Expert Insight: Sorting it Out
By Cliff Holste
Date: August 18, 2010

Logistics News: As The U.S. Economy Improves, Freight Costs Are Expected To Increase

Shippers Combat Rising Freight Costs by Eliminating Charge-Backs

As the U.S. economy slowly heads back in a positive direction, shippers should expect to see increases in freight rates in the coming months and even years as the recovery is expected to be gradual. Many carriers are reporting high single or low double digit increases in shipments, though keep in mind this is being measured against a very depressed 2009 benchmark.

 

All of this points to now being an excellent time for shippers to negotiate new rates. Many carriers have publicly stated that they expect rates to rise once the economy begins to recover as they cannot haul freight at the microscopic or non-existent margins of today and continue to re-invest in their business over the long haul. Therefore, if you believe that the economy is near to or has reached the bottom, then this is the optimal time to negotiate new rates and lock those rates in for as long as the carrier will agree to, preferably 12 months at minimum.

 

No matter the condition of our economy, Fed Ex and UPS cannot resist their yearly opportunity to raise rates, as they did this past January (3.9% - 4.9%). The upside of this is that shippers at least have pricing certainty for the rest of the year, knowing that the next increase will not be until January 2011.

 

Manage Freight Cost by Deploying Technology That Can Eliminate Freight-Carrier “Charge-Backs”


Carrier charge-backs are the cause of considerable confusion, often resulting in some level of frustration. This occurs when the shipper manifests low-density freight by weight only, and the carrier later audits the freight so that a more accurate dimensional weight (referred to as “DIM” weight) based tariff may be applied. When this happens, the shipper has no option but to absorb the additional carrier imposed back charges, which can rarely be reclaimed by the shipper from the customer and can amount to significant unnecessary costs.

 

DIM weight calculations kick-in if the package size is 5,184 cubic inches (three cubic feet) or greater. For package shipments within the USA, DIM weight is calculated by dividing the cubic size in inches by 194 and rounding up to the nearest whole number.

 

With the growth in the small-parcel business due to catalog and internet shopping, DC managers can reduce shipping cost by packing or re-packing shipping cases more densely so that actual weight, not DIM weight, becomes the billable weight – which equates to more bang for your shipping buck.

 

There is a vast range of dimensioning technology and systems available to assist in this effort, such as ultrasound, lasers, vision/CCD cameras and infrared light, to scan an item or package length, width and height. This technology can be combined with others, such as barcode scanning systems, label printers and in-line or static weighing systems to provide a complete dimensioning, weighing and tracking system. Once you know the cube and weight of each item on a customer’s order, the data then can be sent to a real-time host system or to a warehouse management system to automate the calculations and determine the most economical shipping case size based on DIM weight pricing.

 

Of course the cost of deploying automatic or semi-automatic cubing and weighing technology depends on many factors. However, industry reports indicate that most systems pay for themselves in months by reducing the labor cost and eliminating the inaccuracies associated with hand weighing and measuring. In addition, back-charging bills from carriers will be greatly reduced, if not completely eliminated.

 

Quantronix, Inc. has just made DIM weight calculation much easier for SMB shippers to manage with the recent introduction of its CubiScan 150. This is an economical self contained, standalone tool that eliminates freight carrier charge-backs by automating the dimensioning and weighing of parcels in manually assisted manifesting/shipping applications (for more information and video visit www.cubiscan.com ).

Final Thoughts


As the volume of packages subject to DIM weight rates increases, so will shippers’ need to obtain precise information on weights and dimensions of packages leaving their DCs with parcel and express carriers. Going forward, other than rate negotiation, deploying some form of automated dimensioning technology may be your best bet to manage freight costs.


Agree or disagree with Holste's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.

You can also contact Holste directly to discuss your material handling or distribution challenges at the Feedback button below.


Send an Email
profile About the Author
Cliff Holste is Supply Chain Digest's Material Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.
 
Visit SCDigest's New Distribution Digest web page for the best in distribution management and material handling news and insight.

Holste Says:


...This points to now being an excellent time for shippers to negotiate new rates.


What Do You Say?
Click Here to Send Us Your Comments
views
 
profile Related Blogs
Sorting It Out: Shippers Looking To Increase System Capacity Are Surprised To Find It May Already Exist!

Sorting It Out: For Shippers - Benefits Of Real-Time Control In The DC Are Huge!

Sorting It Out: Shippers Looking to Improve Operations Choose Customer Centric Approach

Sorting It Out: Productivity is a Crucial Factor in Measuring Production Performance

Sorting It Out: Packaging Construction Impacts on Logistics Operations

Sorting It Out: System Providers Offering More Modular & Scalable Solutions

Sorting It Out: Business Metrics Drive Technology Adoption

Sorting It Out: Supervising in the DC - Timeless Leadership Skills and Tools First-Line Supervisors Need to be Successful

Sorting It Out: Good Business Security is All About Paying Attention to Details

Sorting It Out: Is Automation Right for Your Business

<< Previous | Next >>

See all posts
.