The Biggest Mistakes Shippers Make With Density-Based Freight
With the deepening effects of the trucking capacity crisis, transportation carriers are moving towards smarter methods of pricing freight. In an effort to get the greatest bang for their buck while transporting the greatest number of pallets, carriers are moving away from the typical 18-class freight system defined by the NMFTA.
Instead, they’re beginning to classify and price freight based on density. The density-based ordering system has 11 classes of freight, which all depend on the weight and dimensions of the package or pallet.
But the density-based freight system is new to most shippers in the U.S., and they’re making a lot of mistakes in the process. We want you to avoid these missteps so you can pay the least and have a strong shipping partnership.
How Does the Density-based System Work?
Because of the capacity crisis, carriers are starting to care less about the products inside the boxes and more about the space of those boxes themselves. Carriers want to fit as many packages as possible in a single truck. This means the more you can fit into a small package, the less your carrier will charge you.
The density of freight is how much space an item occupies in relation to its weight.
To find the density, you divide the weight of the item (lbs) by its volume (cubic ft). You find the volume by multiplying height, width, and depth and then dividing by 1,728, which is the number of cubic inches in a cubic foot.
You can learn more about the basis of density-based freight here.
How does this impact pricing?
Generally, a higher density means that you’re shipping more goods while taking up less space on the truck. This means it’s a lower classification, which lowers your rate and cost. Plus, densely wrapped packages have a lower risk of damage.
What are the key mistakes shippers make with regards to the density-based freight system?
1. Not Measuring Density Appropriately
You should know the density of your pallets before handing them over to your shipping carrier. This ensures that you classify your goods accurately and pay the appropriate freight rate.
“Dimming” refers to the process of measuring the dimensions (“dim”) to determine the density of the goods. You want to dim correctly, meaning you know the height, width, and depth of the package. You then need to ensure you weigh the pallet properly before it leaves your dock.
You should make this density measuring process as efficient as possible in your warehouse. You should have pallet scales that quickly and accurately determine the weight of the goods.
You should also have two tape measures on the wall behind the scale—one vertical and one horizontal. While staff members are weighing the item, they can look at the dimensions of the pallet using the measurements on the wall. They then just have to use a handheld tape measure to determine the depth of the box.
This halves the time it takes to typically calculate the density of a pallet.
From there, you can appropriately classify your shipment. You can also protect yourself against variances if your shipping carrier claims the package is in a different density class.
2. Not Negotiating FAK Rates
Freight All Kind (FAK) is a pricing tool that groups a range of freight classes into a single class. This creates a single baseline price for all shipments in that FAK price.
For example, you tend to ship freight that falls in density classes 100, 125, and 150. You could negotiate a FAK at the 100 level, even though it would apply to all packages between 100 and 150 density.
There are two key benefits of a FAK rate. You can take advantage of the pricing for lower freight classes, even if shipping goods in higher classifications. So, you would be paying the lower FAK 100 price, even when shipping some pallets at 125 and 150.
There are also fewer variances with FAK. Carriers typically won’t re-weigh and dim your pallets if there is a FAK, because the density doesn’t matter as long as it’s between 100 and 150.
You can typically negotiate FAK rates if you consistently ship with the same carrier and your freight hovers around the same classification rate each time. But most shippers don’t understand FAK enough to take full advantage of its benefits.
You want to work with a trusted carrier to appropriately construct FAK tiers. You should also be aware of your most frequently shipped density classifications, so you can start negotiations at that classification level.
3. Not “Spot Quoting”
“Spot quoting” is when you work with your carrier to pay for a specific “spot” on their trucks. Carriers offer a real-time rate for space on the truck based on current capacity/availability and market conditions. This helps carriers fill their trucks at the greatest capacity with the most density.
We usually recommend spot quoting for large and bulky items, which don’t fall into the traditional LTL rates. These also tend to have a lower density, so they’ll have a higher price point in a density-based pricing system.
Spot quoting with larger, less dense items can help you get the best price based on the carrier’s needs at the moment.
4. Not Using Technology
Although the transportation as a whole has a significant technological infrastructure, LTL carriers have often been slow to catch up. It’s only in the past couple of years—especially with the capacity crisis—that LTL carriers are realizing the importance of implementing technology.
SaaS (Software as a Service) providers and 3PLs like LTX Solutions have been at the forefront of tech developments for shipping. They’ve stepped in to better bridge the gaps for shippers to ensure the most efficient processes.
Shipping technology increases visibility and transparency along the supply chain, which minimizes costs and speeds service.
If your shipping service isn’t utilizing cutting-edge technology, you’re throwing money out the window.
LTX Solutions provides customized tech solutions to streamline your supply chain management from warehousing to shipping. Our customized reports and consults offer business intelligence that optimizes your transportation process.
Contact LTX Solutions now to be at the forefront of technology and pricing.