Do Freight Companies EVER Pay Claims? Part 2

WARNING: Do not use to dry pets! (Microwave) – Dang, you mean I have to use a towel?

WARNING: Do not hold rotating end! (Chainsaw) – But I was just trying to put more pressure on it.

WARNING: Do not iron clothes while wearing! (Clothes Iron) – But now I can’t see where the wrinkles are!

Sometimes I feel like the warning labels on many products are ridiculous or even stupid. However, the manufacturers are aware that if they do not clearly make you aware of the hazards, they can be held liable for an injury that really was not their (or their products) “fault”. They put the warning labels on to protect themselves from frivolous lawsuits. Understanding this position, in regards to freight companies, helps me navigate through the loop holes they may throw my way. (Believe it or not, some people knowingly try to file claims that are not legit. Shocking, right?) Because these ‘upstanding citizens’ try take advantage of the claim process, regulations were put in place to protect the freight companies. Unfortunately, sometimes the pendulum swings too far and they end up declining everything based on a ‘technicality’. My goal when filing a claim is always to prove that my freight claim is legitimate and to remove any doubt on whether I should be reimbursed. Here are a few more things I do to ensure my claim gets paid.

Marking damages at the time of delivery. I have learned “Subject to Inspection” just doesn’t cut it. Many freight companies don’t believe the damage was caused by them unless some indication of the damage is noted at the time of delivery. The key is to clearly indicate the state of your shipment when you sign for it. This does not mean you have to open every box and inspect each item at the time of delivery. But if a box is crushed or torn, or the shipment is in rough shape in any way, mark your delivery receipt accordingly. You can inspect for damages later and follow up with the carrier if you do discover something is damaged. “Box crushed”, “carton torn”, “wet”, “punctured”, etc. are all going to be honored at the time your claim is being processed.  Feel free to add “subject to inspection” after whatever kind of damage you have already indicated, but do not only mark “subject to inspection”.

File your claim in time. If your shipment moved 13 years ago and you are finally getting around to filing your claim, don’t be upset if it gets declined. Obviously, no one would expect payment after that kind of time but you do need to be aware that there is a time frame. You have 60 days from receipt of your shipment to give written Notice of Intent to Claim. You then must file the actual claim within 9 months of the shipment. I find the sooner I submit my claim, the easier it seems for the freight company to investigate it and my chances of approval for payment goes up.

My third and final post on this coming soon!

Hundredweight Rates… The Confusion

Mid 2014, I was offered a job with a trucking company. Like any young lad desiring to prove his value to the world, I jumped at the opportunity. “We have a position opening up in our pricing and rating department; would you be interested?” Of course I was interested! Oh had I known what I was in for. It turns out that pricing in transportation is much more difficult than some of the basic examples given in my university classes. For example, consider the hundredweight rating system.

From my limited experience, it seems as though the hundredweight rating system is the most common form of pricing in less than truckload (LTL) transportation. The individual desiring to move his or her freight is given a price per 100 lbs of freight to move the desired goods from origin to destination. As the weight of the freight to be shipped increases, the price per hundred decreases to keep the numbers from getting a little out of hand and to allow carriers to tailor their rates to favor larger shipments. Having 100% variable rates would be tedious and challenging for all involved, so carriers and freight companies have come up with weight breaks. If your shipment is between weight x and weight y, the price per hundred pounds is z. Take a look at the below example:

Freight Rates from Origin x to Destination y

ORIGIN: x

Min.

L5C

500

1M

2M

5M

10M

y

99.13

38.54

26.80

23.30

20.86

17.48

11.65

The minimum column applies to any shipment where the weight in hundreds of pounds multiplied by the corresponding rate per hundred comes to less than the minimum ($99.13 in this case). So a parcel weighing only 30 lbs would move at $ 99.13 because 30 lbs/100 = 0.3, 0.3*$38.54 = $11.56.  $11.56 is less than $99.13 so the $99.13 charge is applied to this shipment.

