2018 has been an extremely challenging year for shippers. We’ve covered the capacity crisis in great length on this site here, here , and especially here , and in this article we continue our series on LTL Freight. Note that you can listen to this article here.
As shippers scramble for bargains in a market with few to find we’re always trying to answer questions about how we can better help our clients lower costs. When it comes to LTL freight that is easier said than done. That’s because the rules that apply to other forms of transportation don’t necessarily apply to LTL freight.
What are accessorials?
Let me explain, when you have a full truckload shipment, that freight is typically picked up by one truck, hauled by one driver, and delivered to one location. Whereas with LTL freight, that same shipment would likely be moved by multiple trucks and handled by several drivers before ultimately being consolidated with other loads that are headed in the same general location as your freight.
Since LTL shipments of all shapes and sizes are comingled into one trailer with freight from multiple consignees that is headed to a handful of different destinations, an LTL Carrier is unlikely to be dealing with the same conditions at each delivery point. To account for that, LTL carriers use accessorial charges.
Accessorial charges are fees that are applied to shipments when additional services are required to handle the cargo. In many cases accessorial charges will be added after the fact as the carrier was unaware of whatever specialized delivery requirements the shipper may have had. Due to this, they can be incredibly difficult for some shippers to factor in to their transportation budgets. However, nearly all accessorial charges can be predicted in advance so long as the shipper has some awareness of what their freight is and where it is going to. Although most can’t be prevented, many can be mitigated, negotiated, and prepared for.
How do accessorials work?
Here’s how accessorial fees work: When a shipper has a load, they’ll go out to the market and get a variety of quotes on the move. If they don’t note any special conditions they’ll receive a base rate quote. This quote assumes that the shipper is moving the exact freight that they described, that freight will be available for pick-up when the driver arrives, it will be delivered to a location with a proper dock, and it will be unloaded without delay. Under these ideal conditions a shipper is unlikely to see anything more than a fuel service charge (FSC) on their bill.
Unfortunately, many LTL shipments are not as straight forward as what the base quote assumes. For example, say you must send a pallet of goods to a trade show in Manhattan that is on the third floor of an event center. Your base quote could be $500 but then you may be subject to all of the following accessorial charges which are based on a major LTL carrier’s list of fees:
Exhibition or Trade Show Shipments (Minimum fee $35)
Positions not immediately adjacent to vehicle
– Street level delivery (Minimum $110)
– Service to each additional floor above street level (Minimum $14)
Liftgate (Minimum $85)
Total = $500 (base rate) + $244 (accessorials) = $744
As you can see in the above example, accessorial fees have raised the base quote by almost 50%!
While that may be an oddly specific example, let’s take a look at something a shipper is likely to see every day. The liftgate charge.
A liftgate charge is applied whenever a shipper doesn’t have a proper dock to load and unload freight. However, since liftgates are specialized equipment and not standard on all trucks, it is up to the shipper to alert the carrier that they’ll require one. If the truck arrives and there is no dock nor is the truck equipped with a liftgate then the shipper will not just be charged a liftgate fee, but the shipment will have to be redelivered by a truck that does have a liftgate. That shipment would then also be charged with a redelivery fee. Those can range anywhere from $85 to over $900 per shipment. As you can see, it is vitally important that you notify your carrier about the need for a liftgate.
Here’s where it gets complicated. Not all carriers charge the same amount for accessorials, even for common charges like liftgates. Some may charge minimums and maximums based on weight while others use flat rates.
Take this real-world example for instance: A shipper has a 3,000 lb shipment that’s headed from Staten Island, NY to Hartford, CT. The receiving facility in Hartford does not have a dock so the shipper needs a carrier with a liftgate.
Carrier 1 base rate: $2,750
Liftgate $4.85/100 lbs = $145.50
Total = $2895.50
Carrier 2 $2,775
Liftgate flat fee = $85
Total = $2860
Carrier 3 $2675
Liftgate flat fee = $350
Total = $3025
Depending on the carrier that this shipper selects, their rate could increase by anywhere from $85 to $350. Therefore, it is of utmost importance to not just review base quotes when booking LTL shipments but to also only consider the bottom line when determining your true cost. That $100 in savings that you thought you were getting with carrier 3 is actually a $165 loss compared to other options. A savvy transportation manager working with a freight managed solution provider like Aborn & Co. would be able to make the distinction between these rates while providing access to services with the lowest total cost.
