Five Ways to Reduce Your LTL Freight Expense
by Mike Starling
Economic Recovery? Hmmm. Regardless of whether you think the economy is recovering from recent years of stagnation, one topic that remains popular among virtually all shippers is finding ways to reduce freight expense. Of all the modes the shipper has to deal with, the endless general rate increases (GRI) of the LTL carriers can be the most frustrating. BUT, if you're just concentrating on holding the line with the base freight rates, you should pause to consider the bigger picture. Are there any other opportunities out there? Most likely. Below are a few ways for shippers to reduce their LTL freight expense.
1. Analyze Shipment History to Understand Your LTL Shipping Profile in the Most Minute Detail.
LTL carriers love to take advantage of shippers who have not done their homework. The shippers who are able to achieve optimum freight expense reductions/savings are the ones who capture, analyze, and utilize past shipment history detail to understand the "what," "where," and "why" of their LTL shipping requirements. A shipper armed with such knowledge is difficult for the carrier to take advantage of. By understanding where the opportunities lie, the savvy shipper can leverage lane volume to achieve freight expense reductions.
2. Develop, Implement, and Utilize LTL Carrier Selection Criteria That Fits Your Service and Financial Requirements.
Shippers should have a documented carrier selection policy and process. Not only should this include a detailed checklist of the shipper's service requirements, but it should also include a checklist of information, documentation, and certifications the carrier must provide. This would include such things as DOT Safety Rating, Insurance Minimum Coverage, Financial Statement, Claims History, etc. Qualifying the carriers to consider provides the shipper with leverage to achieve freight expense reductions via competitive bidding.
3. Don’t Use More LTL Carriers Than Necessary.
Using too many LTL carriers can lead to unnecessary freight expense, especially if the shipper does not have a good understanding of how LTL tariffs, discounts, and accessorial charges can vary from one carrier to another. One of the first steps toward achieving freight expense reduction is to narrow the variability in freight charges by using only as many LTL carriers as are needed to meet current service requirements. By leveraging total shipping volume among fewer carriers, a shipper can achieve freight expense reductions.
4. Utilize Volume Lanes to Achieve Maximum Freight Expense Reductions.
Shippers must realize that LTL carriers are motivated to capture business that builds the volume moving in key shipping lanes that are important to the carrier, not necessarily to the shipper. Shippers who take the time to thoroughly understand which lanes are important to the LTL carrier and how their current shipping volume requirements match up with those lanes have another opportunity to reduce freight expense. Achieving freight expense reductions in 100 percent of the shipping lanes may not be realistic, but shippers who use the 80/20 rule stand an excellent chance of maximizing freight expense reductions in the lanes that provide the best negotiating opportunities.
5. Ensure Apples-to-Apples Rate Comparison to Optimize Freight Savings Opportunities.
Shippers who ensure that all their LTL carriers utilize a common base-rate tariff are capable of comparing base rates between carriers on an apples-to-apples basis. While LTL carriers prefer to utilize their own base-rate tariff, they don’t have a problem quoting base rates off a common tariff specified by the shipper. The most common tariff utilized by shippers is SMC3’s Czarlite tariff. This tariff is commonly used when multiple LTL carriers are competing for business. Savvy shippers will take time to research the Czarlite process and learn how it can be utilized to achieve a maximum LTL freight expense reduction via the competitive bid process.
The bottom line is that achieving LTL freight expense reduction should be possible for any shipper who takes time to plan how they will deal with LTL carriers in general, and to employ proven tactics that yield maximum results.
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