The L5C column picks up as soon as a item weights more than the minimum charge. In this case, that weight is ~257 lbs. The 500 column applies to freight weighing between 500 and 999 lbs; the 1M freight between 1000 and 1999 lbs; 2M, 2000  to 4999 lbs and so on and so forth.

If this was all that there was to hundredweight pricing, things wouldn’t be too bad! However, because the rates are decreasing to give shippers more favorable rates as the weight of shipment increases, there is a point in each weight break where it becomes less expensive to ship at the lowest point of the next category. Take for example the below shipment:

1 Box – 925 lbs

Pick up: x

Delivery: y

The box weighs 925 lbs meaning that we should use the column of our rate table labeled “500”. If we do this, we get the following equation:

925 lbs / 100 = 9.25

9.25 * $26.80 = $247.90

We convert the weight of 925 lbs into hundreds of pounds, and then multiply by our corresponding rate to come to a total of $247.90. If however, we were to decide to move this box from x to y and bump up the weight to 1000 lbs, we would see the below changes.

1000 lbs / 100 = 10

10 * $23.30 = $233.00

We end up saving $14.90 by sending our box at a higher weight. For this reason, it is important to consider both the weight of your shipment and the lowest cost of the next weight break when finding your price. Generally, freight companies will take the lesser of the two rates and computer software will be used to determine the price quickly and efficiently.

The hundredweight rating system certainly keeps the pricing side of the transportation industry interesting and often makes those of us involved enjoy those days where we get to work with flat rates or skid rates for a change. If nothing more, I hope that this shed a little light on the topic of hundredweight rates and gave you a taste of my adventure in the transportation industry.

Why You Should Tell Your Customers That You Cannot Help Them

Have you ever called a particular vendor or store and had the daring person on the other end of the phone tell you that he or she is afraid he or she cannot help you? Sometimes there is nothing more painful than knowing you have wasted precious time on hold, sifting through phone menus looking for human contact, only to find out you get to do it all over again. Now there are two topics presented in that scenario… the phone answering menu, and being told that the individual you finally reached cannot help you. I will leave the automated phone menu for a different rant and suggest that though it may be frustrating… I have had great success telling my customers that I cannot help them.

The trucking industry seems at times to be viewed by those involved as an industry lacking some key ingredients, namely integrity and honesty. Customers are constantly bombarded with increasing rates, fuel surcharges in excess of 30%, accessorial charge sheets miles long, and trucking companies who want to be everything to every customer. Well sometimes you just can’t.

A couple weeks back I was attending a business mixer for WeBa, our business association here on the west end of Edmonton, and ended up chatting with a jolly fellow maybe only a couple years older than I. He asked what I did, and I told him. “I work for a trucking company!” He proceeded to question me about how I would ensure that when I moved his freight, it would deliver on the truck of the company that he had hired. Initially I was rather confused, but soon realized that this gentlemen was concerned about how we carriers often interline freight or use service agreements that leave his valued goods in the hands of those other than whom he had contracted.

This experience, coupled with many sales calls and phone conversations where I have honestly told customers that I would be interlining their freight has led me to believe that sometimes you should tell your customers what you cannot do. “I can’t service that area at the moment, I can get a rate for you; I would usually contact company xyz. If you would like to call them, you may be able to get a better rate as there would be less cross docking/fewer mark ups.”

Now some of you may think it is ludicrous to suggest that you send your customer to another company, I mean, what if you lose the account?! It’s true; there is risk; they may leave, or choose to use someone else. But, my experience has been that when most of your customers experience such a level of honesty and integrity, they will gladly use you where it matters to you the most.

I feel that being honest about what you can and cannot do as a company are key elements to ensuring that your customers keep on coming back year after year. Helping them understand your specific service network will allow them to get the service quality that they need and keep freight moving to you in the lanes you service direct.

Do Freight Companies EVER Pay Claims? Part 1

I don’t know if you have ever had to file a freight claim, but if your experience was anything like mine, you decided then and there you would much rather do something else. Anything else! Sometimes it felt like the freight company was finding any and every reason under the freakin sun to decline or delay paying my claim. Seriously, all I wanted was to be reimbursed for something they obviously damaged! Why all the hold ups?

