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I previously discussed 5 Factors That Determine LTL Freight Rates. These factors are extremely important because if you don’t have this knowledge, it could lead to a 15-40% increase in your freight charges! Fortunately for you, these costs are absolutely avoidable.
Here are 5 More Factors That Determine LTL Freight Rates.
- Freight All Kinds (FAK)
- Freight All Kinds (FAK) is an arrangement between the client and the carrier that enables multiple products with different classes to be shipped and billed at the same freight class. For example, a client that ships multiple commodities ranging from 50 to 100 could negotiate a FAK with the carrier to rate all items at class 70. This can be a source of significant savings for customers by reducing the amount paid on higher class shipments.
- The pricing within LTL freight rates that’s increasing the fastest with LTL carriers is the absolute minimum charge (AMC). This minimum charge is the charge below which a carrier simply will not go. Carriers are constantly requesting a 2-3% increase on contract rates, but 5% increases in the minimum charge. If the minimum charge is $70.00, a $5 increase equates to a 7.1% increase. Carriers are doing this because the costs a carrier experiences for a minimum charge shipment far exceeds the costs they experience for heavier shipments.
- Negotiated Rate Tariffs With LTL Carriers
- You can negotiate with several LTL carriers per your various lanes of shipping. You’re not simply relegated to a base rate. If you have analyzed and better understand your freight data and activity per lane, you can come to the LTL carrier and work with them to get different tariffs for different lanes. This allows you to make sure you’re not leaving money on the table by balancing your more unattractive lanes with your attractive lanes giving you overall better LTL freight rates.
- Negotiated Discounts
- For companies looking for relief from high shipping costs and market volatility, a professional, third party logistics (3PL) provider or even a large shipper can save an extra 18 to 25% off already heavily discounted LTL freight rates if they routinely make multiple shipments to multiple locations and work with numerous freight carriers. For every $100,000 in freight costs, that’s an extra $18,000 to $25,000 in savings. How can a 3PL lower freight costs beyond a company’s existing discounts? By negotiating additional discounts based on the 3PL’s or shipper’s relationship, reputation, and volume business with established carriers.
- Accessorials / Surcharges
- Accessorial charges stem from extra services performed by the carrier that goes beyond the typical dock to dock / business to business pick up and deliveries. Common examples of these charges are lift gate service, residential pickup or delivery, limited access locations (i.e. jails, prisons, churches, schools, storage units) and inside delivery. Accessorial charges can be negotiated to a flat rate or even waived altogether. A fuel surcharge is the most common accessorial as it’s typically factored in on every shipment.