Freight

From Wikipedia, the free encyclopedia

Freight is a term used to classify the transportation of cargo and is typically a commercial process. Items are usually organised into various shipment categories before they are transported. This is dependent on several factors:

• The type of item being carried, i.e. a kettle could fit into the category 'household goods'.
• How large the shipment is, both in terms of item size and quantity.
• How long the item for delivery will be in transit.

Shipments are typically categorized as household goods, express, parcel, and freight shipments.

Furniture, art, or similar items are usually classified as “household goods”.

Very small business or personal items like envelopes are considered “overnight express” or “express letter” shipments. These shipments are rarely over a few pounds, and almost always travel in the carrier’s own packaging. Service levels are variable, depending on the shipper’s choice. Express shipments almost always travel some distance by air. An envelope may go coast to coast overnight or it may take several days, depending on the service options and prices chosen.

Slightly larger items like small boxes are considered “parcel” or “ground” shipments. These shipments are rarely over 100 pounds, with no single piece of the shipment weighing more than about 70 pounds. Shipments are always boxed, sometimes in the shipper’s packaging and sometimes in carrier-provided packaging. Service levels are again variable; but most “ground” shipments will move about 500-700 miles per day, going coast to coast in about four days. Parcel shipments rarely travel by air, and typically move via road and rail. Parcels represent the majority of business-to-consumer (B2C) shipments.

Beyond HHG, express, and parcel shipments, you get into the category of “freight shipments.”

Contents 1 Less-than-truckload (LTL) freight 2 Truckload (TL) freight 3 Increasing the size of truckload shipments 4 How freight pricing works 5 Cargo insurance 6 Freight Packaging 7 Freight shipping summary 8 See also

[edit] Less-than-truckload (LTL) freight

The first category of freight shipment is “less than truckload” (LTL), which represents the majority of “freight” shipments and the majority of business-to-business (B2B) shipments. LTL shipments are also often referred to as “motor freight.” LTL shipments range from 100 pounds to about 15,000 pounds, and are always less than 28’ long because LTL carriers’ trailers are typically 28' long. The shipments are usually palletized and packaged for a mixed-freight environment. Unlike express or parcel, LTL shippers must provide their own packaging, as LTL carriers do not provide any packaging supplies or assistance. However, crating or other substantial packaging is required for LTL shipments due to the mixed freight environment.

“Air cargo” or “air freight” shipments are very similar to LTL shipments in terms of size and packaging requirements. However, air freight shipments typically need to move at much faster speeds than 500 miles per day. Air shipments may be booked directly with the carriers or through brokers or online marketplace services. While shipments move faster than standard LTL, “air” shipments don’t always actually move by air.

[edit] Truckload (TL) freight

In the United States of America shipments larger than about 15,000 pounds are typically classified as “truckload” (TL) in that it is most economical to exclusively use a truck rather than share it in an LTL environment. The gross weight of a truck (tractor trailer 5 axle rig) in the U.S cannot exceed 80,000 in ordinary circumstances so a full truck is limited to the amount weight that a unit can legally carry to by the difference between 80,000 pounds and the weight of the tractor trailer. Similarly a load is limited to the space available in the trailer -- nominally 53’ long and about 100 inches wide and 106 inches high. While express, parcel, and LTL shipments are always intermingled with other shipments on a single piece of equipment and are typically reloaded across multiple pieces of equipment during their transport, TL shipments usually travel as the only shipment on a trailer and TL shipments usually deliver on exactly the same trailer as they are picked up on. When shipping freight, it is extremely important to understand pricing, claims, and insurance.

[edit] Increasing the size of truckload shipments

Increasing shipment size has proven to be a significant opportunity for many companies - particularly large consumer product companies. Under the current U.S. truck pricing model, adding more to a load cost nothing more. Strategies for increasing load size include:

• reducing truck equipment weights for example, by "light weighting" the equipment. This may involve extensive use of lighter-weight materials such as aluminum
• consolidating orders onto the truck using a Transportation management system. Here the "optimal combination of orders and stops can be used to fill out the truck
• precise calculation of the load within the equipment specifications. This is predominantly is performed by taking demand from, for example, a [Distribution_Resource_Planning] system or a [Vendor_Managed_Inventory] system. In some cases a forecast of demand can also be used. This demand is formed into a truckload order quantity by a manual process or automated load-builder. For example the SAP_R/3 automated load builder has a number of rules such as don't exceed "x" weight or "y" cube to set load size. It creates loads that fall within theses parameters. Additional advantage may be possible with other load builders that have more rules to better optimize shipments. These load-builders, such as AutoVLB (Automatic Vehicle Load Building include Mathematical_optimization against all the legal and physical constraints such as equipment size, axle weights, axle spacing. In some cases, these automatic load builders create a load diagram to ensure precise execution .

