Finding the right carrier for a less-than-truckload transactional deal is a bit like Prince Charming looking for Cinderella. The glass slipper must fit, and it helps if she has another slipper in her pocket. In the case of transactional LTL shipments, that means finding the right combination of rates, reliability, geographic coverage and services. When the combination seems right, a shipper may try a few transactional arrangements, like dates in a courtship, before deciding to “go steady” with a longer-term contract or end the relationship and find a more compatible carrier. 

 “Very few carriers are geared to service the small to mid-sized business shipper,” notes Ed Conaway, Executive Vice President of Sales for Con-way Freight. Among those who do—and Con-way is among them—shippers must focus on more than rates and coverage.

 “Choosing a carrier based solely on the lowest Freight All Kinds (F.A.K.) discount on frozen rates and a coverage map are old school and passé,” opines Carey Treadwell. Instead, her experiences as a shipper managing millions of dollars in spending with common carriers, and now as director of global business for Mallory Alexander International Logistics, indicates that “maybe a faster transit at a premium will lead to enhanced time to market,” which drives a quantifiable, sustainable, competitive advantage over the next nearest competitor. Shipping—even LTL—has become a strategic advantage with enterprise-wide considerations.

The first point to address for on-the-fly transactions is, “who can do the job?” Much of the answer depends upon where you are geographically and who can provide on-demand pickup, notes Pete Stiles, Vice President of Marketing and Strategy at Lean Logistics.

Savvy shippers should investigate a mix of small regional carriers as well as large national shippers to develop a mix of capabilities that fits their own situation. Ensure that the size and scope of a carrier’s operations fit your needs. The ability to make one call and meet service needs throughout the region or the nation can simplify operations, providing they also meet the other requirements of reliability, fast transit times and good service. But shippers may also find they need several small regional shippers and a national carrier for long-haul shipments, and it may be more economical, too, especially when geographic depth of coverage is needed.

How do you decide? “The carrier should be able to provide the shipper with a distinctive, city-specific coverage map that shows the carrier’s coverage area for one-, two- and three-day service from that location,” Conaway advises.

Overall costs

Competitive rates are the first thing most shippers mention when describing the perfect LTL. But, there are many different tariffs, including the carriers’ own ‘tsar,’ SMC3 and others. To effectively compare rates, shippers must work from a standard tariff schedule. “At Pep Boys, we used the Yellow Freight tariff because everybody had visibility to it,” notes David Schneider, former transportation manager for Pep Boys, now president of David K. Schneider Consulting, LLC. Fuel surcharges are an issue, he notes, but negotiating a low fuel surcharge is less important than negotiating an overall good rate.

If shippers have the time, they should put transactional shipments out to bid. Close-out retailer BigLots, headquartered in Columbus, Ohio, cut its LTL rates nearly 25 percent from previous rates when Unyson Logistics conducted a procurement bid event.

The first step in comparing bids is to get all the RFPs off the same tariff schedule so shippers can make accurate comparisons. “Anybody can get a 50 percent discount,” one shipper notes, and carriers often offer 60, 70 or even 80 percent off 2008 tariffs. Using an older tariff, 1996, for example, yields a lower discount, but compensates with other factors that may result in lower overall rates. Consequently, the tariff’s year is unimportant, because the primary difference between years is the level of discount. 

Putting the information on a spreadsheet allows for easy comparisons (and serves as a guide for the occasions when there isn’t time to bid a shipment). Include discounts and fuel surcharges to 30 of your most common destinations, recommends Ted Barton, who managed LTL freight for 35 years for Fortune 500 companies and now owns the Freight Management Group SE. Also include data for any other services that are important to you. “That will give you a very good feel for what carriers, going to which lanes, will work best for you,” he explains.

It’s also worthwhile comparing truckload and LTL rates. Shippers sometimes find surprising variances that can result in savings of time and/or money. For example, although a LTL shipment with multiple stops is considered more cost effective, a noted southeastern shipper revamped its operations to the point that its rates for truckload shipments are lower than most companies’ multiple-stop LTL, David Schneider reports.

Another step, Barton says, is to analyze your freight. “Do you ship a large percentage of low density items or a multitude of many different classes? Will your carriers consider a ‘freight all kinds’ rate for all or part of the shipments? Do you ship a large percentage of ’minimum floor’ shipments? What are the floors of your carriers?” Knowing these subtleties can help you maximize savings and service.

Consolidating shipments is another strategy. In some cases, customers can be encouraged to order larger shipments less frequently and thus reduce overall shipping costs. This is a particularly strong strategy to advocate to international customers while the dollar is low, but it makes sense even without the “exchange rate price break.”

Good forecasting capabilities make it easier to effectively consolidate freight, one North American concrete form manufacturer emphasizes. By knowing when spikes in orders and, therefore, shipments are likely, shippers can improve their planning for routine shipments as well as those resulting from increases. And, by giving carriers more notice to plan for impending shipments, they may get better rates or better service.

Companies may find that shipping at near the LTL maximum weight can result in savings of 20 to 25 percent off straight tariffs. Likewise, adjusting the minimum weight also had advantages. In David Schneider’s days with Pep Boys, he recalls, “we changed our minimum weight from 500 pounds to 200 pounds, which cut the minimal cost from $180 to $78.” That made sense for inbound freight, which typically came from small shippers, he explains.

It’s also worth checking among carriers to determine their minimal LTL weights and pricing. The differences may be significant. What is considered LTL varies according to carrier. As Barton points out, “Most common carriers allow the maximum linear feet of the shipment to be somewhere between 12 and 20 feet, and for 12,000 to 20,000 pounds to be considered as an LTL shipment.” Knowing where companies draw the line helps shippers better match their shipments to the carrier.

