Defend Yourself Against Improper LTL Carrier Freight Charge Adjustments
By Paul Benfer, Kinetic Supply-Chain Services, LLC –
In my role as a third-party logistics provider I administer customer LTL programs in the United States and Canada. My company is also an agent for one of the larger web-based LTL transportation management system (TMS) providers. LTL freight is the majority of my business, but it just isn’t that much fun anymore. Why? Because LTL carriers continue to wage war on their customers. Wage war you say?
Every week between thirteen and sixteen percent of the shipments moved via my TMS partner are adjusted by the LTL carriers. Changes come in many ways. From class and weight adjustments, to limited access and accessorial fees not requested on the bill of lading, which happens to be the contract of carriage. Since when can a carrier obligate you to pay an accessorial fee not requested or required? Oh, the carrier rules tariff states that they can charge whatever fees deemed necessary to effect delivery at their discretion. My very large TMS partner signed a contract and agreed to those tariff rules. Chances are your customers and even you have signed on to subject yourself to a carrier rules tariff.
My largest managed LTL account operates three distribution centers in the United States. They spend close to $5,000,000 per year on LTL freight. Are they able to properly describe their freight on a bill of lading? The answer is no. Their products are subject to density class rating. While they can tell the carton dimensions via their main network, the capability to transit that information over to a bill a lading does not exist. They can’t even break out their model (sku) numbers on a bill of lading. They have over eleven hundred distinct model numbers. You can just imagine the volume of adjustments that I deal with on a weekly basis. Time and again I bring up the benefits of bridging the product data, only to be told that the parent company doesn’t want to spend the time or effort to align the systems, so a proper bill of lading can be issued. The one positive is that I negotiated the carrier contract, so they are exempt from the LTL carrier rules tariff. That one fact alone saves my client over $100,000 in invoice adjustments per year.
Based on the formidable obstacles outlined above, what can you do as someone who is responsible for freight payment to limit the damage? One basic step is to make sure the inspection was carried out in accordance with the product description on the bill of lading. My customer often ships four to ten cartons loose as described on the bill of lading. When an invoice is adjusted on a loose carton order, approximately seventy-five percent of the time it is inspected unitized or palletized. This is a violation of the contract of carriage (bill of lading). The adjustment is invalid. I have never had a carrier refuse to revert an invoice when presented with the above scenario.
The carriers get lazy even when they attempt to properly inspect loose carton shipments. Often the carton dimensions for my account show the exact same dimensions for each carton on the certificate. My client rarely ships a single model on any order. They can provide the pallet dimensions if asked to pull the information from their system. You can present the evidence to the carrier. If they relent, great. If not, ask the account to reconstruct the order and have the carrier representative visit the distribution center to take measurements.
Another way to help reduce the onslaught of adjustments is to talk to the people who construct the shipments on pallets. Explain that any overhang or pyramid built on top of a pallet adds to the cube of the order. Stress the importance of building square, uniform pallets when possible. I had one customer constantly complain about adjustments. I went out on his dock and saw a pallet with one carton that protruded two feet above the rest of the skid. I explained how the carriers calculate cube. He now understands how the game is played. My client no longer complains about adjustments.
Most LTL carriers take photos either via dimensionalizers or manually. Ask for photos that confirm dimensions. If the carrier cannot document the dimensions reported via photographic evidence, you should be able to defeat the adjustment. If the top layer of a pallet shifts while the trailer is unloaded, there is a good chance to win a challenge to the adjustment. A dimensionalizer cannot delineate when a layer shift results in a slight overhang on a pallet. It only records the dimensions based on the overall length, width and height of a pallet. I cannot stress how important it is to review adjustments when a change in class, particularly with multi-step freight all kinds (FAK) programs are in place.
When you review an inspection certificate, always look closely to insure the dimensions are provided before an adjustment is approved. Make sure the pallet footprint matches your customer’s actual pallet size. One inch off can make a big difference, especially when your customer has a stepped FAK pricing program. In the case of the account referred to earlier, the difference is between class 70 and class 150 for freight charge calculation. The charges billed can be more than double the cost at class 150 versus class 70.
Ask your customer to measure and list the pallet dimensions on the bill of lading. This step is helpful where the freight is subject to a density classification. Again, the extra effort will pay for the time expended very quickly in today’s freight environment.
Recommend your customer describe their shipments as cartons or pieces. They can add a pallet notation in the body of the bill of lading. The carrier must then weigh and measure every piece for an adjustment based on density and class to be valid.
The definition of what is a limited access delivery seems to expand every day. I now see the application of the fee to traditional retail and strip mall facilities. If you were to chart the evolution of limited access fees, one couldn’t help but notice the march to include just about any location without a dock or not in an industrial park. If your client has storefront deliveries, ask the carrier to provide their definition of limited access and insist that it be spelled out in the customer’s tariff page or contract.
Encourage your customers to purchase a scale with a digital readout. You would be surprised by the number of shippers who do not have a scale with readout capabilities. I would wage money the return on investment for a scale is less than one month. I have also suggested to small shippers to take a photo of the weight and pallet dimensions via a smartphone. You can download the image to a computer for future reference.
If your customer ships pallets with mixed commodities, it is important to properly describe each commodity even if they operate under an FAK contract or FAK tariff provision. Most FAK programs are capped. I had a client ship displays with one mannequin inside each pallet. The mannequin wasn’t listed on the bill of lading, so the carrier took the packing slip and adjusted the class to 250 for the entire shipment. The actual density of the shipment was more then ten (10) pounds per cubic foot, but that didn’t matter. NMFC Item 640 allows the carrier to charge the shipper at the highest-rated commodity contained in a pallet if the contents are not properly described. I discussed Item 640 with a Weight and Inspection Manager at a large Northeastern LTL carrier. He confirmed the above application as valid. His company chooses to review each case individually. They do not impose a strict interpretation of Item 640. Their carrier policy is to apply the overall density of the shipment for class calculation. They obviously value their customer relationships.
Many LTL carriers have incentive programs to generate weight and inspection revenue. Any incentive provided via gifts or money should always be scrutinized by the party subject to the program ramifications.
Back when I worked for common carriers, we were always frustrated by customers who underreported their freight weight or used a lower NMFC class description to cheat on rates. I believe that the carriers have a right to be paid for what they haul. My concern is with overzealousness on the part of some LTL carriers to glean revenue through the misapplication of rules and improper inspection practices.
The best way to insulate yourself is to know your product and be precise when you generate the bill of lading. Money invested in software, education, discipline and the development of policies and procedures is the best way to reduce and defeat LTL carrier adjustments. Your company will still see invoice adjustments, but with the proper tools and information, you can do much to reduce or eliminate inaccurate invoice adjustments.
You can reach me at paul@kineticsupplychain.com with comments or questions.