Freight

From Wikipedia, the free encyclopedia

It has been suggested that Less than truckload, Truckload carrier, Cargo and Bulk cargo be merged into this article or section. (Discuss)

This article or section contains instructions, advice, or how-to content. The purpose of Wikipedia is to present facts, not to teach subject matter. Please help improve this article by removing or rewriting the how-to content, which may qualify for a move to Wikibooks. This article has been tagged since February 2008.

Freight is a term used to classify the transportation of cargo and is typically a commercial process. Items are usually organized into various shipment categories before they are transported. This is dependent on several factors:

• The type of item being carried, i.e. a kettle could fit into the category 'household goods'.
• How large the shipment is, both in terms of item size and quantity.
• How long the item for delivery will be in transit.

Shipments are typically categorized as household goods, express, parcel, and freight shipments.

Furniture, art, or similar items are usually classified as “household goods” (HHG).

Very small business or personal items like envelopes are considered “overnight express” or “express letter” shipments. These shipments are rarely over a few pounds, and almost always travel in the carrier’s own packaging. Service levels are variable, depending on the shipper’s choice. Express shipments almost always travel some distance by air. An envelope may go USA coast to USA coast overnight or it may take several days, depending on the service options and prices chosen.

Larger items like small boxes are considered “parcel” or “ground” shipments. These shipments are rarely over 100 pounds, with no single piece of the shipment weighing more than about 70 pounds. Parcel shipments are always boxed, sometimes in the shipper’s packaging and sometimes in carrier-provided packaging. Service levels are again variable; but most “ground” shipments will move about 500-700 miles per day, going coast to coast in about four days depending on origin. Parcel shipments rarely travel by air, and typically move via road and rail. Parcels represent the majority of business-to-consumer (B2C) shipments.

Beyond HHG, express, and parcel shipments, movements are termed “freight shipments.”

Contents 1 Less-than-truckload (LTL) freight 2 Truckload (TL) freight 2.1 Optimizing truckload (TL) shipments 3 How freight pricing works 4 Cargo insurance 5 Freight packaging 6 See also

[edit] Less-than-truckload (LTL) freight

The first category of freight shipment is “less than truckload” (LTL), which represents the majority of “freight” shipments and the majority of business-to-business (B2B) shipments. LTL shipments are also often referred to as "motor freight" and the carriers involved are referred to as "motor carriers". LTL shipments range from 100 pounds to about 15,000 pounds, and the majority of times they will be less than 100" wide or 28’ long. The average single piece of LTL freight is 1,200 pounds and the size of a standard pallet. Long freight and/or large freight are subject to "extreme length" and "cubic capacity" surcharges. Trailers used in LTL can range from 28' to 53'. The standard for city deliveries is usually 48'. In tight and residential environments the 28' trailer is used the most. The shipments are usually palletized, shrink-wrapped and packaged for a mixed-freight environment. Unlike express or parcel, LTL shippers must provide their own packaging, as LTL carriers do not provide any packaging supplies or assistance. However, crating or other substantial packaging may be required for LTL shipments in circumstances that require this criteria.

“Air cargo” or “air freight” shipments are very similar to LTL shipments in terms of size and packaging requirements. However, air freight shipments typically need to move at much faster speeds than 500 miles per day. Air shipments may be booked directly with the carriers or through brokers or online marketplace services. While shipments move faster than standard LTL, “air” shipments don’t always actually move by air.

[edit] Truckload (TL) freight

In the United States of America, shipments larger than about 15,000 pounds are typically classified as “truckload” (TL), given that it is more efficient and economical for a large shipment to have exclusive use of one larger trailer rather than share space on a smaller LTL trailer. The total weight of a loaded truck (tractor and trailer, 5-axle rig) cannot exceed 80,000 pounds in the U.S. In ordinary circumstances, long-haul equipment will weigh about 35,000 pounds; leaving about 45,000 pounds of freight capacity. Similarly a load is limited to the space available in the trailer; normally 48 or 53 feet long and about 100 inches wide and 106 inches high. While express, parcel, and LTL shipments are always intermingled with other shipments on a single piece of equipment and are typically reloaded across multiple pieces of equipment during their transport, TL shipments usually travel as the only shipment on a trailer and TL shipments usually deliver on exactly the same trailer as they are picked up on.

