The objective of this presentation is to provide small businesses with the opportunity to see real-world results from two different companies' successful transportation plans. We will show how these companies directly improved profitability through transportation management.
In most small and mid-sized companies, transportation is considered a necessary evil. We view it differently. We look at it as an untapped gold mine. Its potential to add profit to a company's bottom line is significant. As a starting point, we will present an overview of essential transportation concepts, including modes, terminology, and freight classifications. Next we will cover key points to negotiate with carriers and examples of quantifiable cost savings achieved through these negotiations.
When we are finished, participants will be able to develop and implement a transportation plan based on these concepts. They will learn how to evaluate and measure the degree of success with respect to the plan and how to continuously assess and improve the plan.
MODES OF TRANSPORTATION
There are a few terms we would like to discuss.
LTL: LTL stands for "less than truckload," meaning a shipper is not giving a carrier a full truckload worth of freight. The size of a full truck may be compared to a 48' truck carrying no more than 45,000 Ibs. per load. The carrier makes money by putting multiple LTL loads together and combining a full truckload and taking it to the final destination area.
Truck Load: That is where you are buying an entire truckload from point A to point B.
Intel-modal: Where you use a combination of trucking and rail service to move a load to its final destination. It could also be extended to ocean and then back to ground again for final delivery. Intermodal has many possible combinations, not just one.
Air: Moving freight via air is the most expensive mode and also the quickest. Two-day and 3-to-5-day air options can help minimize the costs. Shippers also tend to pay a premium for this service.
Small Parcel: This is a mode of transportation used to move product that does not have enough weight or size to warrant being shipped via truck. There are many small parcel carriers in the United States that can accommodate these needs. We are all familiar with those big brown trucks.
Ocean and International Freight: Product is moved in containers that are 20' or 40' long. Material is packed to maximize the utilization of the cubic space or weight depending on product density. Ocean and international shipping require another entire presentation. We are simply mentioning it here.
Own Fleet: Moving your product using your own tracks and drivers.
When any of these transportation modes are used in conjunction with finding the best way to serve your customer at the most reasonable price, then you have tapped the hidden gold mine.
CONCEPTS AND TERMINOLOGY
NMFC: "The National Motor Freight Classification is a pricing tool that provides a comparison of commodities moving in interstate and intrastate transport. Based on an evaluation of density, stowability, ease of handling, and liability, the commodities are grouped into one of 18 classes. The NMFC provides both carriers and shippers with a standard by which to begin pricing negotiations and greatly simplifies the comparative evaluation of the many thousands of products moving in today's marketplace." (http://www.erols.com/nmfta)
The National Motor Freight Traffic Association, Inc., (NMFTA) is a nonprofit organization with thousands of members throughout the United States and Canada. Its members are primarily motor carriers in the LTL transportation market. NMFTA offers a variety of transportation services to both shippers and member carriers. In conjunction with the National Classification Committee (NCC), NMFTA publishes the National Motor Freight Classification (NMFC). Their phone number is (703) 838-1810.
Freight classes range from class 50 to 500. They are in sequence: Class 50, 55, 60, 65, 70, 77.5, 85, 92.5, 100, 110, 125, 150, 175, 200, 250, 300, 400, and 500. Generally, higher freight classes have higher transportation charges since they have less density and more mass.
It is important for a shipper to understand the freight classifications for all inbound and outbound product. If you are uncertain, ask your carriers, a third-party logistics provider, or the NMFTA for help.
Keep in mind that a carrier and shipper need to figure out what to charge and pay for a shipment. What should a carrier or shipper charge or be willing to pay in order to ship a truckload of steel or a truckload of feathers? Shippers and carriers both needed help on these issues as they related to volume versus weight. This is why the NMFC was developed.
To Be Continued
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