Keeping the supply chain operation at peak efficiency requires efficient and economic transportation of goods. This all starts with an eye to detail towards the most effective transportation management practices.  There is a strong relationship between mismanaged supply chains and transportation and loss of profits, as an effectively structured supply chain will reduce business operating expenses.  Shippers are often challenged when dealing with the freight classification system from the National Motor Freight Classifications (NMFC) book, the code numbers assigned to all products that determine the correct freight class for shipments.  Logistics and transportation professionals at third party logistics companies have the necessary expertise to help shippers avoid re-classes and re-weighs when it comes to NMFC codes to help reduce unplanned expenses.

LTL shipping, much like any industry with so many moving parts, can be a bit tricky from time to time. Between re-classes, re-weighs, other freight invoice adjustments due to mistakes, accessorials, freight delays, and damaged shipments, there are numerous things to watch out for when moving your freight – so it’s important to do the necessary groundwork BEFORE you start shipping.

In today’s post we will offer up some information and best practice tips to avoid common mistakes such as incorrect freight classification (which could results in a re-class by the carrier, wasting both time and money for both parties), incorrect weight resulting in a re-weight, and what are some of the most common freight invoice adjustments that may occur due to error. As we said in our freight claims series, knowledge is power in avoiding errors that may drive up your transportation costs unnecessarily.

A Brief on Freight Classification

There are 18 freight classification categories which range from the densest lbs/cubic ft (least expensive) to least dense lbs/cubic ft (most expensive classes).  The freight classification (NMFC) is provided by the National Motor Freight Traffic Association (NMFTA) and identifies, the typical density, size, stow-ability, and value of the goods being shipped.  The shipment’s NMFC code establishes the carrier’s shipping charges.  It is critical for transportation companies to accurately identify the correct NMFC number and calculate freight class accurately to obtain correct freight charges.  NMFC numbers and classes are categorized in the NMFC Tariff.  Inaccurate NMFC numbers and freight class result in a carrier re-class which can result in a higher or lower than expected shipping charge.

So Why Do Shippers get Freight Classification Wrong and Experience Re-Classes Anyway?

Unfortunately, shippers choose to look at class first. You don’t pick the class of your freight, you pick the correct NMFC description of your freight which gives the shipper the correct and accurate freight classification. Cost of the NMFC  book, unfortunately, is around $275 for non-participants so that is also a reason why many shippers don’t own the book which would guide them towards the right freight classification. This is even more especially true if the shipper only ships a few different commodities.

Further, most shippers don’t have the resources or time to attend one of the webinars put on by the National Motor Freight Traffic Association that would help educate the shipper on how to determine the correct description, NMFC Item number and class for a shipper’s freight which could then be put on a printed bill of lading. With this knowledge no LTL carrier would dare challenge since correctly applying the information from the NMFTA is the best practice when choosing freight classification.

When shipping freight of any kind, the freight classification needs to be researched and understood.  Many shippers do not understand what the NMFC codes really signify and don’t get concerned until the shipment is charged higher fees than anticipated.  For example, shipments changed from a Class 70 to a Class 150 could incur an additional fee.  Carriers have specific employees whose job is to reclassify any shipments necessary.

Another reason shippers choose the wrong freight classification boils down to some of the most dangerous words in business: “We’ve always done it that way.” This is akin to passing down an old wives’ tale that isn’t always the whole truth. What we mean is that someone who was choosing the wrong freight class before trains the new person to do the same exact thing! Why?! Well, we are all busy and have a job to do, right? Sometimes, it’s easier in the mind of the transportation coordinator to just “Get it done” instead of “Get it right.” Unfortunately, this doesn’t hurt the transportation coordinator directly but does hurt the business who is letting unnecessary costs pile up.

In brief, here are some ways shippers can avoid freight classification errors:

Know your freight classes: Errors and oversights in LTL freight billing can be common, especially in product classification. The NMFC system can be confusing, and products may be classified incorrectly, resulting in higher rates. Additionally, products may have been arbitrarily assigned a general Freight-All-Kinds classification, which may be higher than the actual product classification. Work with your carrier to negotiate rates and talk about your freight history with them. If you are not comfortable with doing so, a good third party logistics company are experts are freight classification knowledge.