[edit] How freight pricing works

Express letter and parcel carriers typically have fairly simple pricing based on package size and service level requested; however, freight pricing is considerably more complicated. LTL carriers typically charge by freight “class.” The National Motor Freight Traffic Association [1] (NMFTA) issues a publication called the National Motor Freight Classification (NMFC). The NMFC is basically a list of every kind of item that ships via truck. Each item has a class assigned to it based on the item’s density, loadability or mixability, value, and other factors. Freight classes range from 50 to 500, and generally indicate the percentage of the base rate that should apply. So class 85 freight should be charged 85% of the full rate between points A and B, theoretically. Denser items such as steel and machinery have low classifications such as Class 50 thru 85. Fragile or bulky items fall into freight classes 125 to 500, and pay higher shipment costs.

LTL rates are quoted “per 100 pounds” or “cwt” or “per hundred weight.” Besides the discount off of base rate created by the freight class, there is typically a second discount applied to the calculated transportation rate. So a given LTL lane may have a rate of $50 cwt. If your shipment is class 70, then your adjusted base rate is $35 cwt (70% of 50 cwt); then the carrier applies a negotiated discount of 50% for example, to give you a rate of $17.50 cwt. So a 1,000 class 70 shipment would have a base rate of $175.

Besides class, rates, and discounts, an LTL carrier will apply a wide range of surcharges and accessorial charges that will affect the final price of the shipment. Most shipments will receive a fuel surcharge, which is always a significant proportion of the overall cost, possibly as much as 30% or more. Some common accessorial charges are:

• Liftgate: this is a service that assists the driver in loading or unloading his truck when a loading dock or forklift is not available. The trailer is equipped with a hydraulic ramp that lowers to the ground. Liftgate service is almost always billed on residential pickups or deliveries and in commercial pickup and deliveries where loading docks or forklifts are not available. Only a small percentage of most trucking companies’ trailers are equipped with liftgates, so be sure to notify them of your need for one in advance.

• Residential pickup or delivery: anytime a carrier must pickup or delivers into a residential area an extra fee is charged, because in most cases the local laws restrict the size of delivery trucks, causing the carrier to utilize a smaller truck to service a residential area. These requirements equal less shipments per day picked up and delivered, so these fees are assessed to offset the carrier’s costs.

• Appointments or notification before pickup or delivery: by default, carriers make pickups and deliveries in order arranged by geographic location (a route). If your shipment requires the carrier to call ahead, or schedule and appointment, the carrier will charge an additional fee for this service.

• Inside pickup or delivery: by requiring the truck driver to pickup or deliver inside a building his route takes longer to complete. The carrier will charge an additional fee for this service.

Also, charges for additional insurance or literally hundreds of other possibilities may be added to the final freight bill. It is extremely important that the LTL shipper works with the carrier or intermediary to completely understand all of the requirements of their shipment in order for an accurate price to be quoted.

Often, an LTL shipper may realize savings by utilizing a freight “broker,” online marketplace, or other intermediary instead of contracting directly with a trucking company. Brokers can shop the marketplace and obtain lower rates than most smaller shippers can directly. In the Less-than-Truckload (LTL) marketplace, intermediaries typically receive 50% to 80% discounts from published rates, where a small shipper may only be offered a 5% to 30% discount by the carrier.

Truckload (TL) carriers usually charge a rate per mile. The rate varies depending on the distance, items being shipped, equipment type required, and service times required. TL shipments usually receive a variety of surcharges very similar to those described for LTL shipments above. In the TL market, there are thousands more small carriers than in the LTL market; so the use of transportation intermediaries or “brokers” is extremely common.

One other cost-saving method is facilitating pickups or deliveries at the carrier’s terminals. By doing this, shippers avoid any accessorial fees that might normally be charged for liftgate, residential pickup/delivery, inside pickup/delivery or notifications/appointments. Carriers or intermediaries can provide shippers with the address and phone number for the closest shipping terminal to the origin and/or destination.