Unfortunately (or fortunately, depending on how you look at it), I have gotten very good at filing claims with other carriers because of my position at our company. Here are some keys I have learned over the years. Hopefully they will help you, should you ever have the ‘pleasure’ of having to file a freight claim yourself.

1st, ensure you are the proper party to file the claim. There is no point even filing if you are not the ‘proper’ party. Why would a freight company pay anyone who did not have a legal right to even ask for money? The key you need to know is this; while a shipment is in the custody of a freight company, it is legally ‘owned’ by the party that pays the freight charges. Prepaid shipments are ‘owned’ by the shipper, and collect shipments are ‘owned’ by the consignee. It is very easy to get confused on this point.

 

Say you ordered something from a company in a city 400 kms from you. That company informs you that they will pay for the shipping as long as you pay for the product up front with a credit card. You agree, the transaction is completed and the shipment is sent. But unfortunately the shipment is completely destroyed by the freight company before it gets to your door. Who should file the claim? Because the shipment was prepaid (paid by the shipper), the shipper is the one who should file. Even though you may have already paid for the product! How does this make any sense? It is because when the shipment is prepaid, it is not considered to have been ‘possessed’ by you until you rec’d it from the carrier. On collect shipments, the reverse is true. A shipment is considered to be ‘possessed’ by the consignee at the moment the shipper turns it over to the freight company.

Many companies will not even respond to a claim filed by the wrong party. While a company with even a tiny bit of integrity would contact you and inform you of the error so you can have the claim filed properly, many of them just leave it in limbo. Legally, they have no obligation to respond to a party that does not have a legal right to their grievance. Remember to ensure you are the party who should be filing, and you will be one step closer to getting your claim approved.

Keep an eye out for my next post. I will share more keys to getting your freight claim resolved!

Freight Density, Cubing, and Air

What weighs more: a ton of feathers or a ton of lead?

They weigh the same of course… a ton. But. How much space would a ton of feathers take up?

Trucking companies ship air. And they charge you for it too. It’s actually a  very interesting topic. You see, the real culprit is density. In the transportation industry, individuals are tasked with the problem of finding an appropriate price to charge when moving freight. The challenge here is that trailers have a limited amount of space (volume) as well as a limited amount of weight that they can carry. Freight in a trailer must be less than the total volume of the trailer as well as less than the total weight that can be carried by the axles. I know… quite intuitive. Should the price then to ship a full trailer be the same regardless of whether it is the weight that limits the shipment or the volume?

For example, a common trailer load of insulation (or feathers if you will…) may take up the entire amount of space within a trailer, but weigh only 10 000 lbs (a standard dual axle trailer in Alberta can take a maximum weight of 53 000 lbs). On the other hand, several pallets of tile or cement (our proverbial lead) may end up weighing 53 000 lbs long before they ever fill the entire space of the trailer. This scenario is the reason that most carriers utilize some sort of cube rule. Typically, a cube rule is where a weight is assigned to a volume and used to calculate rates; whichever rates is greater, the cubed weight or the actual weight is used to determine the price of the move.

Knowing that trucking companies compensate for the problem of density with a cube rule can greatly help shippers and makes package optimization that much more crucial. All of that excess air in your packaging now has a price attached to it. Packaging products as efficiently as possible means that less space is used and makes the actual weight of a shipment the weight that dictates the rate. I mean… why pay for moving air

Negotiating Freight Rates

The fact of the matter is: most things and life are negotiable. Yet, it would seem as though there are many of us walking through life oblivious to this fact. As a young man still early in my career, the importance and breadth of negotiation has had a huge impact on my thinking. We are put in situations daily where negotiation is a must; which restaurant to go to for lunch with a work colleague, what movie to watch with the family, or who is going to do what chores around the house. Becoming a better negotiator is an important skill to focus on and I have provided a few links to some great articles on how to improve your negotiation skills below. This said however, my focus here is not to tell you how to be a better negotiator, but rather to suggest that you should be mindful of the fact that everything is negotiable when approaching transport rates.