Use Technology to your advantage: A transportation management system has many benefits, one being the ability to avoid costly errors and increased costs by storing your common freight classifications so there are not things such as simple data entry error. Also, if you are using an ERP system, see if integration is offered in the TMS so that way your classification and commodities are built in.

Audit Your Freight Bills: Shippers should audit freight bills, and if you are using a third party logistics provider, they should be doing it for you (if they are not, well…..). For starters, 3PLs will audit the NMFC code on the freight’s bill of lading to ensure it hasn’t been misclassified at a higher rate. Determining a wrong freight classification is not always obvious as it may require the knowledge and expertise of an experienced logistics professional.

Although routinely checking bills of lading can help contain freight costs, doing so often requires substantial staff to manage the process in-house. Regularly reviewing NMFC classifications to keep up-to-date with changes involves time, which may stretch an in-house staff.

Use a Third Party Logistics Provider: In addition to uncovering and preventing potential freight errors, 3PLs can quickly obtain and compare quotes from multiple carriers and follow up with shipment status. Relying on the resources of a dependable, proven 3PL can give shippers both a logistics and a competitive advantage.

A Brief on Re-Weighs

freight classification and reweigh errorsTransportation costs include the gross weight and the dimensional shipment weight.  Dimensional weight is calculated by multiplying the length, width, height in inches and dividing it by various factors to establish the cubic weight of a given shipment.   The greater of the actual weight versus the dimensional weight will typically determine the shipping charges.  Transportation charges for heavier items are determined by gross weight.  Light items, such as plastic toys may have transportation charges derived from their dimensional weight, as their dimensional weight is higher than their actual weight.   Freight companies can decide to re-weigh items at any time during the shipment transport process.  Shippers who estimate approximate weights on their shipments may find their products re-weighed for greater accuracy and be subject to increased shipping charges.  Carriers may even re-bill at a non-discounted rate for the discrepancy.

Re-weighs are one of the most common daily issues reported by shippers.  When the weight on a Bill of Lading doesn’t match what the carrier shows on their scale, additional charges are added.  The re-weigh process can occur at any terminal at the discretion of the carrier.

True to its name, a Reweigh occurs when the weight on the BOL (Bill of Lading) does not match the weight the carrier shows on their scale, resulting in an additional charge for this extra weight. These reweighs can happen at any terminal the freight passes through, and are up to the carrier’s discretion.

To avoid these reweigh charges, here are a few things to consider before shipping your freight:

When it comes to reweighs, the best defense is a good offense, so it’s best to be proactive in the beginning. Get all the correct information on the BOL the first time and that will dramatically cut down on the chances of a reweigh.

Other Common Freight Charge Adjustments/Accessorials To Consider

Third party logistics experts offer the best transportation management solutions which significantly improve cost savings and efficiency opportunities to shippers.  They have experts available to help shippers properly class items with the correct NMFC number, get the right weight, and if necessary also advocate for the shipper with the carriers to work with all parties involved to proactively educate and create a favorable business environment for all.

If you are a manufacturer or distributor, most likely you use many modes to ship your freight, such as less-than-truckload freight shipping or LTL shipping. If you have any experience in shipping LTL, you know how volatile, process is driven, and challenging it can be to make sure you get the best carrier, best time, best rate, and are making the best long term decisions. There are many things that go into effectively managing LTL freight and many factors that determine pricing. One of the most important factors is freight classification (read our post about how to calculate freight class to understand freight classification at length).

The National Motor Freight Classification or NMFC is the standard for freight identification and classification. The NMFC provides a comparison of commodities moving in interstate, intrastate and foreign commerce. It is similar in concept to the groupings or grading systems that serve many other industries. Commodities are grouped into one of 18 classes—from a low of class 50 to a high of class 500—based on an evaluation of four transportation characteristics: density, stowability, handling, and liability. Together, these characteristics establish a commodity’s “transportability.” – Source, the National Motor Freight Traffic Association.

