Buying transportation is usually cheaper when your business is buying an entire truckload of space rather than part of a trailer or even parcels. ‘Less than truckload’ shipping (also known as LTL shipping) usually refers to palletised shipments that are too large for parcel carriers but which do not fill an entire truck. LTL consignments are typically packed on wrapped pallets or in large containers; carriers typically consolidate multiple customers freight together to get a full truckload. For carriers, splitting operating costs between multiple customers can be tricky; for this reason, LTL pricing is typically determined by base freight rates as well as accessorial fees. Accessorial fees are essentially charges that cover additional services which are required to deliver a consignment. They can add up quickly, so it’s important not to let them get out of hand.
An Introduction to LTL Pricing
LTL base freight rates are usually determined by a range of factors, including weight and size, route and distance, shipping speed and freight class. Heavier or bulkier shipments will occupy more space in the trailer and adversely affect fuel consumption, so pricing increases by weight and size. Longer distances are naturally more expensive to ship, although shorter distances along some routes with less competition may be more expensive than longer distances along another, popular route. Freight classes also matter; carriers tend to charge higher rates for fragile or dangerous goods. These are just some of the factors that affect freight costs.
Accessorial fees can often lead to unexpectedly higher transportation costs, particularly for merchants who do not frequently use LTL freight. Accessorial fees might include lift gate service fees, inside pickup/delivery fees and even fees for delivering to a residential area. Some accessorials, like residential delivery, are easy to plan for upfront (particularly if you use online inventory management software); unfortunately other add-on fees can unexpectedly increase the final charges on your bill of lading.
Failing to accurately fill out a bill of lading will typically result in administrative costs being charged. Although it stings for a merchant to have to pay additional fees for no added value, it’s worth remembering that listing incorrect weights or freight classes on a bill of lading will often make it difficult for carriers to load trucks, plan logistics and keep their operation running to schedule. If shipments are much heavier than stated in the bill of lading, or if fragile or dangerous goods are not correctly declared, carriers need to take these shipments out of transit while the bill of lading is updated and verified. To keep freight costs low for everyone, carriers need to charge for this added work. Fortunately, these are the easiest accessorials to avoid; make sure your staff know how to correctly fill out the bill of lading and you should avoid most of these charges. Using online inventory management software is a good way to keep track of all the information your staff will need to accurately complete the paperwork.
This type of LTL accessorial fee ensures that merchants bear additional delivery costs beyond simple line haulage, such as where a shipment must be delivered in a busy urban area or to a location with restricted access (such as a secure facility). These location-based deliveries are typically difficult to avoid as they’re essentially just the cost of doing business in a specific location. Another type of delivery accessorial is where a carrier must make several delivery attempts to complete delivery. This can occur when premises are empty, where a carrier is turned away or where a driver has to wait at the delivery location and insufficient time is left for delivery. A frequent issue is with facilities or residential deliveries where an appointment is required – if the bill of lading doesn’t specify a specific time, the driver will attempt delivery any time during business hours. With a little planning, redelivery fees can be avoided. Crucially, shippers should clarify delivery needs with customers, log this in online inventory management software and ensure these are set out on the bill of lading.
Some shippers bundle equipment charges into line haulage freight rates, although most charge for lift gates and pallet jacks as a separate accessorial. This means that carriers can keep rates low for customers who have loading docks or their own receiving equipment. This accessorial is difficult to avoid, particularly for smaller customers who may struggle to justify the cost of loading equipment when they can simply pay the accessorial fee. That said, merchants should make sure to accurately list their equipment needs on the bill of lading to ensure that a second delivery attempt (and the resulting accessorial fee) is not required.
Reducing shipping costs is one of the ways businesses can save money.
Freuqently use LTL freight? Print this handy infographic from our friends at Unyson so you’ll always remember to factor in LTL accessorial fees in your online inventory management!
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.