There are a few key areas that I think you should consider when negotiation trucking rates. The first and most obvious is of course your standard freight rates. These are most likely in the form of hundredweight rates (CWT rates) or skid rates. (For a brief description of how hundredweights work check out this article: http://www.duckeringstransport.com/index.php/blogging/111-hundredweight-rates-the-confusion). Most shippers are familiar with this approach and work hard to get rates from different carriers to find the one with the most favorable rate per hundred pounds. In order to do this effectively, it is crucial to understand how your rates work and which weight breaks are most applicable to you. If you ship full loads (FTL), a carriers less than truckload rates (LTL) rates probably have little value to you. On the other hand, if you ship primarily LTL freight in the 2500-3000lb range, the 2M CWT rate is going to be very important to you while a carrier’s minimum charges may have much less relevance. Knowing your freight and the rating style being used may allow you to negotiate better rates in the weight brackets and lanes that matter to you the most.

Now that you have your freight rates dialed in, it is time to focus on the fuel surcharge. Most transport companies have a fuel surcharge that is added to the freight rate to compensate for the cost of fuel. The reason that the fuel surcharge is not simply built into the rate is that the price of fuel has seen major fluctuations, even in time frames as short as a couple weeks. This fuel surcharge is variable and can work to benefit both the carrier and the shipper. When the price of fuel goes down, a proper functioning fuel surcharge decreases and passes savings on to the shipper in the form of a lower total freight cost. When the price of fuel goes up, a proper working fuel surcharge protects the carrier from huge jumps in its fuel expense. In essence, the fuel surcharge works to help the carrier be more competitive in its price. If a transport company includes fuel in its price, it must maintain margin to protect from major spikes in fuel prices; this generally results in a higher average price for the shipper. (The fuel surcharge is explored in greater detail: http://www.duckeringstransport.com/index.php/blogging/120-why-is-there-still-a-fuel-surcharge)

Fuel surcharges are negotiable! As a shipper negotiating your freight rate, it is key that you know what your fuel surcharge is, the formula that is being used to calculate it, and what data will be used to calculate it. Many individuals work hard to get the lowest freight rate and never realize that they are being charged a fuel surcharge that is higher than average. The rates “look good” but the cost may be the same as an individual who has a higher freight rate and a lower fuel surcharge. If the carrier you are working with does not want to reveal their fuel surcharge formula to you, or has no method by which they maintain accountability for the values given, there is always the option to use a third party such as the posted FCA or NTS fuel surcharges (respectively http://www.fca-natc.org/ or http://www.ntscanada.com/CFS.asp).

The last major portion of your freight rate to consider are accessorial charges. You may have the best freight rate possible, reasonable fuel surcharges with third party accountability, but you get nailed on excessive accessorial charges. The idea behind accessorial charges is that you should only have to pay for the services you use. While there is some merit to this argument, it really depends on if you are a heavy user of accessorial services. Common accessorial charges include things like power tailgate usage, heated trailer requirements, appointment charges, and other similar services. Each company typically sets it’s own accessorial charges and decides which items to include in its overall rate and which to charge additionally. Knowing which accessorial charges are most applicable to you allows you to negotiate more favorable rates on ones that really matter and worry less about the ones you rarely ever use. Being aware of and negotiating accessorial charges also aids in ensuring you are not surprised by extra charges when you see your freight bill at the end of the month.

Knowing the three major areas to focus on when negotiating freight rates is key to ensuring that you get the best numbers possible to successfully move your goods from one location to another. That said, the old adage still remains – you get what you pay for – and in some regards this is certainly true. Negotiation on each of these three areas of freight rates can create great value for both the shipper and the carrier.


If you are interested in tips on becoming a better negotiator in general, check out the links below!

http://www.brodow.com/Articles/NegotiatingTips.html

http://www.forbes.com/sites/jennagoudreau/2012/10/08/the-secret-art-of-negotiating-take-your-ego-off-the-table/#57b969947224

http://lifehacker.com/five-tips-to-negotiate-better-with-just-about-anyone-493106085