The 2:00 Minute Warning

This month, the LTL freight class changes proposed by the NMFTA became effective on July 19. These changes are being made to move towards density-based pricing for LTL shipments.
 
We have received several questions from customers and shippers asking how these changes will affect their LTL freight costs in the future. On an immediate basis (a.k.a. the next six months) the impact of these changes will be minimal because as we have predicted, many carriers plan to keep their freight classes the same until the end of their contracts with each shipper.
 
Candidly, while many shippers may not be prepared for managing these changes, it appears that several LTL carriers are also not prepared to put these changes into effect. For example, when FedEx Freight issued their 150 day "grace period" last week, it looked like they were doing a favor for shippers by giving them more time to adjust their internal processes in light of these changes.
 
But practically speaking, many LTL carriers confirmed to us that they were also not prepared to put these changes into effect. So FedEx did a favor for many LTL carriers by allowing other LTL carriers to play "follow the leader" and provide more time for everyone to implement these changes.
 
However, these changes will eventually be implemented. And when that happens shippers will see different pricing as a result for about 2000 different products included (covering approximately 70% of all LTL freight) in the changes that went into effect on July 19. If you’re not sure whether a certain product is included, you have two options. You can use a document created by the NMFTA called Docket 2025-1 to find out, or make life easy and call TranzAct and let us assist you.
 
Add it all up and when your next round of negotiations with your LTL carriers takes place, it will be more important than ever to understand how LTL pricing works. As many LTL carriers have told us, what a lot of shippers don’t understand is that LTL carriers are basically selling a seat on an asset, like a seat on a plane. The charge for that seat depends on several factors.
 
If you want to get the best possible rates from your carriers and even lower your costs, we recommend getting more familiar with those factors and finding any improvements that can be made for mutual benefit. One tool for getting to know these items and evaluating how well you’re working with LTL carriers is our Carrier Yield Test worksheet. If you'd like a copy of this worksheet, let us know. This is something you can ask your carriers to complete to basically get a report card on your relationship. Whether it’s freight coming in from suppliers or freight going out to your customers, it can help you understand how carriers see your business and has proven to be an exceptional tool in LTL sourcing events.
 
For example, one of the parameters that’s very important to carriers is how long it takes to get a truck into and out of your facilities. But it’s not just your facilities. It’s the facilities of your suppliers as well as your customers. How many people really have any idea how long it takes?
 
Another item to evaluate is the timing of communication. How far in advance do you let your carriers know what they should expect when their trucks pull up?
 
Additionally, it’s important to evaluate how you’re doing in terms of the commitments you made to the carriers with an RFP. If you’ve been issuing RFPs that vary largely from your actual freight, carriers have to build more variability into their pricing. Are you giving them the freight they expected?

There is a lot to understand and there can be unique factors for each company, so we encourage you to get in touch. We have a seasoned team that can provide valuable support if you’re going to put your freight out to bid. And once again, if you'd like a copy of the Carrier Yield Test let us know. To get in touch, give us a call at 630-833-0890 Ext 190, send me an email, or schedule a time to meet via Calendly. We typically will provide a fifteen to thirty minute consultation where we address key areas for your company.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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