This commentary was written by Don Newell, principal and consultant of Newell Enterprises LLC, and Scooter Sayers, principal of Sayers Logistics. They have a combined 75 years of experience in the LTL industry as practitioners and consultants. The views expressed here are solely those of the authors and do not necessarily represent the views of FreightWaves or its affiliates.
By Don Newell and Scooter Sayers
What is wrong with LTL? Some would respond by saying, “What isn’t wrong with LTL?”
Many LTL shippers don’t trust their carriers. Many LTL carriers don’t trust their shippers. Why the mutual distrust? It has something to do with the complexity of LTL transactions, which make it hard to decipher the cost of shipping from point X to point Y.
Shippers use the bill of lading to advise the carrier on product type and quantity, origin and destination, and what services are requested. However, it is all too common for shippers and carriers to disagree after the fact about what and how much was shipped. This leads to a myriad of problems for the shipper. These include surprise charges that can’t be passed on to customers, administrative headaches and complicated payment reconciliations.
For the carrier, it means hiring and training a staff to inspect and correct freight bills, and purchasing equipment to enable the staff to do its work. There will be delayed payments and unwanted friction with customers. Inaccurate or missing data means an operation that’s based on guesses rather than facts.
This is a problem that has plagued the industry for decades. Before trucking deregulation in 1980, pricing was clean and straightforward. What’s more, the industry had tariff experts who knew pricing structures inside and out. Post-deregulation, everything changed. Suddenly there were discounts and class exceptions, and the opaque Freight All Kinds (FAK) rate formula. Different rate bases, discounts and exceptions emerged. By the start of the 21st century, shippers didn’t know how to determine the rates for their shipments. Meanwhile, the tariff experts had all but disappeared.
Third-party logistics (3PL) providers have tried to fill the void. Some are good, some are not so good. That leaves shippers in the same boat regarding their carriers and the issue of trust.
The four-part pledge
In LTL, the idea of partnerships is, for the most part, given lip service. It doesn’t have to be this way. We propose the creation of a four-point mutual pledge we believe will go a long way toward bridging the lack of trust that continues to fester in the industry. Such a pledge must include all or most of the following:
- Shippers pledge to provide accurate handling unit dimensions, weights, descriptions, package types, counts and service requirements on the BOL.
- Carriers pledge to honor the shippers’ submissions of handling unit dimensions and weights, allowing an appropriate (maybe 5%) tolerance to allow for negligible corrections.
- Shippers pledge to utilize an electronic bill of lading based on industry standards.
- Carriers pledge to issue a single invoice containing all charges, including special services requested and/or provided.
Think of the massive amount of friction, inefficiency and overhead expense that could be removed from the equation. Think of the sense of partnership such a pledge can yield. The trust, transparency and visibility benefits could be huge.
It is critical that shippers be seen as a “Shipper of Choice” by their LTL providers. What better way to accomplish that than to give the carriers exactly what they want and need, namely an accurate and comprehensive electronic BOL. This is definitely a case of shippers helping the carriers, which then help the shipper.
The future of LTL pricing will be based on accurate calculations of a shipment’s density. This makes the early capture of shipment dimensions so critical. It does not help the shipper for a carrier to identify dimensional or classification errors and fix them after pickup. By then, the shipper has already obtained a freight quote and has invoiced the customer. The shipment profile information needs to be fully transparent for shipper and carrier at the time of pickup.
Some shippers may not have a way to accurately weigh and measure their freight. There are many options out there that will perform both options. Carrier partners can help with that. Shippers may also feel they lack the means to provide an electronic bill of lading. Again, there are many options, some of which can be provided by the carriers themselves. Some of these options are even free to the shippers.
LTL carriers may worry about a loss of revenue. Done right, this pledge can be monitored and audited to hold shippers accountable for submitting accurate information. Carriers also benefit from more-precise cost application at the shipment level.
Shippers want predictable costs and no surprises. Making density- and profile-based pricing a reality requires that shippers know exactly what they are shipping and how much. Shippers need to know their freight’s commodity descriptions, weights and dimensions. They need to provide accurate information to the carriers. The payoff is that shippers would know precisely what their freight charges are before the shipment hits the road.
About the authors
Don Newell started his LTL career in 1976 as a dock supervisor for the then-Roadway Express. He spent 28 years at Roadway, and became one of the industry’s leading experts on freight classification, packaging, and weighing and research. In 2004, Newell joined the National Motor Freight Classification Association (NMFTA), long considered the LTL industry’s premier pricing and classification group, as its weighing and research specialist. In 2018, Newell opened a consulting firm.
Scooter Sayers started his LTL career in 1991 as a pricing analyst for ABF Freight. Two years later, Sayers developed the LTL industry’s first density-based tariff. He spent 25 years at ABF and its parent, ArcBest Corp. (NASDAQ:ARCB). After leaving ABF, Sayers spent three years with several companies in the third-party logistics and freight brokerage segments.