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Different Freight Types, Different Risks and Rewards

When it comes to running your business, it can be difficult to identify points of improvement, leading you to believe that things are as good as they can get, but in a climate of rising logistics costs, making sure that your operations are running as smoothly and efficiently as possible, can mean the success or failure of your business.

Ground transportation is a cost faced by almost every shipper in every industry, and quite a significant one, yet many shippers aren’t paying enough attention to how their ground transportation spend is being allocated, or don’t realize that there are different ways to approach it. In this article, we will break down a major factor that affects transportation costs: the differences between less-than-truckload (LTL) and full-truckload (FTL) services. We will break down those terms, what they mean for your business, and give two examples of how BlueGrace helped clients that were operating with less-than-ideal business models save hundreds of thousands on their ground transportation costs.

Yes, the perceived cost savings associated with sharing a truck with five other shippers is tantalizing, and a legitimate notion, but it’s not everything.

LTL has gained a reputation of being a more efficient, cost-saving method of transporting freight. It can be thought of like carpooling for cargo; if two people are going the same place, why not double-up and go in one car, splitting the cost savings? Translating that idea into a business scenario, if you’re a small-to-medium sized business, you likely do not have enough product going to one destination to fill up a truck’s full trailer, so LTL can seem like a cost-saving no-brainer, but unfortunately, it’s not quite so cut-and-dry. Yes, the perceived cost savings associated with sharing a truck with five other shippers is tantalizing, and a legitimate notion, but it’s not everything. There are other factors to consider when deciding between LTL and FTL, and there is no, one-size-fits all approach.

Potential Downsides of Utilizing LTL

Timing: By nature of LTL, there are multiple stops along the route that means longer lead times and may cause delays in the supply chain. So, if you are aiming to minimize transportation time, which everyone is in the logistics world, then you are making a sacrifice.

If your company operates in the realm of e-commerce, it would be prudent to examine the costs associated with the loss of business that your business suffers due to potentially longer LTL delivery times, and evaluate what options would open up if you were able to reduce your transportation times by a period of days.

For some shippers, timing is absolutely critical. The obvious examples are perishable products, like fresh produce and pharmaceutical products, which cannot sit for long periods of time in untempered conditions. But now, other “non-perishable” products, like apparel, electronics, and non-perishable food products are becoming time-sensitive in the e-commerce driven world, with monoliths like Amazon now offering same- and one-day shipping options, which have set a standard in the minds of consumers to receive products quickly. If your company operates in the realm of e-commerce, it would be prudent to examine the costs associated with the loss of business that your business suffers due to potentially longer LTL delivery times, and evaluate what options would open up if you were able to reduce your transportation times by a period of days.

Damage: Another common problem associated with LTL transportation is the higher occurrence of damage to cargo. Due to the frequent stops and touch points along routes, in which cargo is being loaded and unloaded from the trucks, freight generally incurs more damage on LTL trips than on FTL trips. For hardier freight, some light damage to exterior packaging is unlikely to be of major consequence, but for shippers dealing in more delicate products, delivering damaged product could mean having to refund a customer for the full price paid for the product, the burden falling on you. If your product is not easily damaged, this may not be an important factor, but if your product is damaged frequently or even occasionally, calculate the average cost that you end up paying to make up for damages per quarter, and then comparing to how much it would cost you to instead opt for FTL, which would result in significantly less damage. Which cost is higher in the end? It will depend on your particular business.

It’s not an easy task for shippers. At BlueGrace, we work with shippers on a case-by-case basis to help determine strategies that fit business’ specific needs. Our digital platform, BlueShip®, takes all of a company’s attributes into account to identify which options result in minimized costs and maximized profits. In the case studies, for example,“Private Equity Group & Transportation Cost Reduction,” and “Manual Process Reduction & TMS Integration for Restaurant Industry,” we dive into each case, exploring how BlueGrace helped two different clients with similar needs rethink their supply chain strategies that were giving them less-than-optimum results.

The routing guide left out multiple states that certain carriers could not go to. Because of this issue, the supplier was receiving chargebacks from distribution centers on a regular basis.

In the first case, a private equity group (PEG) was using proprietary enterprise resource planning (ERP) system to allocate resources and make business decisions. After analyzing the company’s situation, it turned out that the ERP was not suited for the client. The routing guide left out multiple states that certain carriers could not go to. Because of this issue, the supplier was receiving chargebacks from distribution centers on a regular basis. Once BlueGrace helped them downsize their carrier network to a more tailored group of carriers, it saw a 12 percent reduction in transportation costs and $300,000 in annual savings.

