Don't Detain Me! This Assessorial Charge Could Be a Big Deal For Shippers in 2019
Nov 7, 2018
Over the years I have given several talks that highlighted the relationship between airline versus motor carrier pricing patterns. In fact, I've often said that whether it is intentional or not, the airlines have demonstrated that carriers can charge fees for services that used to be considered part of your airline ticket. Twenty years ago, these fees were a blip on the radar screen. But in 2017, according to TravelMole, US airlines took in $57 billion, collecting what is known as “ancillary fees” for things like baggage, reservation changes, and on-board services like meals and movies, sales of frequent flier miles, etc...
So when we fast forward and project what shippers should expect to see from their motor carriers in the future, it's obvious: Carriers will increasingly be relying on accessorial charges to boost their revenues. We're already starting to see that happen.
And the one accessorial charge that we will be paying close attention to is detention. You can expect to see carriers—especially truckload carriers—get creative and aggressive in applying detention charges for shippers who tie up their drivers and equipment with excessive waiting periods. For example, we saw one good size carrier issue a contract that effectively eliminated the traditional dwell time period of two hours. When the shipper pushed back, the carrier "relented" and agreed to give them thirty minutes to get the truck unloaded and get their driver on their merry way. The message has been delivered: The era of “free time” in the delivery schedule is coming to an end—time’s up!
But it's not just truckload carriers that are focused on accessorial charges. Shippers know that for parcel shipments, both UPS and FedEx derive a significant source of revenue from their accessorial fee schedules. And if you're an LTL shipper, you may be seeing matrix-driven detention schedules that are based on the size of your shipment. You may also be seeing more surcharges for dimensional shipments.
That’s why we’re warning shippers: In 2019, pay attention to the accessorial fee schedules included in your carrier contracts—especially changes related to detention. Carriers are looking for ways to ensure that they’re compensated for every aspect of a delivery. If it means eliminating the two-hour dwell time period, they could be looking to charge for the exact time spent at a shipper's dock.
How can you protect yourself? First, Make sure you have complete and accurate data on your shipment activity. If you don't have complete data, good luck refuting a detention charge that comes from the carrier!
Second, get more engaged in taking control of the delivery schedule requirements for your suppliers and for your customers. For example, in our interview with Tracy Rosser, the SVP of Transportation and Supply Chain at Walmart, he explained about how the OTIF program helps them manage their operations more efficiently. If you haven't heard the interview yet, I encourage you to listen to it now.
And if you’re looking for other recommendations about what you can do to mitigate assessorial charges, we encourage you to give us a call or send us an email. We’re on your team, we’re here to help, and we’re passionate about seeing you be successful.