprisingly quick. For this reason someone with real authority in the depot and the organisation may (will) need to champion the transition. If this is you, then this is your chance to be a hero. You can do it!

Essentially, at the moment, there is really only one process that can fully automatically weigh, cube, and identify palletised freight – using a driven conveyor with automatic bar-code scanning, weighing, and cubing technologies integrated into an intelligent, automated, moving line. But this requires significant space, capital investment, and forward planning and although in theory highly productive it still may not be the ideal solution for many applications.

But it may not be necessary to try and Dimension Weigh Scan every item of palletised freight in the cross dock if you have very high volumes, say, up to or over 1,000 pallets per shift.

Auditing makes sense too.

Just as with parcel freight, it would be ideal to be able to cube and weigh every item that is transported. But the very nature of pallet material flows, truck and forklift movements, and other variables can make this a seemingly impossible task for those companies with high volumes.

But do not despair. Rather than try to dimension everything that passes through the cross dock many companies use automated pallet cubing more as a complete freight verification station to selectively audit customers’ freight. Here, the digital image files can come in very handy when assessing and reviewing client declaration and packing behaviours.

By isolating, each week, different key accounts for further review it will be possible to create a detailed record of client declarations versus the actual, legal-for-trade dimensions as determined by the cubing machine. Armed with this critical information it will be possible to make informed decisions about how to treat these behaviours. 

In other words it may be possible to pick up your extra one million dollars through the front door by negotiating with clients and adjusting rates based on known verifiable facts and statistics, rather than through the back door via back charging for amended declarations. 

Mark. Set. Cube!