Economic uncertainty and complex supply chains pressure businesses to optimize spending. However, some professionals overlook their shipping agreements. These foundational logistics contracts may include hidden expenses that affect the bottom line.
Here is a guide to saving money and optimizing LTL shipping agreements.
The Hidden Costs of LTL Shipping Agreements
Hidden fees could bleed the bottom line through accessorial fees and reclassification penalties. Unplanned charges could arise if the logistics partner includes liftgate services, which use a hydraulic platform to raise and lower goods when loading docks are unavailable. Shipping to a residential address could increase costs compared to commercial, dock-to-dock transport.
Freight class is another critical oversight, as it is standard for determining LTL rates. If shippers miscalculate density, the carrier could reweigh and reclass shipments in the terminal, and the enterprise must pay a reclassification fee and a higher rate based on the correct tier. These fees could lead to significant and unplanned spending for organizations.
How Reviewing Contracts Can Benefit Companies
Reviewing LTL agreements goes beyond the initial quote. The details in the fine print are essential to saving money in targeted areas. For example, decision-makers can neutralize surprise accessorial fees accrued outside of dock-to-dock transportation. Instead of paying for each non-dock shipment, teams can negotiate for flat fees or waived charges.
Evaluation is also necessary for seeing through misleading discounts. For example, a carrier could arbitrarily inflate its base rate before offering a discount. Doubling the price before offering a 50% discount means the customer still pays more. If a client has competitive data, they can present these numbers to their preferred carrier and negotiate lower base rates.
Protecting Businesses From Volatile Surcharges
Some factors are beyond an organization’s control. Fuel surcharges could arrive any day due to the volatile global market, so carriers add fees to cover these fluctuating costs. Those exposed to these unexpected costs could lead to budget overruns, leading to significant ramifications for logistics leaders who planned when fuel prices were lower.
Proactively reviewing an LTL contract means considering the carrier’s full surcharge table. Smart business owners audit the invoices and check the EIA price to ensure the correct surcharge is applied. During negotiations, it is wise to request a surcharge cap to limit the ceiling regardless of market trends.
Affordable Ways to Optimize LTL Shipping Contracts
Renegotiating freight agreements may be daunting, but business and startup owners can find substantial savings through smart and strategic adjustments. Here are seven key areas of the contract that allow small operational shifts.
1. Combining Shipments
LTL shipments have baseline costs regardless of their size, so it is wise to consolidate shipments to pay the initial fees altogether rather than multiple times. Business owners can implement consolidation by changing their order cadence and designating specific shipping days, like sending West Coast shipments on Tuesdays and Fridays.
2. Auditing Freight Classifications
Focusing on freight classification is another low-cost action to control LTL shipping expenses. This fee is based on the shipment’s NMFC class number.
Logistics professionals can audit by creating a master product list. Then, each SKU should receive precise dimensions and the correct NMFC classification. Shipping teams use this document when creating the bill of lading.
3. Negotiating Top Accessorial Fees
By identifying and negotiating common fees, brands can eliminate much of the cost without negotiating all line items. Company leaders can start by transforming their shipping invoices into actionable intelligence. For instance, they examine carrier invoices from the previous six months to portray shipping patterns accurately, which may reveal the top costs to be residential delivery and liftgate service.
4. Increasing Carrier Liability Limits
LTL transportation provides limited financial responsibility, as shipments are not automatically insured for their full value. Instead, carriers may determine liability limits on a per-pound basis. A predetermined rate increase may be more affordable than purchasing third-party insurance for each item.
5. Consolidating Carriers
Companies may use multiple carriers to lower the price of one-off shipments, though it can have negative long-term consequences. Those with regular shipments should channel them through one or two carriers. Through consolidation, they can become high-value accounts and gain pricing and negotiation advantages.
6. Creating Effective Routing Guides
Routing guides connect LTL shipping agreements to real-world actions on the shipping dock so logistics teams can negotiate with carriers more effectively. An effective routing guide enforces best-cost decisions, such as finding the right carrier for specific lanes, and reduces decision fatigue by gathering quotes and speeding up workflows.
7. Leveraging 3PL Providers
Startups and small-to-medium-sized entities may have limited shipping volume and leverage with large carriers. Despite their size, they can still save money by partnering with 3PL providers and cost management firms.
3PLs cut costs by aggregating volume and negotiating better rates for their shipments. Clients benefit from volume-based discounts and lower rates.
Trusting Experts to Audit LTL Shipping Contracts
Decision-makers can read the fine print to find ways to save money, but outside experts are helpful when optimizing a bottom line and operational efficiency. These professionals have benchmarking data to provide market-based evidence that logistics managers validate rates and uncover hidden costs.
Broussard Logistics has nearly 50 years of experience in freight auditing and transportation management software. This Houston-based company helps shippers negotiate best-in-class carrier agreements and save money. It features proprietary technology that seamlessly integrates with existing ERP and WMS systems, helping its experts conduct audits and perform analyses.
Business and startup owners can optimize transportation expenses and save money while still having control over their shipments with Broussand Logistics. Since 1978, this firm has helped clients save an average of 18.2% so they can gain the flexibility to renegotiate rate structures and service levels.
Following the Lead of Smart Logistics Companies
The modern landscape is competitive, so overlooking LTL shipping agreements can be expensive. Cost reduction and operational stability involve dissecting standard rates, so it is essential for industry professionals to turn these hidden fees into predictable costs. When shipping turns from reactive to proactive, it gives enterprises powerful competitive advantages.
Spencer Hulse is the Editorial Director at Grit Daily. He is responsible for overseeing other editors and writers, day-to-day operations, and covering breaking news.
