Is Your Company Prepared for 10% to 15% Increases in Freight Costs? Understanding Changes in LTL Dimensional and Density Based Pricing and the Impact of ELDs.

8/23/2017

BY MIKE REGAN, CO-FOUNDER OF TRANZACT AND CHIEF OF RELATIONSHIP DEVELOPMENT

Based on experience, I know that for most CEOs and Presidents, reducing freight costs is an afterthought. I get it—there are far more important issues to attend to. Having said that, may I encourage you to do yourself a favor and pass the following information along to the person in your organization that has responsibility for managing your freight? They need to understand these two critical issues that could increase your company’s freight costs by as much as 10% to 15%.

Dimensional/Density-Based Pricing Affecting Minimum Charge Shipments

First, as we highlighted in a recent Two Minute Warning, ABF recently announced a significant change in their LTL Pricing Platform that could affect what you pay for Minimum Charge (MC) shipments. Basically, instead of just looking at the weight of the shipment, ABF will now look at the size (or dimensions) of MC Shipments freight to determine your freight charges. Based on conversations with other large LTL carriers we expect them to follow suit.

What does this mean? Well, for starters, your company could see a significant increase in the cost for your MC shipments. And for those of you who prepay and add freight to your customers’ invoices, unless you know the dimensions of your shipments (which most shippers don't) you may not know what the carriers are going to charge you at the time you invoice your customers.

Mandated Electronic Logging Devices

Second, on December 18, 2017, all motor carriers must have Electronic Logging Devices (ELDs) installed on their equipment. ELDs make it easier to enforce compliance with the Hours of Service requirements that some carriers may be skirting currently. Most industry analysts predict that we will see truckload capacity tighten as carriers currently running freight illegally leave the market. 

How much will this impact truckload rates? Well, when one of our customers recently called in a panic and mentioned that a consultant told their CEO that they could see their truckload rates go up by as much as 15% to 20%, we had to talk them off the ledge. But it is entirely plausible to look at a 10% to 15% increase in truckload rates based on an economy in recovery mode and the impact of ELD's.

If you or members of your team are looking for outstanding insights on the ELD issue or the trucking market in general, I strongly encourage you to check out this interview with my friend Derek Leathers, the CEO of Werner.

You may want to factor these issues into your transportation budgets for next year.

I welcome hearing your feedback. If you or members of your team have questions or comments please post them below or send us an email at [email protected].