[edit] Optimizing truckload (TL) shipments

Increasing shipment size has proven to be a significant opportunity for many companies - particularly large consumer product companies. Under the current U.S. truckload pricing model, adding more to a load costs nothing more, as long as the total weight limit is not exceeded. Strategies for increasing load size include:

• reducing truck and trailer equipment weights by "light weighting" the equipment. This may involve extensive use of lighter-weight materials such as aluminum;
• consolidating orders onto the truck using a Transportation Management System(TMS). Here the optimal combination of orders and delivery stops can be used to fill out the truck;
• precise calculation of the load within the equipment specifications. This is predominantly performed by taking production demand from, for example, a Manufacturing Resource Planning (MRP) system, a Distribution Resource Planning (DRP) system or a Vendor Managed Inventory system. This demand is formed into a truckload order quantity by a manual process or automated load-builder. For example the SAP R/3 automated load builder has a number of rules such as don't exceed "x" weight or "y" cube to set load size. It creates loads that fall within these parameters. Additional advantage may be possible with other load builders that have more rules to better optimize shipments. These load-builders, such as AutoVLB (Automatic Vehicle Load Building include Mathematical optimization against all the legal and physical constraints such as equipment size, axle weights, axle spacing. In some cases, these automatic load builders create a load diagram to ensure precise execution.

[edit] How freight pricing works

Express letter and parcel carriers typically have fairly simple pricing based on package size and service level requested; however, freight pricing is considerably more complicated. LTL carriers typically charge by freight “class.” The National Motor Freight Traffic Association, Inc. [1] (NMFTA) issues a publication called the National Motor Freight Classification (NMFC). The NMFC is basically a list of every kind of item that ships via truck. Each item has a class assigned to it based on the item’s density, loadability or mixability, value, and other factors. Freight classes range from 50 to 500, and generally indicate the percentage of the base rate that should apply. The freight class does not indicate the percentage discount you receive from your base rate. In most cases, the percentage discount is negotiated before you start shipping. The freight class is mainly based on the density of the shipment. More dense items such as steel and machinery have low classifications such as Class 50 through 85. Fragile or bulky items fall into freight classes 125 to 500, and pay higher shipment costs.

LTL rates are quoted “per 100 pounds” or “cwt” or “per hundred weight.” Besides the discount off of base rate created by the freight class, there is typically a second discount applied to the calculated transportation rate. These discounts are negotiated by the shipper with individual LTL carriers. For example, a given LTL lane may have a rate of $50 cwt. If a shipment is 1,000 lbs at class 70, then the adjusted base rate is $35 cwt (70% of 50 cwt) or $350. If the hypothetical shipper had negotiated a 50% discount on published tariff rates, this would give a final price of $175 for the shipment. A good example of an LTL carrier's pricing application process can be found at the FedEx website[2].

Besides class, rates, and discounts, an LTL carrier will apply a wide range of surcharges and accessorial charges that will affect the final price of the shipment. Most shipments will receive a fuel surcharge, which is always a significant proportion of the overall cost, possibly as much as 30% or more. Some common accessorial charges are:

• Liftgate: this is a service that assists the driver in loading or unloading his truck when a loading dock or forklift is not available. The trailer is equipped with a hydraulic ramp that lowers to the ground. Liftgate service is almost always billed on residential pickups or deliveries and in commercial pickup and deliveries where loading docks or forklifts are not available. Only a small percentage of most trucking companies’ trailers are equipped with liftgates so movements requiring liftgates must be communicated to the carrier in advance.

• Residential pickup or delivery: anytime a carrier must pick up or deliver into a residential area an extra fee is charged, because in most cases the local laws restrict the size of delivery trucks, causing the carrier to utilize a smaller truck to service a residential area. These requirements equal fewer shipments per day picked up and delivered, so these fees are assessed to offset the carrier’s costs.

• Appointments or notification before pickup or delivery: by default, carriers make pickups and deliveries in order arranged by geographic location (a route). If a shipment requires the carrier to call ahead, or schedule and appointment, the carrier will charge an additional fee for this service.

• Inside pickup or delivery: requiring the truck driver to pick up or deliver inside a building a route takes longer to complete. The carrier will charge an additional fee for this service.

Also, charges for additional insurance or literally hundreds of other possibilities may be added to the final freight bill. It is extremely important that the LTL shipper works with the carrier or intermediary to completely understand all of the requirements of a shipment in order for an accurate price to be quoted. Most carriers list their most common additional charges somewhere on their web site, like this FedEx example[3].

Often, an LTL shipper may realize savings by utilizing a freight "broker," online marketplace, or other intermediary instead of contracting directly with a trucking company. Brokers can shop the marketplace and obtain lower rates than most smaller shippers can directly. In the Less-than-Truckload (LTL) marketplace, intermediaries typically receive 50% to 80% discounts from published rates, where a small shipper may only be offered a 5% to 30% discount by the carrier. Intermediaries are licensed by the DOT and have requirements to provide proof of insurance.