In the second case, a restaurant supplier was having difficulties managing their current in-house ERP system. They had looked at 3PL solutions in the past, but couldn’t find a solution that suited their needs, causing them to continue to incur chargebacks frequently, dinging their bottom line significantly over time. After the implementation of BlueGrace’s systems, the supplier was able to straighten out their supply chain and avoid chargebacks, saving them 12 percent in hard costs totaling at $468,000 in one year.

Do You Understand Your Business’ Needs?

At BlueGrace, we understand that every business has specific needs.We would love to learn what matters most to you in this aspect of your business. Contact us at 800.MYSHIPPING or fill out the form below to speak to one of our freight experts today, and learn how you can optimize your supply chain, minimize costs, and maximize your company’s bottom line!

Controlling Costs and Preventing Accessorial Loss

Controlling costs is critical for any business to be successful. When working with a supply chain, the more complex it is, the more chances there are for additional costs and surcharges, any of which can cost your company a great deal of extra money.

They are any freight services that go beyond the normal scope of pickup and delivery.  

Accessorial charges are a particular type of surcharge. They are any freight services that go beyond the normal scope of pickup and delivery. This can include inside or special delivery charges, waiting or detention time, fuel surcharges, storage fees, and many others. Given the way the freight market is changing, especially due to the rise and continual growth of e-commerce, many companies are looking to a more specialized version of last mile delivery as customers want their products sooner rather than later. The “white glove” last mile service, while costly, is growing increasingly important as customer service is becoming one of the last true differentiators among the competition.  

In our webinar, we covered the basics and most common questions of accessorial charges which include:  

  • What are accessorials? 
  • How do they affect cost? 
  • How do they affect supply chain efficiency? 
  • How can we mitigate problems? 
  • How do we know if we have a problem? 

Consumers want their product today, that means that retailers want it delivered, checked in, and on the shelf yesterday.

Logistics and supply chain management has become a very tight game, almost cutthroat in its harsh severity. Consumers want their product today, that means that retailers want it delivered, checked in, and on the shelf yesterday. With the ability to order just about anything a consumer could possibly want from the vast online marketplace, brick and mortar retailers have to run an even tighter ship than they have before if they have any hopes of competing. To that end, some retailers are upping the ante and doling out punishment for shippers who aren’t in compliance.  

What Are Accessorials?  

As we mentioned above, accessorials are extra charges associated with freight delivery that fall outside simple pick up and delivery. We gave a few examples above, but those are by no means the only accessorial charges that you could be stuck paying. Here are some other types of common accessorial charges.  

  • Reweigh 
  • Limited Access 
  • Liftgate 
  • Residential delivery 
  • Appointment / Notify 
  • Sort & Segregate 
  • Hazardous Materials  
  • Trade Show Delivery  

While inaccurate weighing of freight could be a result of an honest mistake, the cost of that mistake can add up quickly.

It’s important to control and monitor as many of these as possible to help control costs. Consider reweigh charges for example. When a carrier weighs freight and compares the actual weight to what’s listed on the bill of lading, the difference can be instantly tacked on to the invoice. For shipments that are 50 pounds or more over what the bill of lading states, there is a $25.00 validation fee as well as an increase to shipping costs. Additionally, all freight fees, fuel surcharge fees, and any other applicable accessorial fees will be adjusted accordingly. While inaccurate weighing of freight could be a result of an honest mistake, the cost of that mistake can add up quickly.

How Accessorial Fees can Affect Your Supply Chain  

One way to better control accessorial charges is to have a more efficient and agile supply chain. Detention fees are a prime example of where efficiency pays off. For the LTL market, every shipment has a set amount of free time per stop before the charges start being applied. While this is based on weight, meaning that heavier shipments have more time, it can be hard to gauge just how long each stop is going to take which leaves your company exposed to detention fees.  

Another thing to consider is that the ELD mandate severely limits the amount of working time a driver has available. The longer it takes to load and unload freight can cause delivery delays and will ultimately increase the price of a shipment. Once you start adding detention fees onto the bill it can quickly become more expensive than you were initially anticipating. 

It’s critical to have your supply chain running smoothly and efficiently.

Because of this, it’s critical to have your supply chain running smoothly and efficiently. Not only does it increase the chances that you will make your delivery schedule, but having a more efficient operation makes you a more attractive customer to carriers (which increases the likelihood of getting the capacity you need) as well as helping to control shipping costs.  

Learn More About How You Can Manage Accessorial Charges   

When it comes to controlling costs, the more you understand about extra fees the better off you’ll be. Because many of these accessorial charges can compound and complicate others, it’s important to understand the full workings of your supply chain and identify any potential problems before they arise.  

The truth of the matter is that the more you understand your freight and the way your carrier works, the more accessorial fees you can either reduce or negate entirely. Many of these fees won’t even enter into the picture so long as the shipper is taking the time to make sure they’re doing things right. Doing this means preventing the issue before it even begins. On the other hand, if your freight invoice is coming as a bit of a shock, it might be time to take a closer look at the surcharges and determine what you can you do to correct the issue.  

