Wednesday, June 2, 2010

Freight Costs are more than just the state to state rate...

Okay - so you've negotiated some great state to state rates with your truckload carriers. With fuel accounting for 30%+ of transportation costs these days, and the potential for big accessorial charges being occurred at any time from pick up through to delivery, there are a lot of factors to be paying attention to when it comes to managing your logistics costs.

The bottom line is a lot goes into your company's transportation spend beyond just the per mile rate. The following are some important factors to think about that are likely making up 50% or more of your logistics management budget.

Fuel Surcharges - The aforementioned cost of fuel is likely making up over 30% of your transportation spend. Fuel surcharge are a factor largely out of a shipper's control (aside from finding ways to be more efficient with how your trucks are routed - because less miles shipped equals less fuel costs) but paying attention to movements in the price of diesel fuel is vital to budgeting and anticipating the cost impact on your business. Truckload carriers will typically use a company's own standard fuel surcharge matrix, so if you have not already done so get your carriers on the same fuel table. It will provide more consistency on your costs and make invoice audit easier.

Avoiding detention – Make sure your dock scheduling process is working. For many shippers detention charges make up the next largest piece of cost beyond linehaul and fuel charges. Detention happens when a truck shows up at your facility to pick up a load and it is not ready. The cost impact to the shipper can run from $50 to $200+ per hour. Make sure your production planning and logistics group are communicating and product is shipping on time. Obviously getting products to your customers on time and in good shape is often the priority but there could be significant costs being incurred by your business as well.

Product damage and returns – A lot of time and cost is spent dealing with and resolving issues with product damage and returns. The following is a list of best practices for shipping to help manage the issues.

Best Shipping Practices:

- Know what a carrier's liability limits are before shipping.

- Use only new packing material, use of used cartons or packing may limit your ability to receive full value for any loss or damage.

- When necessary, verify the identity of the driver before loading his truck.

- Properly complete the bill of lading using correct classification descriptions.

- Clearly mark any special delivery requirements on the bill of lading.

- Make sure the driver clearly signs the bill of lading noting the total number of "outside" pieces received.

- Never permit a driver to sign "shippers load and count (SLC)" unless he is signing for a sealed load.

- Make sure all trailer loads are sealed by your personnel.

- Record seal numbers on the bill of lading before it is signed.

- When shipping hazardous materials make sure the individual preparing and offering the shipment to the carrier is properly trained and certified to handle hazmat shipments.

Ken Kowal has 15 years experience in logistics supply chain management and is founder of companies in the ecommerce order fulfillment and the transportation management system markets.

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