TRENDS IN TRANSPORTATION-Growing use of DENSITY-BASED PRICING by LTL CARRIERS

by James Durfee

Within the last 3 years, less-than-truckload (LTL) carriers have shifted away from the traditional National Motor Freight Classification (NMFC) rate-setting formula.  In the past carriers assigned a distinct class rating to each different commodity.  Because of new scanning technology that allows carriers to weigh and inspect each shipment it has become easier to utilize more density-based pricing. Density-based pricing prices freight according to the weight per cubic foot of space (cubic feet) the shipment uses in the truck. This model has had a significant impact on shippers’ freight costs.  Due to this change, it’s important to understand the new pricing methods for LTL shipments, how it impacts rates and how to negotiate rate structures.

TRADITIONAL NMFC CLASS RATING

As background, the “class rating” assigned to LTL products, runs from a low of class 50 to a high of class 500. The higher the class the higher the cost. A rough rule-of-thumb is that using class 100 as the baseline, class 50 would essentially be 50% of the baseline cost and class 200 would approximate 200% of the baseline cost. This is a very rough approximation, but it illustrates how significantly costs can vary based on the CLASS RATING of a shipment. Class ratings are normally assigned using the following 4 characteristics:

  • Density – pounds per cubic foot
  • Handling – ease or difficulty handling product
  • Stow Ability – ability to effectively load product in the trailer
  • Liability – cost in dollars per pound to compensate pay for lost/damaged product.

PURE DENSITY BASED PRICING

Pure Density-Based pricing assigns a class to product just using the following formula:

  • Length x Wide x Height in inches= cubic inches / 1728 = cubic feet.
  • Divide weight of product (including pallet weight) by cubic feet = DENSITY

If the density = 6, the product would be classed at class 125

If the density < 4, the product would be classed at class 250

In this case the cost of the shipment could almost double if the density drops by 2 lbs./cubic ft. That’s a substantial difference and points out how important it is to understand the density of your product and how it is classified.  Remember, density-based pricing limits carrier liability.  The reduced insurance risk then falls back on the shipper to have additional insurance for high value items.

If you would like to discuss this topic further, contact one of our sales representatives at 804-729-8189.

By James Durfee

What Transportation Services Does Riverside Logistics Offer?

Riverside-Logistics-New-Trailers
Third Party Freight Management
 – It can take hours of valuable time to search for the best combination of mode, equipment, schedule, price and availability. Even then, you may not be sure that you’ve selected the right carrier for the job. When you have Riverside Logistics manage your shipments, whether for a project or your entire supply chain, we tap into our vast contracted and insured network of quality, reputable carriers to find the best solution. We have access to all modes of transportation, including small package, LTL, full load /consolidations, refrigerated, dry, and flat bed.

Riverside offers dedicated trucking resources to serve the Middle Atlantic and Southeastern states along the I-95 corridor. Our experience is both broad and deep, including work in a variety of industries such as medical products (including sterile surgical products), food and beverages, building materials, retail and industrial packaging, metals, chemicals, fertilizer and minerals, automotive supply, timber and paper products and a wide variety of consumer products including, non-durables and durables. We are a proud member of The Transportation Intermediaries Association (TIA) as well as the Council of Supply Chain Management Professionals, leading trade associations of third party logistics companies.

Services

  • Truck Brokerage
  • Core Carrier Program
  • Carrier Quoting – RFP, RFQ, Analysis, Negotiation, and Contracting
  • Shipment Consolidation and Mode Selection
  • Carrier Optimization and Selection
  • Freight Bill Audit and Payment
  • Freight Claims & Prevention Strategies
  • Yard Management
  • Trailer Pools

Transportation Modes

  • Air freight (small package and heavyweight)
  • Small parcel
  • LTL (Standard and Volume Quote)
  • Drayage
  • Truckload (Dry Van, Flatbed, Refrigerated)
  • Intermodal
  • Dedicated
  • Ocean Freight (Container or Roll On Roll Off)
  • Hot Shot, Time Definite, Guaranteed Delivery

Riverside Logistics TMS system provides insight to shippers for the best LTL carrier choices.

LTL Metrics

Introducing Logistically TMS:

Logistically TMS (LyTMS) was designed with simplicity in mind.  The system provides shippers with insight into the best carrier choices for their customer by listing cost and transit information across a wide variety of carrier choices. This allows the user to make an up-to-date informed decision consistent with their immediate requirements for cost and service. Once carrier selection is decided based on your customer requirements, the bill of lading and tendering functions can be generated right from the quote screen, making the transaction very efficient.  The Dashboards will allow you to view your shipping patterns and track your costs and shipments in real time. The Logistically TMS offers additional benefits to help manage your freight accurately.