Ultimately, everything we covered in the webinar is about helping your company to manage these fees and perform better across the board. From internal operations to external executions, everything is connected and we break it down for you. Watch the full webinar to learn more about how you can be successful!

If you would like to speak to one of our freight experts, call us at 800.MYSHIPPING or fill out the form below:

Driving Down Supply Chain Costs with Mode Optimization

The term “optimization” is thrown around often in the logistics landscape. It’s true, optimization is an indispensable part of a well-run business model. Of course, every business owner wants their operations running as tightly and efficiently as possible, but the footwork required to determine how to optimize your business’s operations and see tangible results is often easier said than done.  

Our Webinar discusses the typical LTL network and differentiates between less than truckload (LTL) and full truckload and the factors companies should consider when deciding which alternative is best for a particular shipment.

In our Webinar “Driving Down Supply Chain Costs with Mode Optimization,” Brian Blalock, Senior Manager of Sourcing Strategy at BlueGrace, discusses the typical LTL network and differentiates between less than truckload (LTL) and full truckload and the factors companies should consider when deciding which alternative is best for a particular shipment. Both have their advantages and weaknesses, but one may suit the business better depending on the kind of freight being transported, the location or origin and destination. While the decision is sometimes considered arbitrary, in order to optimize your operation, i.e. lower cost and maximize profit, it is crucial to consider the following factors. 

LTL vs. Full Truckload

LTL shipments must be 12 linear feet or less, usually 5000 pounds or less, and are “typically consolidated with other freight from other shippers,” Blalock said, continuing that they are identified by class and that the structure, and that pricing can be very complex because it is determined by product class, distance and weight. Typically, it costs less than a full truckload, an obvious appeal to any shipper. 

Fewer claims of damage occur with truckloads than with LTLs.

Fewer claims of damage occur with truckloads than with LTLs. “Why?” One might ask. It’s simple. Blalock uses the example of witnessing luggage being boarded into the belly of an aircraft; people rarely handle a stranger’s items as gently as they would their own. In conclusion, the “less handling of freight, the less damage to the freight,” Blalock says. Since LTLs require more stops and handling, more damage is incurred to LTL freight than full truckload on average. 

When shipping a full truckload, your freight is the only thing on the trailer, so transit time is only contingent upon the required breaks for drivers and the time between pickup and delivery locations. The freight never has to leave the truck because it travels directly to its destination, so truckload shipments tend to arrive faster than LTL shipments, while at the same time, incurring less damage. 

When to Not Ship LTL?

LTL loads should be the choice for shippers dealing in smaller quantities at a time as carriers charge by weight and volume, but may not be the optimal choice at every juncture. In order to determine which mode is right for your operation, create business and shipping rules around factors like weight, volume, time constraints, and cargo sensitivity of your shipments. You need to consider the rate at which damage may occur in your LTL shipments. How much does it really end up costing you at the end of the day? In knowing this information, you will be better able to decide in which case you need to opt for a full truckload, and which you are able to go with an LTL. 

If the margins are tight on your product, the last thing you want is another cost eating away at your bottom line.

Another key is understanding how business decisions affect OTIF (on time in full). “If you ship to Walmart you can’t show up late, you can’t show up early, and you can’t show up incomplete,” Blalock said. “Any of those that you do, typically, [are] about a 3% ding to the cost of the entire invoice.” If the margins are tight on your product, the last thing you want is another cost eating away at your bottom line. “Likewise, if you continue to not hit your dates, you’ll find that you can lose valuable shelf position, and you won’t be shipping to Walmart anymore.” Blalock says to consider using different carriers for different shippers to this end: “The choices that you build into your business rules include choosing the right type of carrier every time,” he said.  

Supply Chain Engineering

“Understand that we are following the linear rules of the carriers,” Blalock says. “Build the rules of your freight around your tariffs.” Blanket rate pricing main type associated with the LTL market. Customer specific pricing is negotiated on your behalf when all of your capacity is going to a single provider, which is typically preferred for shippers with a larger freight spend. BlueGrace negotiates specifically customer-by-customer to determine which suites the customer better. “If you’re in Montana or the upper peninsula of Michigan, sometimes you may just want to pay the more expensive LTL cost,” he said, due to the fact that market is more remote, and competition between carriers is less apparent. 

Identifying consolidation opportunities is the key to the cost-reducing aspect of optimizations.

