Accessorials: What Every CEO & CFO Should Know
As your company grows, if you ship physical goods, it’s likely that you’ll seek ways to save money on daily supply chain operations. One growing cost center for many businesses is shipping goods from your location or warehouse to the end consumer.
As shipping costs climb, it will become even more important to assess the freight costs your small business incurs – most importantly, hidden costs. Every small business owner should seek out ways to plan for the unexpected, manage unforeseen shipping costs and maintain supply chain budgets.
What are Accessorials?
One of the biggest unforseen freight costs are accessorials — extra charges for transportation services including packing, unpacking, long haul fees and extra pick-ups. Freight carriers may also charge extra fees for trailer detention, re-delivery, fuel increases, and other expenses or extra services.
The biggest difference between accessorials and surcharges, special service codes, and other fees that the major carriers charge is that, for the most part, they are assessed and applied post-shipment.
Companies can plan and budget for anticipated surcharges and special service codes to certain degrees, but accessorials, which are typically neither applied at the point of manifest nor included in regular invoices, can be extremely difficult to factor into your company’s logistics and supply chain budgets.
For this reason and others, they can be a major thorns in the sides for your supply chain managers and executive level management who have to answer to you for losses that are nearly impossible to pre-determine, difficult to uncover, and at the same time, very hard to ignore.
Today, the three accessorials that are charged most often are:
1. Residential adjustments,
2. Weight adjustments,
3. and Additional handling accessorials.
Like other accessorials, they are usually included in supplemental carrier freight invoices that contain limited data. Often, carriers will leave entire accessorial data fields completely blank. Without supporting information, shippers are unable to make knowledgeable inquiries as to why their accessorials were assessed in the first place.
Unfortunately, companies cannot expect to get any relief from accessorial charges in the foreseeable future—at least, not without negotiating a new carrier contract or taking strategic steps to reduce them internally. Another great way to know more about your accessorial data and how to start decreasing them, is to employ a third party logistics provider who empowers you with a transportation management system, but more on that in a bit.
How Costly are Accessorials and Why are Carriers Charging for Them?
Currently, accessorials account for about half of carriers’ total annual revenue, if not more. Carriers have almost no incentive to reduce accessorials or provide detailed billing when it comes to accessorials. Carriers are only required to publish accessorial charges in their public tariffs; they do not have to provide your small business with enough detailed information to determine why they were assessed and verify that they were assessed appropriately.
More Audits & Less Credits = Greater Losses for your Business
Generally, carriers are aware that most companies do not plan for accessorial-related expenses. It is also reasonable for you to assume that carriers don’t want you to plan for it. When you don’t consider accessorial expenses upfront, it gives your carrier more opportunities to make up for any “losses” they might accept during contract negotiations.
You might be surprised to know that accessorials are often accumulated during internal carrier audits. In some cases, carriers even hire outside consultants to work on-site and look for instances to which accessorials can be applied. These consultants may even be compensated based on the amounts of accessorials accumulated.
Adding to a company’s prospective problems as it pertains to shipping is another trend: fewer credits for accessorials.
Carriers have become adamant about not crediting shippers for accessorials, even when shippers make the claim that accessorials were charged needlessly or erroneously. Carriers are also increasing amounts charged and expanding the range of zip codes in which accessorials can be applied.
From all angles, when it comes to accessorials, it appears that carriers are making a concerted effort to charge more and compensate less.
Accessorials Getting you Down? Don’t Get Mad, Get Proactive
As you seek to manage supply chain and transportation costs, you’ll soon understand that most carriers are using accessorials to make money — and it isn’t a reason to get angry; it’s a reason to take action. After all, they too have to remain profitable and in business to haul our freight. As the saying goes, "Don't hate the player, hate the game." (I went there!), but I like to say, "Don't hate the game, learn the rules and win it!"
By performing thorough analyses of your company’s shipping history and characteristics internally or with the assistance of a qualified third party logistics provider, it is possible, if the 3pL has a great carrier relations program and has collaborative good working business relationships with carriers, to see that your accessorials are discounted or waived entirely.
Other things you can do to begin reducing your accessorial spending immediately, include:
1. Being more efficient at the time of creating your freight shipment by measuring boxes accurately, weighing all shipments, and making traceable adjustments that will give carriers less opportunities to tack on accessorials and give you the leverage you need to better dispute erroneous accessorials.
2. Using scanning equipment to automate data entry as it applies to specific shipment credentials such as weight, dimension, res indicator, etc.
3. Implementing a third-party logistics provider to both manual and automatically audit every freight invoice and then interfacing with the carriers on your behalf to help you secure refunds when you are charged incorrectly.
Don’t let carrier billing tactics get you down.
By making it a priority to manage supply chain and logistics by optimizing processes, implementing cost-saving ideas, and creating solutions, you can combat the accessorials that may be causing you to go over your shipping budget or forcing you to cut corners that you don’t need or want to cut.