Negotiate Rules and Audit Your Carrier Invoice Adjustments
By Paul Benfer – Managing Partner, Kinetic Supply-Chain Services
In the past year I reviewed thirteen hundred and seventy-six (1,376) carrier adjusted invoices for one client. Close to thirty (30) percent of those adjustments were rescinded or reduced by the LTL carriers. How did I get the LTL carriers to reduce or remove the adjustments? The simple answer was to ask for evidence to verify the adjustments and demand that the carriers adhere to the contract provisions negotiated.
Below are some steps you can take to help mitigate the pain of aggressive LTL carrier behavior.
- If you have a significant LTL freight spend, demand a contract. The cost of a contract crafted by a seasoned transportation attorney or third-party consultant is negligible compared to the potential additional costs of overly aggressive LTL operations personnel. Make sure to develop a rules tariff and exempt your company from the carrier’s rules tariff. Place verbiage in the contract to require the carrier to contact your staff before an accessorial is provided that isn’t requested on the bill of lading. Examples of common accessorial fees are lift-gate delivery, inside delivery, notification prior to delivery and sort and segregation. You wouldn’t let a contractor add costs to a job for repair or construction work on your home without consent. Why would you allow a carrier to arbitrarily add fees to your freight bill without prior approval?
- If you don’t move significant amounts of LTL freight, carriers will be less inclined to agree to a contract. In that case, know your freight and your customer base. If your deliveries are to strip malls or stand-alone shops in downtown areas, negotiate riders that protect your company from lift-gate delivery and limited access fees. The trend is to charge for all deliveries to stores and businesses without docks, along with limited access fees. Protect yourself through specific rule change requests to the carrier tariff page agreement. Make the carriers specifically address the fees and how they will be applied before you move forward. Have all provisions that deviate from the carrier rules tariff put down in writing.
- List the pallet dimensions on the bill of lading. This simple step will help reduce or eliminate invoice adjustments where the commodity shipped is subject to density classification.
- Document your freight via weight certificates and photography. If you can document the weight and dimensions of your shipments, it becomes easier to defeat adjustments. The money spent on a digital scale will pay for itself very quickly. You can use a camera on your phone to take pictures of the freight on the scale.
- Ask for evidence. A few LTL carriers do not operate with the latest technology. Instead, they rely on their dock workers and drivers to inspect the freight. Many LTL carriers incentivize their personnel to inspect and find shipment discrepancies. It is only human nature to take a short cut on occasion if there is a reward tied to it. A one-inch variance in pallet dimensions can mean the difference in a class change. As an example, a 500 lbs. shipment from Newark NJ to Chicago IL costs $289.69 at class 175 (4 lbs. to 6 lbs. PCF) and $579.38 at class 250 (2 lbs. to 4 lbs. PCF) with an 88.7% discount via a major regional carrier. That is a one hundred percent increase in cost! If the carrier cannot provide photographic evidence for an adjustment like the one above, demand that they rescind the adjustment. If they still do not relent, recreate the shipment and have their representative come in and measure the pallet. If possible, make sure that all correspondence is compiled on one email thread in case of collection calls, small claims or litigation.
- Ship orders as cartons and not pallets. If a driver can count the pieces on a pallet, then craft the bill of lading with a carton count. In many cases LTL carriers will inspect a shipment if it is palletized as a single unit. They will not take the time to measure every carton. If they fail to inspect the shipment as presented via the contract of carriage, the bill of lading, the inspection is invalid.
- Know the weight breaks for your freight and demand that the LTL carrier(s) use the billed weight versus the actual weight. I discussed this position with two transportation attorneys. Both thought my argument was strong. If you have a shipment that weighs 440 lbs. but the freight charges are calculated with a deficit weight (60 lbs.) at 500 lbs. and the class is determined by cube, the carrier should use the actual billed weight to determine the freight class. If the above’s pallet cube was 112 cubic feet (4’x4’x7’) the density based on actual weight is 3.93 PCF versus 4.16 PCF for billed weight. The LTL carrier benefits from 60 lbs. of extra cubic capacity that can be used for another shipment and the additional revenue generated by using the actual weight to change the class and increase your freight charges. I would suggest you add the above to your contract or rules tariff agreement.
- An LTL carrier will continue to focus on any account that does not provide accurate weight or properly describe their commodity. They will continue to focus on any account where there is money to be made. If you properly weigh and describe your shipments, the carriers will tend towards other shippers, as there is little or no reward for an audit of your account’s freight.
LTL carrier invoice adjustments can wreak havoc on your freight budget. The best defense is attention to shipment detail and knowledge of customer delivery requirements. When carriers see an opportunity to upwardly adjust fifteen (15) percent of tendered shipments or more, it is obvious that they will not soon relent in their pursuit of a larger share of your transportation dollars.
Please contact me with any questions or comments at firstname.lastname@example.org