You want to buy a new car. There is the base model. It looks good, has a nice engine, the right interior and cargo space, gets a little above average gas mileage, and has the general safety features. You want the bells and whistles! Upgraded sound system, all the special electronics and safety features, semi-autonomous driving, etc. You are willing to pay more for the extra features.
The purchase of the car is similar when dealing with the procurement of the movement of goods from a transportation carrier. The base model is to have goods picked up, moved, and delivered within the pricing established by the carrier for general services taking place during normal business hours and is business to business (B2B). Wait — You need it picked up at 9 p.m., consignee needs it to be a lift-gate delivery, the truck cannot have a total length over 30 feet, it needs a specific delivery time, and a move to a mine 50 miles off the freeway. All of these are services and conditions above the standard B2B move, each adding costs to the carrier. The use of accessorial charges or fees is how transportation carriers account for the costs associated with requirements exceeding the base pricing configuration.
Why are these additional charges not included in the original quote or shown on the carrier’s manifest provided the next morning?
- A failure in Information placed on the bill of lading (BOL) or information provided in the quote.
- Something changed or was needed that was not known at the time of tender.
There are certain additional charges due to how they are calculated that cannot be applied at the time of the shipment. Demurrage/Detention has been a hot topic over the last few years and is one of these types of charges that are assessed after delivery. The carrier is experiencing the loss of equipment, labor, or both when they are sitting and being non-productive. This charge cannot be calculated until the amount of time over any free time has been validated.
Understanding & Preventing/Mitigating
Different modes of transportation do have some unique assessorial charges. Having the freight tarped for a flatbed truckload carrier would be a normal service. Not so much for parcel or LTL shipments. The LTL industry handles freight too large for parcel and too small for TL, so they have a lot of additional charges. Once you get a good feeling of the LTL charges, it is much easier to understand charges for all modes. The following will be addressed toward the LTL carrier moves, yet the principles apply to all modes.
Other than fuel, there are five types of actions or characteristics of a shipment triggering the application of an additional charge or fee. They are:
- Type of pickup or delivery location. Examples: Residence, church, school, fair, exhibition or show, prison, storage unit, construction site, mine sites, utility locations, power plants. These locations may be referred to be “limited access.”
- Characteristics of the freight. Examples: Extended length, oversize, packaging, space being occupied in the trailer, hazardous materials, import or export, protect from freezing.
- Congestion, Rural or Special Location. Examples of Congestion: New York City, Chicago, Atlanta, Los Angeles. Example of Rural: Points where there is little freight moving in or out, Gabbs, Nevada; Indian Wells, Arizona; Elk City, Idaho; La Push, Washington. Example of Special Locations: Florida Keys, Nantucket Island, Massachusetts; San Juan Island, Washington.
- Incorrect information at time of shipment. Examples: Correction to information on the bill of lading such as address, prepaid or collect information entered wrong; Incorrect weight or description of freight; Not identifying the type of destination (see 1).
- Change of the service needed or provided. Examples: Detention, consignee requesting inside delivery or lift-gate, storage, reconsignment, smaller delivery truck needed.
For 1 through 4 above, the key to having the charge applied correctly during quoting or first rating is having the correct information on the bill of lading. Prevention comes through ensuring:
- Correct addresses and contact information. Shipper, Consignee, Bill To, and when applicable the Hazardous Material Contact. Phone numbers for all addresses if available.
- Identification of the consignee type. Business, residence, school, church, etc.
- Prepaid or collect is correctly indicated. Most bills of lading provide for the shipment to move prepaid if nothing is marked.
- Numbers required for delivery acceptance. Purchase order or job number.
- Complete description. Proper description of the goods; Packaging; Number of skids and/or pieces being tendered; for LTL the applicable National Motor Freight Classification (NMFC) number and class; Hazardous Material — properly described and certification signature; Weight — including the dunnage; Dimensions of each piece in the move.
- Export and import documentation. Filled out properly and attached. Must be clear as to the broker doing the clearance, where they are located, and contact information.
- Special services are noted. Inside pickup or delivery, lift-gate, appointment, notification, straight truck for delivery.
The optimized supply chain is one providing the best service to get the product to the consumer when needed at the overall optimal cost. Understanding the assessment of base charges as well as additional charges for each mode of transportation is essential to balancing service to your customers and transportation costs.
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