Another criteria, Barton says, is the extent to which carriers are willing to work with shippers to establish correct and fair classifications for freight. That is best determined by experience and by the carrier’s reputation. “Freight bills coming in three weeks later that have been adjusted by a carrier’s weighing and research department are difficult to correct,” he points out, and any discrepancies “often are difficult to collect from your customer if you have made a prepaid shipment.” Therefore, ascertain such details beforehand.

Although costs are certainly important, shippers are quick to point out that costs are only one factor in the shipping decision. Often, they’re not even the most important. Some additional, important aspects to consider include reliability, transit times, geographic coverage, delivery accessorials, driver know-how and cost of claims from damages. The bottom line: reliability matters.

Service

At Pep Boys, Schneider recalls, small shippers who “were shipping to us using the carrier’s standard tariffs were often getting killed in accessorial charges.” He sees that in his consulting business, too. The solution is to first determine which special services you really need. For example, inside delivery, lift gates, COD shipments, or hazmat handling all increase the cost of shipments. After you decide what you need, determine what services your carrier can provide and its service standards.

In comparing service standards, understand that carriers may not define their terms the same way. “Overnight” for example may mean delivery by 10 a.m. to one carrier and 5 p.m. to another—or worse. Know how each carrier defines the terms used to describe its services.

The next step is to very carefully delineate what is or is not an accessorial charge with a given company. Carriers often are willing to negotiate the rates on these services, particularly if doing so may help them get more of your business. Note that negotiations for an on-the-fly shipment rarely will result in terms as favorable as those possible when negotiating for a longer-term contract.

Another point, Schneider emphasizes, is to ensure that expected services are actually provided. Schneider notes that although the carrier may offer specific services, local managers didn’t necessarily provide them, leaving the shipper holding the bag. So, researching a carrier should also include research on the local operation.

 “You have to monitor service levels over time,” Stiles insists. “Software won’t detect service levels.”

Reliability

Cost is irrelevant if the carrier is unreliable, emphasizes Dan Weingart, president and CEO of the Alisam Group. “I come from the customer side of the industry,” he prefaces. And, as a shipper, “We had an issue with a freight company that was extremely unreliable, but also very cheap. We never knew if the shipment would make it.” That escalated the overall cost because problem resolution often took nine or ten hours, and detracted from the shipper’s image.

Shippers can minimize the risk of finding themselves in that situation by pre-qualifying potential carriers. “Get referrals and check their credit worthiness,” Weingart recommends. The TIAnet.org “Watchdog” system tracks carriers’ performance, and load matching services have similar information.

Checking credit worthiness is another subtlety that tracks back to service and reliability. If the company can’t pay its drivers, the turnover rate is very high. Therefore, the caliber of driver tends to be lower, which affects reliability as well as the quality of service. And, for outbound freight, the driver becomes the face of your company during that last mile. The carrier’s assets also are a factor in this assessment, as a company with physical assets has made a tangible commitment to its continued existence while a virtual company has less financial exposure that may sometimes also indicate less commitment.

While you’re researching carriers’ financial positions, also look at their claims ratios and, importantly, their reputations for prompt payment of claims. Experienced shippers advise researching carriers’ claims adjustment process upfront, before it is needed.  Such details as whether there is a designated person or department to adjust claims and the details of how they actually are handled can make a difference in terms of speed of service and overall satisfaction.

Real-time capabilities

Online capabilities seem ubiquitous, but the depth and breadth of electronic services vary considerably, particularly in terms of how the information is made available throughout the carrier’s own operations. For example, the ability to generate real-time electronic bills of lading, track and trace shipments and see proof of delivery may be available, but other operations, like accessing freight bill payments and generating reports in real-time may not be available. Determine which online capabilities are important to your operations—and to your customers—before choosing a carrier. Some of these features, like online procurement, can save considerable management time by allowing companies to download pricing directly into their applications for faster comparisons, and increase accuracy by eliminating the need to re-enter data.

Morphing to longer-term contracts

The concept of a business being too small to consider a contract with one or more carriers is dissipating as carriers evolve to handle all types of services volume, Stiles says. Conaway, for example, advises shippers to enter into a longer-term contract when they have enough volume to benefit from customized pricing or for products with unique characteristics. Routine shipments, he says, don’t really need longer-term contracts. That, however, varies according to carrier.

When shipments grow to the point that shippers begin to contemplate formalizing relationships with carriers through longer term contracts, they may find it beneficial—especially at first—to work through a third-party logistics provider (3PL). The great benefit is that 3PLs do the pre-qualifying work of monitoring performance and services and tracking rates that otherwise would fall to the shipper, and tend to get very good rates based on their aggregate volume.

That’s the solution KC Flip Books employs. The benefits go beyond cost, according to owner Linda Munch. Her broker “…gets me really good rates, but more importantly, they monitor the shipments. It saves me a great deal of time and aggravation,” she says.

In the experience of Big Lots!, working with 3PL Unyson Logistics resulted in inbound of savings of more than 30 percent. Those savings came not only from the LTL bidding process, but through transportation management techniques. Unyson optimized LTL shipments using intermodal transportation as well as straight trucking, and worked through consolidation centers to further optimize logistics, according to Unyson’s case study.

Although 3PLs offer a streamlined approach to managing transportation logistics, negotiating directly with a carrier has certain advantages, too. One shipper, speaking off the record, advises logistics managers to search the Internet for a standard contract. “Have the legal department review it.” Then, he says, send that contract to the relevant carriers and shop the price.

Rates and services are more negotiable than most people realize, particularly as volume increases. “Carriers are often very creative,” Stiles says. For high value shipments, for example, Stiles says he’s seen carriers take over the management of LTL shipments from the customer. Other services also may be available. The key is to know what you, as a shipper, want. wt



Contributing Editor Gail Dutton writes frequently about logistics subjects.