SFA Panelists: Tips on How to Save Money on Freight

John Wolz

Negotiate with freight carriers for discounts and check the paperwork to make sure you aren”t paying too much, panelists on a Southwestern Fastener Association session on “How to Save Money on Freight” recommended.\
David Gates of Freight Audit Recovery advised training for shipping and receiving clerks and the staff person who checks freight invoices prior to payment.
The first item is to know the National Motor Freight Classification for your products, several panelists agreed.
This year”s 765-page book “includes all the rules and regulations pertaining to shipping,” Gates explained. The text includes standard forms such as bill of lading, loss and damage cargo claim, over-charge claim and “guides you on how to fill them out.” There also are training seminars for staff.
“Each and every commodity has a classification number ranging from Class 50 which includes most fasteners to Class 500 ping-pong balls. The higher the class the higher the shipping costs.”
Most nuts, bolts, screws and washers are in the iron and steel products Class 50.
” “Taking time to fill out the Bill of Lading accurately will reduce the odds of your freight bill being invoiced incorrectly,” Gates emphasized. “Make sure all the BOL is complete & the shipper, consignee, number of cartons, class number, weight, date and signature.” “Most carriers will re-weight and inspect your shipment, especially if the BOL is incomplete,” Gates warned. “If you do not put an accurate description of your commodity along with its class, the carrier may re-class your commodity often with a higher class. You know your commodity best, so don”t leave it to chance that the carrier will.”
In addition to re-classing your commodity, shippers add a weight/ inspection charge. Gates noted that in auditing 1,700 client bills the previous month he found $12,400 in overcharges. One carrier charged $16.70 per weight inspection and 28.5% of the invoices had a W-I charge.”

” “Your freight auditor should be able to catch errors made by the carriers”,�Gates explained. But there may be errors made on those “collect” shipments you receive by your suppliers.

” Watch the NMFC#’s on those incoming “collect shipments”. “Catch the errors and charge it back to the original shipper to wake them up and encourgage them to fill out the BOL�accurately.”

” Be sure receiving clerks inspect each shipment. Incoming shipments should be checked before signing the Proof of Delivery (POD). The person signing “basically agrees that the whole shipment is accounted for, there is no apparent damage and it was received on time,” Gates explained. “If the shipment is short the number of cartons it should be noted on the POD. It gets complicated if the shortage was not noted on the POD. If there are some damaged goods and the receiving clerk does not note it on the POD, who is responsible for the damage?”

” Check your backup documentation before approving invoices for payment. Check the BOL, POD, weight/inspection and other accessorial charges. Be sure your correct discount is being applied. “If the carrier can not provide back up for any accessorial charges, deduct that amount from your freight invoice, ” Gates advised.

” “Every week the Energy Information Administration posts the U.S National Average Diesel Fuel Index” (www.EIA.DOE.gov), Gates explained. “Most carriers use this index to determine fuel surcharges.”

In auditing for one of his clients, Gates recently found that one carrier was applying full truckload (T/L) surcharges on LTL (Less than Truckload) shipments which had upped the freight bills a total of $1,300.

” If you pay an invoice and later find mistakes, you have six months from the ship date to file an overcharge claim, Gates pointed out.

” Negotiate with carriers. “I have seen many pricing agreements and I am amazed at some of them. One client of mine had an agreement based on a more-than 10-year old base rate and another had the fuel surcharged waived,” Gates found. “Another client had a “Freight All Kinds” classification rating all commodities between class 50 and 100 at Class 60.”
“The more volume you have, the more room you have for negotiating. One possibility is having your fastener association approach a carrier to negotiate a better rate for all members,” Gates suggested.

” “Be sure to research “ma & pa” carriers. Many are good and have great customer service and rates,” Gates finds. “But one fastener company I visited had a ma & pa carrier go out of business and a critical piece of equipment was never recovered.”

” Before signing a warehouse lease check the rating of the location. “One fastener distributor I talked to had opened a branch only to discover it was in what a LTL carrier classified a “non-direct pickup and drop off point” or “beyond” zone, making every shipment more expensive,” Gates explained. “The parcel air carrier that a client of mine uses charges 35 cents per pound with a minimum of $35 for these “beyond” charges.”

“Ask for a discount,” advised Rick Heydenreich Jr. of Ace Bolt & Screw Company. “The worst that can happen is they say “no”.”
If you can”t get a discount on all shipping, “negotiate discounts on frequently shipped routes.”
Find out where the price breaks are. It may be cheaper to ship a 4,500 lb load than 4,000 lbs.
“Negotiate. Remember, when it comes to moving your product, you”re the customer,” Julie Glass of International Fastening Systems advised. “Trucking companies want your business and UPS is not your only option.”
Reduce the number of times you handle product, Glass emphasized. Every pick up involves purchasing, receiving, inventory control, accounts payable and accounts receivable. The more people that touch it, the more the costs.”
“Anticipate your needs for one week. Your steady customers have a pattern to their orders and you can serve them just as well and save money at the same time by being prepared.”
Two or more shipments per week “can eat away at your margins.”
“Added convenience equals additional costs,” Glass pointed out. “Weigh carefully the expense incurred to fill an order from a local source instead of planning just a few days inventory.
” Avoid packaging that moves your rate into “oversize” categories.
Glass also suggested choosing vendors with a prepaid freight policy, consolidating inventory replenishments with order fills, asking vendors to drop ship customer orders directly and scheduling blanket orders.
Take advantage of UPS hundred weight rates. “UPS won”t tell you, but it takes effect at 150 lbs,” Glass revealed.
Compare FedEx pallet service with truck rates. FedEx is “getting pretty ambitious.”

“Don”t automatically think of air freight,” Robert Fennell of FedEx Freight advised. You can ship from Fort Worth 1,600 miles to Saginaw in two days by ground, Fennell pointed out.
Freight cost factors include mileage, weight and weight price breaks, density, value, claims and liability and stowabilty. “These produce your cost per carton on each freight bill,” Fennel noted.
While customers should look for the best freight rates “we”re in business to make money and somewhere I”m going to say “no”,” Fennell said.
Factors to consider include “soft costs” of time, claims, customer relationships, workload, loss of production, loss of sales and the time ordered to time delivered.
Freight companies that can provide services such as advance notice of late delivery, can help your relationship with customers, Fennell suggested.
Web technology can increase efficiency, reduce costs and increase customer satisfaction. “Just click to ship,” Fennell said.

“Every business is different,” observed Ritchie Palk, the North Texas director for UPS. “You have to find those who can help you.”
The freight business can be more than just trucking. UPS and Toshiba figured out that instead of shipping laptops for repairs to different locations for diagnosis and repair the entire operation could be in one clean room in a UPS facility and be handled overnight.
“You shouldn”t have to be logistics experts,” Palk said. Papa John”s are pizza experts and UPS manages their fleets.
UPS can pick products off shelves. “We”ve got to be creative,” Palk emphasized. “It keeps evolving.”
How many days is your product in shipping? Palk asked.
“Think about the supply chain” and how steps can be eliminated.
“We”re all talking the same thing cash to cash. If you grow, we grow.”
“Somebody in this room is going to figure out how to do it better and they will gain.” �2006 FastenerNews.com