Shipping experts optimize their service and costs by sampling rates from several carriers, brokers, and online marketplaces. When obtaining rates from different providers, shippers may find quite a contrast in the pricing offered. If a shipper uses a broker, freight forwarder, or other transportation intermediary, it is common for the shipper to receive a copy of the carrier's Federal Operating Authority. Freight intermediaries are also required by Federal Law to be licensed by the Federal Highway Administration. Shippers are cautioned to avoid unlicensed brokers and forwarders; if brokers are working outside the law by not having a Federal Operating License, the shipper will have no protection in the event of a problem. Also shippers normally ask for a copy of the broker's insurance certificate and any specific insurance that applies to the shipper's shipment. The internet is full of websites operated by unlicensed and inexperienced brokers, forwarders, and other intermediaries who come and go and come again overnight. Shippers typically favor major brokers and established online marketplaces that have been in business many years and manage hundreds of thousands of shipments annually, in order to get the best service and price.

[edit] Cargo insurance

Whether a shipper deals directly with a carrier or use an intermediary, they typically question the amount of cargo insurance coverage the carrier will be providing on the shipment. Shippers do not assume that full-coverage insurance is provided, as it almost never is. Many carriers offer minimal cargo coverage, typically pennies per pound, and intermediaries typically just pass along the carrier’s coverage. In the event of a damage claim, shippers may find themselves without enough coverage and having to file a claim with the carrier directly without the assistance of the broker. Shippers typically ask the broker about the procedure the broker has in place regarding freight loss or damage claims. Responsible carriers and intermediaries will always have additional insurance available for purchase; and they will have fast and easy ways to manage claims.

About 10% of all freight shipments will experience some significant loss or damage. It is a common misconception that a freight rate includes full coverage insurance, when in fact a base freight rate typically includes only a bare minimum of cargo insurance. A shipper should always ask their carrier or intermediary what the insurance coverage is for every specific shipment. LTL shipments will often be insured for less than 25 cents per pound, and TL shipments will often be insured for only slightly more than LTL shipments. Most good TL carriers have maximum cargo insurance of $100,000 for the entire load; but for a 40,000 load, that’s only about $2.50 per pound.

Furthermore, cargo insurance only covers significant loss or damage to the cargo only. Carriers’ insurance does not cover “consequential” damages like lost sales or downtime on a production line. Also, carrier insurance does not cover the cost of returning damaged cargo to the shipper. Again, cargo insurance is very low and very tightly defined; so shippers must package shipments extremely well and be sure to clarify the specific insurance that will apply to each shipment.

Carriers and intermediaries do typically offer “additional insurance” through known insurance companies like Fireman’s Fund. Rates vary widely depending on the item to be covered and the amount of additional insurance that the shipper would like to purchase.

[edit] Freight Packaging

Unlike small parcel shipping via Fed EX or UPS, shipping freight has a much higher likelihood of damage. Trucking companies pack lots of different types of freight onto lots of different trailers using forklifts and other heavy equipment, creating a harsh and dirty environment for freight. Other shipments will be packed around and on top of your shipment; so all freight shipments should be packaged very carefully.

All shipments should be palletized and wrapped in plastic to protect from damage. Most shipments should be fully crated in order to ensure a damage free delivery. Shippers typically ask the carrier or intermediary for the specific packaging requirements for each shipment – then exceed those requirements. Also, since shipments may be reloaded several times, it is important that the packaging has all the shipper and consignee info clearly noted on at least two sides of the shipment. Filing claims with freight companies is a huge hassle and claims are almost always denied; so shippers typically do as much as possible to avoid freight claims.

[edit] Freight shipping summary

Shippers typically first ensure that they are using the best type of carrier for their specific type of shipment: using an LTL carrier for an LTL shipment, for example. While parcel carriers will accept LTL shipments, and LTL carriers will accept TL shipments, shippers will typically realize lower service at higher rates when carriers service freight that is "non-standard" for their specific company.

Once the shipper has chosen the right kind of carrier, the shipper then shops several carriers in order to find the best service and price for their shipment. Shippers search out “all-inclusive” quotes that include all surcharges and accessorial fees.

When the shipper has chosen the mode and carrier and is ready to ship, they typically over-package their freight shipment and verify insurance coverage, to minimize damage and claims.

Inexperienced shippers often use the services of a freight intermediary to help them find the best carrier, service, and price for their shipments.

[edit] See also

• Cargo
• Goods