  • Automated shipment tracking and event notification.
  • Pre-loaded customer database addresses and information.
  • Changes to the bill of lading can be done and updated while in the system.
  • Total cost metrics are available on demand per customer or carrier
  • Multiple users with varying levels of access can be setup as needed
  • Quotes can be saved and retrieved at any time to tender to the carrier

Riverside Logistics invested in “Logistically” in 2018, a Less Than Truckload (LTL) online portal for our customers.

Riverside Logistics invested in “Logistically” in 2018, a Less Than Truckload (LTL) online portal for our customers. Logistically will speed your access to LTL information, therefore, improving your customer experience by saving you time and money by leveraging our buying power.

Why is that important to our customers? Because LTL shipments can be a great advantage when you need your product shipped at an affordable cost. Logistically gives you the ability to book your own loads and see the options available in real time on your computer. The information below provides some further insight into LTL options and benefits compared to full truckloads.

When should I ship a Full Truckload (FTL) vs. or Less than Truckload (LTL)? 

There are many factors to consider when determining best way to ship freight. Fortunately, Riverside Logistics can guide you through your options.  Product, size, speed and of course price all influence that decision.  Here are a few points to help you determine which is the best route for your freight.

LTL – Less than Truckload

An LTL shipment is a palletized shipment that weighs anywhere from 100 – 10,000 lbs. and simply means that the shipment will not utilize the entire truck.   This is an economical option since you are only paying for the space you are using.  However, it may involve a slightly longer transit since the freight will need to be off loaded and reloaded several times prior to final delivery.   Also, if your shipment is over 10 pallets or 20 linear feet, then you will need to explore full truckload options.  There is a surcharge from LTL carriers for shipments over 20 linear feet and that will often negate any savings that LTL will offer.

FTL – Full Truckload

FTL or TL fill the entire truck or may be a heavier shipment (10K LBS+) that will require TL.   There are other product variables that may benefit from FTL shipping.  For example, if your product is more fragile or cannot be securely packaged, then FTL offers advantages.  FTL shipments are not off loaded for consolidation like LTL so there is less risk of damage.  Additionally, high value shipments will also benefit from reduced handling and less exposure.  Lastly, FTL offers quicker transit because the truck is loaded for final destination at time of departure.

Medical Device Sterilization and the Supply Chain Challenges and Solutions

By Rick Holden

For most medical device manufacturers, who utilize ethylene oxide (EtO) sterilization or radiation sterilization, to sterilize large quantities of medical devices, will typically outsource this process to a companies specializing in these highly controlled environment. This often adds a lot of cost to the supply chain because often there is additional transportation, warehouse handling and post sterilization assembly that must take place so that the finished products can be distributed to customers.

Riverside has over 15 years of experience providing this specialized supply chain expertise to the medical device manufacturing industry.   By locating a warehousing operation in the same building to the sterilization outsource provider, Riverside is able to offer industry specific warehousing and transportation solutions that allows for a great amount of efficiency, reduced order cycle times, and overall supply chain value.

 

  • Value of warehouse efficiency – By being co-located in the same building as the sterilization supplier, there is no need to re-load trailers, ship in transit and unload trailers. These processes can often take days to complete, and create additional costs. It is all done in the same building, often in the same day of when the product is complete and available. Riverside also able to gain efficiency by cross-docking and storing products for multiple clients who utilize similar processes.
  • Value of post sterilization – Often medical devices require products such as drugs and heat sensitive products that will be damaged by the sterilization process to be added after the product is sterile. As sterilization costs can be high, sometimes there are requirements for non-sterile items to be packaged with sterile items. Some examples would be clean-up kits and patient hospital stay kits. Riverside offers post sterilization kitting and assembly solutions that can reduce the order cycle time and transportation costs by having these done on site, immediately after sterilization. This added value not only reduces costs but it increases speed to delivery.
  • Value of Transportation efficiency – Having multiple clients in the same facility also has a vast amount of transportation value. As much of the medical device world is distributed by a few, large medical distributors. Often we find many of the same destination points for many of the medical device customers. This allows for many shipments that would often be shipped small package or less-than-truckload to be transported using full truckloads, pooling and truckloads with multiple stop-offs. This not only reduces the cost per case delivered it also provides for more control of the supply chain, faster deliveries and far less loss and damage.

In an increasingly competitive healthcare environment these cost and speed to delivery advantages are strategic to Riverside’s clients, allowing them to gain and retain more market share than their competition.