Freight Classification Changes Impact Shippers: Those in the Know Have an Advantage

Every so often, however, the NMFC will make changes to the way you make your freight classifications, and this does impact shippers. Savvy shippers who are keeping up with all the changes or shippers who outsource to a logistics service provider who stays on top of all of these changes on behalf of the shipper the provider is managing freight for will have a competitive edge. So how do freight classifications from the NMFC impact shippers?

Recent Changes to the National Motor Freight Classification System

The most notable change, which was a sign to come for a move towards density based rating, was on Dec. 1, 2012, for classifying computer equipment. Under the new classification, this product type moved to a density-based rating with the lowest possible class being 60 and the highest possible at 400.

2013 brought about additional freight classification changes that will likely affect LTL shipping costs for medical kits, hand tools, TVs, and other products. Again, the classification trend has been to favor density-based ratings.

The latest changes follow a pattern established years ago where more and more commodities are classified according to their density.  Whether it be full density or just a few density brackets, more commodities have become the subject of density calculations to determine their freight classification. The march to full density on all freight has been ongoing and is the direct result of the growing pains of an archaic and ineffective freight classification system that the 200 plus members of National Motor Freight Traffic Association have been stuck with for decades.

Do all Carriers Rate by the NMFTA’s National Motor Freight Classification System?

Rooted in the pre-deregulation era where carriers were restricted in the type of freight they hauled, where they hauled it and the fees they charged, the NMFC list of commodities was necessarily small and pertaining to but of few of the myriad of freight that’s shipped today on trucks. The Board and the Association have been playing catch up in adding new commodities and doing their best to classify them, but it’s been at best a moving target.  This being said, not all LTL carriers operating in the US are part of the National Motor Freight Association and as such, they don’t have to adhere to its classes and rules.  Most of them have forged a business case by classifying (and thus rating) everything based on its density.

The Driving Force Behind Freight Classification Changes: Simply, Times are A-Changing…

freight classification densityA significant factor in freight classification is the change in material composition and packaging. Production and building materials are shifting from heavy metals to lightweight plastics and polymers. Yesterday’s cast iron lawn furniture, pipes, and fittings have been replaced with polycarbonate and polyvinylchloride versions. In electronics, the switch from CRTs to LCDs significantly reduces product weight while often increasing value liability.

The use of lightweight materials can reduce tonnage by more than half, which, in turn, reduces rates charged shippers. But operating costs and truck space required remain the same or may increase, creating a business challenge for LTL carriers. To compensate for less weight, some carriers are looking for higher freight classifications to offset lower charges compared to their costs.

How to Avoid Increased Costs with a Better Knowledge of Freight Classification

Know your freight classes: Errors and oversights in LTL freight billing can be common, especially in product classification. The NMFC system can be confusing, and products may be classified incorrectly, resulting in higher rates. Additionally, products may have been arbitrarily assigned a general Freight-All-Kinds classification, which may be higher than the actual product classification. Work with your carrier to negotiate rates and talk about your freight history with them. If you are not comfortable with doing so, a good third party logistics company are experts are freight classification knowledge.

Use Technology to your advantage: A transportation management system has many benefits, one being the ability to avoid costly errors and increased costs by storing your common freight classifications so there are not things such as simple data entry error. Also, if you are using an ERP system, see if integration is offered in the TMS so that way your classification and commodities are built in.

Audit Your Freight Bills: Shippers should audit freight bills, and if you are using a third-party logistics provider, they should be doing it for you (if they are not, well…..). For starters, 3PLs will audit the NMFC code on the freight’s bill of lading to ensure it hasn’t been misclassified at a higher rate. Determining a wrong freight classification is not always obvious as it may require the knowledge and expertise of an experienced logistics professional.

Although routinely checking bills of lading can help contain freight costs, doing so often requires substantial staff to manage the process in-house. Regularly reviewing NMFC classifications to keep up-to-date with changes involves time, which may stretch an in-house staff.

Use a Third Party Logistics Provider: In addition to uncovering and preventing potential freight errors, 3PLs can quickly obtain and compare quotes from multiple carriers, and follow up with shipment status. Relying on the resources of a dependable, proven 3PL can give shippers both a logistics and a competitive advantage.

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