What you should know about every shipment
Liftgates are just one of a laundry list of accessorial charges. Below is a checklist of basic information that every transportation manager should know about each LTL shipment.
– Total weight of the shipment
– How many pallets there are and are they stackable
– The dimensions of each pallet (L x W x H)
– The origin & delivery addresses and zip codes
– What you are shipping, how it is packaged, and if any goods are over length
– The freight class (your LTL carrier can help with this)
– Any special conditions, needs, equipment (e.g. liftgate if you don’t have a receiving dock)
– Accessorials that have applied in the past (if delivery conditions are the same then you’ll likely be subject to the same fee)
You can download a handy version of this checklist here
Base rates are the door busters of the freight world. The whole point is to lure in shippers who aren’t taking the time to do the math. Quiz your transportation manager on this checklist. If they can’t answer the above questions, there is a very good chance that they may have no idea what your company will end up paying for any given shipment. If they have no idea what the final cost would be then how can they make an educated decision on which carrier to choose?
Since each carrier has their own set of accessorials it behooves the shipper to refer to their tariff with each individual trucking company. That said, accessorials can typically be broken down into one of three basic categories.
Administrative – This can cover anything from errors and omissions on a bill of lading to improper weighing of freight. Some common mistakes that shippers make are not letting the carrier know that pick up and delivery appointments need to be made, inaccurate piece or pallet counts, and/or incorrect weight, class, or National Motor Freight Classification (NMFC.)
Equipment – Lift gates, fork lifts, pallet jacks, dry ice, additional packaging materials, temperature control units, etc. All these specialized pieces of equipment may come with a fee. Not having the equipment can lead to delivery delays, loads that are turned down, as well as other time and cost factors.
Delivery – This is where charges can really add up. The most common delivery charge is also usually the most avoidable. That’s the redelivery fee. This occurs when the consignee requires a delivery appointment, however this hadn’t been noted on the bill of lading, so the carrier must now redeliver the freight. Redelivery can also happen when the right equipment isn’t on-hand for loading and unloading. Excessive delays and difficult deliveries also come with their own set of charges and penalties. Time is money for LTL carriers and when a shipper cuts into it, that shipper is usually the one paying the bill.
How to avoid, control, and save on accessorials
The bad news is that some accessorials are just the cost of doing business in the LTL world. The good news is that they shouldn’t be too hard to negotiate, mitigate, and budget for so long as you are aware of what it is that you’re shipping. If you understand your freight than it makes it much easier to negotiate away the bulk of these charges when you’re putting your carrier contracts out to bid. The more you can tell your carrier about your freight, the more transparent your billing will be, and the more opportunity you’ll have to leverage your easier lanes with your more costly and challenging ones.
Sometimes to solve an outward problem you need to look inward. There are accessorial fees that shippers can easily eliminate or reduce simply by doting their i’s and crossing their t’s. Redelivery fees due to not alerting the carrier on the bill of lading about the necessity for delivery appointments or not requesting lift gates for facilities without docks are all things where the onus falls directly upon the shipper. Your transportation manager and/or a freight managed solutions provider needs to take ownership of those responsibilities.
Rule of thumb: if your shipment is anything but general cargo, that is accurately weighed and classified, and is being delivered dock-to-dock under ideal conditions then you might be paying accessorials. With rapidly escalating LTL costs and an ongoing capacity crisis, shippers who aren’t taking control of their freight are falling further behind in a market where so few can afford to do so.
Don’t forget to download our LTL Checklist here!
Are you paying too much in accessorial fees? Contact a trusted adviser at Aborn & Co. today for a complimentary consultation and learn how we have empowered data to save our clients over $5 billion in freight expenses.
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– The LTL Capacity Crisis Survival Guide for Shippers
– The Industry Report
– Shipper of Choice: A How To Guide
– The Truck Driver Shortage and the Rising Cost of Everything
Listen to our podcast Consulting Logistics presented by Aborn & Co.