Truckload (TL) carriers usually charge a rate per mile. The rate varies depending on the distance, geographic location of the delivery, items being shipped, equipment type required, and service times required. TL shipments usually receive a variety of surcharges very similar to those described for LTL shipments above. In the TL market, there are thousands more small carriers than in the LTL market; so the use of transportation intermediaries or “brokers” is extremely common.

Another cost-saving method is facilitating pickups or deliveries at the carrier’s terminals. By doing this, shippers avoid any accessorial fees that might normally be charged for liftgate, residential pickup/delivery, inside pickup/delivery or notifications/appointments. Carriers or intermediaries can provide shippers with the address and phone number for the closest shipping terminal to the origin and/or destination.

Shipping experts optimize their service and costs by sampling rates from several carriers, brokers, and online marketplaces. When obtaining rates from different providers, shippers may find quite a wide range in the pricing offered. If a shipper uses a broker, freight forwarder, or other transportation intermediary, it is common for the shipper to receive a copy of the carrier's Federal Operating Authority. Freight brokers and intermediaries are also required by Federal Law to be licensed by the Federal Highway Administration. Experienced shippers avoid unlicensed brokers and forwarders; because if brokers are working outside the law by not having a Federal Operating License, the shipper has no protection in the event of a problem. Also shippers normally ask for a copy of the broker's insurance certificate and any specific insurance that applies to the shipment.

[edit] Cargo insurance

Whether a shipper deals directly with a carrier or uses an intermediary, the amount of cargo insurance coverage the carrier will be providing on the shipment probably will not cover the full cargo value. Full-coverage insurance is almost never provided; as carriers will assign their own liability levels based on the commodity, service level, and other factors. For example, a typical LTL shipment may be covered for damages up to $25 per pound; however, that same shipment might only be covered for 50 cents per pound if it is being shipped as a result of an auction. Experienced shippers ask the carrier or intemediary about the procedure in place regarding freight loss or damage claims before they ship. Responsible carriers and intermediaries will always have additional insurance available for purchase and will have fast and easy ways to manage claims.

About 10% of all freight shipments will experience some significant loss or damage. It is a common misconception that a freight rate includes full coverage insurance, when in fact a base freight rate typically includes only a minimum of cargo insurance. Experienced shippers ask their carrier or intermediary what the insurance coverage is for every specific shipment. LTL shipments will often be insured for less than 50 cents per pound, and TL shipments will often be insured for only slightly more than LTL shipments. Most TL carriers have maximum cargo insurance of $100,000 for the entire load; however for a 40,000 pound load, that’s only about $2.50 per pound.

Furthermore, cargo insurance only covers significant loss or damage to the cargo only. Carriers’ insurance does not cover “consequential” damages like lost sales or downtime on a production line. Also, carrier insurance does not cover the cost of returning damaged cargo to the shipper. Again, cargo insurance is very low and very tightly defined; a good example of these policies can be found at the FedEx web site[4]. Experienced shippers package shipments extremely well and are sure to clarify the specific insurance applications for each shipment prior to shipping.

[edit] Freight packaging

Unlike shipping small parcels via a delivery company like Federal Express, UPS or DHL, shipping freight has a much higher likelihood of damage.^{[citation needed]} For example, LTL companies pack lots of different types of freight onto lots of different trailers using forklifts and other heavy equipment, creating a harsh and dirty environment for freight.^{[citation needed]} Other LTL shipments will be packed around and on top of a given customer's shipment; so improper packaging will greatly increase the liklihood of damages.

All shipments should be palletized and wrapped in plastic to protect from damage. Most shipments should be fully crated in order to ensure a damage-free delivery. Experienced shippers ask the carrier or intermediary for the specific packaging requirements for each shipment — then exceed those requirements. Also, since shipments may be reloaded several times, it is important that the packaging has all the shipper and consignee info clearly noted on at least two sides of the shipment. Filing claims with freight companies is a cumbersome and time consuming process, so shippers should take extra care in packaging to avoid freight claims.

[edit] See also

• Cargo
• Goods
• Packaging
• Standard Carrier Alpha Codes
• Freight Transport Association
• Freight company
• Freight train

This article may require cleanup to meet Wikipedia's quality standards. Please improve this article if you can. (September 2006)

This article or section contains instructions, advice, or how-to content. The purpose of Wikipedia is to present facts, not to teach subject matter. Please help improve this article by removing or rewriting the how-to content, which may qualify for a move to Wikibooks.

This article or section deals primarily with the United States and does not represent a worldwide view of the subject. Please improve this article or discuss the issue on the talk page.