Transportation Cost Containment - 1999
Furniture World Magazine
By Dan Bolger
Check minimum charges, make it easy for carriers.
The year of 1998 was significantly different than prior years in dealing with carriers. Overall capacity in the less than truckload (LTL) and truckload (TL) appears to be reasonably well balanced. Without excess capacity, the carriers appear to be gaining sophistication in understanding market conditions and are using their costing models to evaluate specific account profitability. Most importantly, with capacity in balance, they have been able to accomplish significant price increases with many customers. Don't take this to be all bad news because there are still things you can do to reduce costs.
Carriers started raising prices in August 1998 and most had increased their rates by November. If you were not receiving goods under a contract agreement, you may have noticed 5-6% increases in base rates and even greater increases in minimum charges, notifications, and other accessorial charges. By year end, every LTL carrier has increased rates and many contract rates have increased accordingly.
One of the largest LTL carriers, Roadway led the way with a dramatic increase in minimum charges in mid September. The minimum charge was increased from $48.00 to $54.75 for shipments under 150 pounds, $69.50 for shipments over 150 pounds and $80 minimum charge to indirect points. Just a few years ago, Roadway's minimum charge was $39.00. Other carriers subsequently took their own independent actions on minimums and also increased rates.
Many companies are shifting the smaller size shipments over to UPS and RPS if they are within their dimensional limits. Some manufacturers have even redesigned their products to ship by UPS, even if some assembly is required at the destination.
Do you require the carriers to call before delivery? I'm continually surprised to see notations on retailer purchase orders to call 24-48 hours before delivery, even on small shipments when the shipper is an overnight point. The trucking companies are in the shipping business, not the holding business and the notification charges are becoming higher because their costs are higher. It isn't just the phone call, it is the extra handling and administration. Some appointment charges are waived but many are now in the $20 to $24 dollar range.
Receiving staffing planning can require appointments for large shipments, but it doesn't make sense for small shipments. We see instances where the retailer's expense for appointment charges exceeds the cost of having the staffing available. Setting up an express receiving door for small shipments is an option to make it easy for the trucking company and eliminate delays. The advantage of getting speedy delivery is to make the goods available for sale or to deliver custom ordered product more quickly. Most trucking companies can also provide you with a daily fax of inbound shipments and some even provide a complete manifest. Your manufacturers are also increasingly capable of sending you advance information.
Receiving damaged product is more and more of a hassle for everyone. For everyone's protection, review the fundamentals of receiving so damages are caught right away. There are two excellent articles posted to FURNITURE WORLD's website www.furninfo. com in the "Operations Management Index" called Warehouse Receiving Tips-4/96 and Managing Receiving-8/94. It minimizes surprises when opening the carton later. With the increased availability of the Internet and email, we encourage use of a digital camera instead of Polaroid pictures. You can photograph the damage, pop the disk into your computer, and include pictures right on the freight claim. It helps the carrier and it provides permanent documentation to keep the manufacturers involved in damage reduction. (The digital camera is also great for showing manufacturers missing parts or defects.)
Are you tracking problems by carrier and manufacturer? If not, let that be a New Year's objective. Some carriers are much better than others. Even when the manufacturer puts a quality piece in the truck, furniture needs more handling care than many industrial commodities. For that reason alone, there is a clear preference to use specialized furniture carriers whenever it is possible.
Finally, when comparing freight carrier prices, don't just look at the discount percentage. Because the base rates for specialized furniture carriers are lower, a 20% discount from a specialized furniture carrier may actually be better than a 50-60% discount from general LTL carriers. The base rates also differ dramatically between the general LTL carriers such as Roadway, Yellow, Consolidated Freight, ABF and ConWay Transportation. If you choose by discount alone, you will be spending excess dollars. When comparing you must compare actual shipments and get the bottom line cost.
Bottom line, there is a continuing need to monitor freight cost and service to assure that you are getting solid value for the expenditure.
Daniel Bolger of The Bolger Group helps companies achieve improved transportation, warehousing and logistics. Questions can be directed to Mr. Bolger care of FURNITURE WORLD at email@example.com.
Contributing editor Dan Bolger of The Bolger Group helps companies achieve improved transportation, warehousing and logistics. See many other articles by Dan in the Operations Management article archives on the furninfo.com website. You can send inquiries on any aspect of transportation, warehousing or logistics issues to Dan Bolger care of Furniture World Magazine at firstname.lastname@example.org or call him direct at 740-503-8875.
Read other articles by Dan Bolger