What is Freight Density and How Does It Impact Your Bottom Line Profit?
Among shippers and carriers alike, freight density is a hot button topic of late. The evolving changes in freight classification, density sub-groups, and the introduction of freight density measurement equipment has caused shippers to reexamine their supply chain functions due to its impact on bottom line profits. Freight density is a reality that everyone has to deal with in 2019 – so in the information below, we’ll outline some facts about cargo density, how it impacts daily FTL and LTL carriers, and most importantly – the impact of profitability on shippers and carriers.
The Basics of Freight Density
If you’re in the dark about freight density and have “Googled” this term and found us – awesome. Let’s explain some of the facts about freight density. Essentially, freight density is the space an item fills in relation to its weight. In the logistics world, the space that a shipment occupies has become just as important to carriers as weight because their objective is to move shipments as efficiently as possible. Increased freight density (meaning more empty space) is not conducive to the cost-effective movement of freight – which is why it’s such a big deal today.
Now let’s get scientific. If you’re curious about finding your freight density via mathematics, you simply divide the weight of the item in pounds by the volume in cubic feet – or Height x Width x Depth / the weight. Today’s carrier will examine both the physical weight and the freight density to determine which is greater – and then, charge the shipper the greater expense.
Freight Density and How it Impacts Your LTL Shipments
Freight Density has been used in the express parcel industry for several years. For those who have shipped products via Fed Ex Express or UPS in their own packaging may have noticed this on their monthly invoices. Initially, your 5-pound box heading to Memphis may have been estimated to cost you $25.00 for overnight service – but when your bill arrives, it’s magically $28.00. This isn’t because they are trying to price gouge or insert hidden costs – it’s because they are using dimensioners to determine the freight density or DIM-weights. If that 5-pound box is bigger than the space it consumes based on average weight, you’ll be billed on the size vs. the weight.
LTL carriers are starting to use the same technology when measuring your pallets, boxes, and other freight shipped via their networks. If your estimate is based on your measurements of weight or the simple size of the pallet, it does not factor the DIM measurement at the LTL depot. Freight accounting is usually the hardest hit department – as your estimates and the carrier’s final charges seldom match. When this occurs, it can extend your freight invoice auditing process, and cause significant financial headaches.
How Freight Density Impacts Your Bottom Line Profits
As you can see, when you expect to pay a certain fee for your LTL shipments, but are being billed additional charges due to freight density, it can dramatically impact your shipping business. However, there are other areas that freight density can impact including:
- Ontime delivery: There are some carriers who will delay shipment on items that are ‘bigger’ than estimated. Since the carrier’s primary objective is to ensure each route is balanced efficiently, if your shipment takes up more space than it should, it can be bumped to a future delivery. While this may only cause a minor delay, the impact to your customers might be significant.
- Reduced Customer(s): Today’s customer does not care about ‘freight delays’ due to measurement issues. When they order products, they expect them to be delivered in a timely and efficient basis. If continual delays occur due to incorrect freight density measurements, or problems with billing to carriers, the customer is likely to reach out to competitors.
The expansion of freight density billing, specifically in the LTL industry is causing a lot of headaches for shippers in manufacturing, retail, e-Commerce and more. A great resource for shippers in these industries is an experienced 3PL. A third-party logistics company has a clear understanding of freight density, DIM weights, and the equipment used to measure freight accurately. They also can help shippers classify their LTL movements correctly – which can significantly reduce freight density issues. If you’re a shipper who is tired of receiving incorrect or overcharged freight invoices due to freight density issues, reach out to a professional 3PL and ask them how they can help.