Identifying consolidation opportunities is the key to the cost-reducing aspect of optimizations. BlueGrace’s software is designed to help clients consolidate unnecessary costs in their unique supply chains. One measure that BlueGrace uses is a center of gravity study, which considers various origin points and points of destination and calculates where each region should ship from to find the fastest route at the best cost. “You want to be able to take advantage of the ability to choose the right mode every time and drive down costs. If all things are equal, an FTL is going to travel much faster … and [incur] less damage to freight,” Blalock said. “If time is no issue, if the freight is indestructible,” then LTL could be the best option for you. 

Click HERE to watch the full Webinar and learn more about tariffs and fuel surcharges associated with costs. If you would like to speak to one of our freight experts, contact us at 800.MYSHIPPING or fill out the form below.

How fuel scale surcharge effects transportation cost.

“It drops like a feather, and rises like a rocket”… People have said this for a long time in relation to fuel costs.

Fuel surcharge has both a good and bad impact on the economy. Of course increased fuel costs decrease personal purchasing power. Though, when fuel costs drop, top line revenue for transportation companies drops, while spend for businesses who have need for transportation gets lower. Consumers pay less for gas and transportation, as well. Airline pricing is the exception to this rule.

Untitled

Above is a simple chart explaining how increasing fuel surcharge, in addition to line haul, raises transportation cost overall. According to a recent Boston.com article Will Gas Prices Drop Below $2 a Gallon? AAA Says Yes. And, gasoline is approaching less than $2 a gallon in many states.

YRC reports their current LTL FSC is 21.30% and TL FSC is 42.60%.

It may be a good idea to get out on the road and enjoy it now, before fuel costs rise again.

What are you wasting by not auditing your freight invoices?

At BlueGrace we make it our business to audit every invoice before it gets billed. To maximize the value our services provide, we research all invoice discrepancies and identify as either customer, carrier, or internal error.

If it is determined that the carrier has billed us in error, we dispute directly with them and a corrected invoice before we billing our customers. In the event it was caused by an internal error, we correct the error and adjust the invoice to the quoted price before the customer receives the bill., we will send that invoice at your quoted price. When there is a customer error, we inform you of the carrier findings, justification and educate you on how to avoid costly mistakes in the future. Should you dispute the findings, we provide you the opportunity to dispute with the proper paperwork, pictures, etc. and advocate on your behalf.

Failure to audit your invoices and hold your carrier’s accountable can result in thousands of dollars of annual waste. Here’s a recent, real life example:

If you were to ship, for example, 20 LTL shipments per a week, it could take 5 minutes each shipment to audit. The median salary in the United States is $33k a year. This means by BlueGrace professional auditing your shipments and letting you run your business we save you $26.45 a week in actual money as well as an hour and forty minutes in time. We provide this auditing service as an added service to our customers at no added charge. We can also provide data analysis of your current provider transportation costs to either validate or advise on if you are getting the most competitive rates possible. We also report on these audit savings in quarterly business reviews as you can see in the slide below:

TB

To learn more about our services email contactus@mybluegrace.com or call 800-697-4477 today

Guaranteed vs Expedited Shipping

Every day shipments are booked for pickup with LTL carriers, and on occasion those carriers get overloaded and miss the pickup. A serious problem arises when that freight was time critical, such as a manufacturer waiting on freight from their vendors to finish a product. In cases like this, we have seen plants shut down until the freight arrives.

One way to help prevent this situation from occurring is a guaranteed shipment. By placing a day guaranteed on your shipment, the LTL carrier will be responsible if the freight misses that guarantee. They are much more inclined to pick up freight with guarantees attached to avoid paying the freight charges.

In case a carrier does miss the pickup on a time sensitive shipment, an expedited shipment may be required.  A dedicated carrier is called in to move the freight. This carrier picks up the freight and drives straight through until it arrives at the specified delivery location. Shipping costs for Expedited Freight can become expensive, as you are paying for a dedicated truck. However, when you compare the costs of expedited shipping versus the cost of shutting down the manufacturing plant, it may be a bargain.

Freight traveling cross country may require an air rate. When the freight is sitting in Laredo, TX and needs to be in Boston, MA by 10 AM the next day, the freight must be sent by air. This can be very expensive as airline space is very limited.

BlueGrace Logistics are the experts in expedited situations and the phrase our LTL representatives typically hear is “you just saved my job!” The worst feeling in the world as a customer is knowing that your job may be on line if the freight does not arrive. When you have a hotel opening in New York on Saturday and the drapes are still in Alabama on Thursday morning, that sinking feeling in your stomach will not go away until the freight arrives. On Friday morning when the customer calls to say “Thank you! You saved my job!” there is a feeling of significant relief for them – which is the best feeling for our company.

Avoid the stress and don’t play with chance, setup your next time sensitive shipment with BlueGrace Guaranteed services.  In the event you need expedited help, BlueGrace can help you there too.

 

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