The cost of shipping air is going up this summer.
Carriers are in the final stage of preparing shippers for major changes coming in the way freight is classified for less-than-truckload (LTL) shipments on July 19.
Specifically, on that date, density of a freight shipment will suddenly become the most important characteristic, and freight will be priced accordingly. So, shippers unaware of the changes will be paying sharply higher rates if they are penalized for bad packaging of smaller shipments that will be reclassified as less dense freight.
Most LTL carriers have opened dialogues with shippers about the National Motor Freight Classification (NMFC) density-based pricing changes that go into effect on July 19.
“Space is money in LTL transportation,” Geoff Muessig, chief marketing officer for Pitt Ohio, a major Eastern regional LTL carrier, told LM. “Shippers who use more space on a trailer will generally pay more than shippers that use less space to move the same weight shipment between the same Zip code points.”
Like many LTL carriers, Pitt Ohio is encouraging customers “to do their research on the front end” to better understand their exposure to possible freight class changes, Muessig added.
“This is an opportune time for shippers to ensure that they are optimally configuring their packages on each handling unit to maximize their PCF (pound per cubic foot) metric per pallet,” Muessig explained.
Over the longer-term shippers able to accurately add shipment handling unit dimensions to their bills of lading stand to gain access to “the best pricing terms,” he added.
In other words, if you don’t adhere to the new classification changes, be prepared to pay more – perhaps much more, freight advocates said.
Historically, the NMFC was based on what type of product was being shipped. It was based on the age-old question, “Is it a widget or is it a sprocket?”
“It’s very subjective,” said Scooter Sayers, a former LTL executive who now is business development director of LTL solutions at Cubiscan, a leader in freight dimensioning solutions. “Space is what drives carriers’ cost.”
It all comes down to this: LTL carriers don’t really care what the pallet looks like – they’re more interested in how much that pallet weighs.
“There is a real push toward density being the overarching factor in classification,” Sayers explained on a recent LM podcast. “They’re taking a big step forward with changes effective July 19. Density drives the class.”
Sayers predicted, “We’re going to see a progression to where they are redoing the entire classification process.”
“This is arguably the most important change (after motor carrier deregulation) in pricing in the LTL industry’s history,” Mike Regan, chief relationship officer and founder of TranzAct, said recently. “Pricing in the LTL space has been typically more art than science. But that is changing.”
Because of data sharing, weight is no longer the sole criteria in freight pricing, Soon, it will be a combination of weight, dimensions, as well as distance, Regan said.
The emphasis will soon favor more strategic partnerships rather than purely transactional ones, Regan said.Shippers are advised to start dimensioning freight. To calculate freight density, you need to divide the total weight of the shipment (in pounds) by its total cubic feet. First, measure the shipment’s length, width, and height, and calculate the volume in cubic inches. Then, convert this volume to cubic feet by dividing by 1728 (1 cubic foot = 1728 cubic inches). Finally, divide the weight by the cubic feet to get the density in pounds per cubic foot.
Shippers need to understand how they can maximize the stowability of their handling units on their carrier’s trailer. Carriers advise shippers to work with vendors to take air out of cartons.
Shippers need to optimize pallet cube, according to Steve Robinson, CEO of the Supply Chain Project and a former UPS and Roadway executive who also worked for Walmart and Starbucks during his 45-year career in transportation. “An entirely new world” in freight transport is coming.
“It’s a necessary response by the LTL industry,” Robinson said of the classification changes. “There is some cleanup that needs to be done in terms of KYC—know your classification.”
