September 25, 2014

Freight 101 – How To Ship With Zip!

• Transportation Modes

• Understanding Freight Costs

• Freight Claims

• Management Options

• Q & A

Agenda

Transportation Modes – Small Parcel

Transportation Modes – Small Parcel

• Loose package shipments

• Shipments under 150 lbs.

• Length + 2x height + 2x width less than 165 in.• Hub and spoke distribution

• Standard $100 per package insurance

• Very few competitors

• UPS, FedEx, DHL

Transportation Modes – Less than Truckload (LTL)

Transportation Modes – Less than Truckload (LTL)

• Palletized or crated shipments (generally)

• Shipments between 150 lbs. and 5000 lbs.

• Typical shipments are from 1-6 pallets

• Terminal/Breakbulk network, shipment will travel on multiple trucks

• Insurance coverage is generally $5 -$25 per lb.

• Lots of local, regional and national competitors

• YRC, Conway, FedEx Freight, R&L, Central

Transportation Modes –Truckload & Partials

Transportation Modes –Truckload & Partials

• Lots of equipment types – vans, flatbeds, intermodal, reefers

• Full truckload implies that you are using the entire trailer - up to 45,000 lbs or approx. 24 pallets

• Partial truckload encompasses shipments over 6 pallets up to a ½ truckload

• Shipment stays on same trailer for entire journey

• Insurance coverage is generally $100,000 per load

• Thousands of local, regional & national competitors

• Schneider, JB Hunt, Swift, Mercer, Werner

Transportation Modes – Expedite

• Expedite – make an action or process happen sooner or be accomplished more quickly

• Terms – “guaranteed”, “hot shot”, “time definite”

• Any size shipment from parcel to full truckload

• Can be via truck or air

• Guarantees only cover freight charges – not down time, crew costs, client penalties etc.

• Fragmented competition – lots of carriers offer expedite options

• FedEx Custom Critical, Panther, Conway Now

Transportation Modes – Expedite

Transportation Modes – International

Transportation Modes – International

• Shipments originating or destined to countries outside of North America

• Full container and less-than-containerload options

• Can be via ocean or air

• Lots of insurance and pricing (incoterms) options

• Most shippers use a broker or freight forwarder

Understanding Freight Costs

Basic Freight Cost Elements

• Distance – zones, zip to zip, mileage

• Size and weight (dimensions & freight class)

• Transit time requirements

• Equipment requirements

• Additional services – liftgate, inside delivery, residential

• Capacity – carrier specific and market driven

• Fuel costs

LTL Costs – Freight Classes!!!

• Freight classes are used by LTL carriers to categorize different types of freight for costing and pricing.

• There are 17 classes: 50 -500.

• Classes are published by NMFC (National Motor Freight Classifications).

• Freight class is determined by multiple factors: Density

Value

Ease of Handling

Fragility

Special considerations – hazardous, used or new, “dirty” items

Common Accessorial Charges

• Liftgate – Free to $100 per occurrence

• Inside Delivery - $25 to $150 depending on complexity

• Notification – Free to $25 per occurrence

• Non-Commercial or Residential - $50 to $100 Service is defined by each carrier – not consistent

Schools and colleges

Farms

Military bases and government facilities

Churches

Cost Differences by Service Level

Strategies to Reduce Freight Costs

• Conduct a formal review at least annually.

• Identify metrics that measure freight costs.

• Incent customers to order in larger quantities.

• Consolidate purchasing of materials.

• Eliminate vendor “best way” shipments.

• Negotiate an FAK with LTL carriers.

• Negotiate fuel and other accessorials.

• Utilize a broker/3PL/consultant with expertise.

• Utilize economy carriers (lower service expectations).

Freight Claims

Types of Freight Claims

• Shortages – portion of the shipment is missing or the entire shipment is gone.

• Visible Damage – shipment is obviously damaged and notated on the delivery paperwork.

• Concealed Damage – damage is not obvious and discovered after the delivery has occurred. Carrier will pay a max of 33% of the claim when concealed.

• Service Failure – applicable on certain “guaranteed” shipments. Only covers the cost of the freight, not any incidental costs.

Freight Claim Tips

• Inspect shipments immediately, there is a limited window to notify the carrier that a damage has occurred.

• Document as much as possible, take pictures. You will need copies of the bill of lading, delivery receipt, vendor invoices and details of your costs.

• Expressly list both pieces and pallets on the bill of lading.

• Use proper packaging, pallet sizes, corner protectors etc.

• Don’t waste time on claims under $200.

• Be Persistent! Do not accept the carrier’s first denial – you need a “bulldog” mentality to get resolution.

Freight Management Options

Customer and Vendor Routed

• Hands off approach to freight – puts the responsibility on your vendors and customers to choose and pay the carrier.

• Liability for charges and claims falls on vendors & clients.

• Don’t have to negotiate freight rates, pay trucking invoices.

• Zero control / leverage when problems do occur.

• Dock congestion for larger shippers, too many different carriers / drivers.

• There is really no such thing as “Free freight” .

Carrier Direct Model

• Shipper responsible for managing carrier contracts, selecting carriers and paying carrier freight bills.

• Allows for complete control over the process, carrier choices.

• Best possible freight rates for shippers with high volume (over $1M)

• Must have staff to perform traffic management and freight payment functions.

• Hidden cost increases in carrier rates and tariffs.

Outsourcing – Forwarders, Brokers & 3PLs

• Hiring a company to perform traffic and freight payment services on behalf of your company.

• Access to better freight rates for smaller shippers.

• Reduces time involved in dealing with freight administration and problems that occur with shipments.

• “Must have” option for international shipping

• Lose some control over carrier selection.

• Start-up and implementation can be a difficult process.

• May feel threatening to existing employees.

Questions and Answers

Thank You!