After a recession-caused freight price war in the past few years, less-than-truckload (LTL) freight demand and prices are rising again as the economy recovers.  With a shortage of trucks, drivers, and even the terminals needed to consolidate LTL shipments due to cuts during the recession, industry experts are predicting double-digit price hikes until capacity meets demand.  For manufacturers dependent on inbound, outbound, or just-in-time shipment of parts or finished goods, rising LTL rates can be particularly worrisome.

 

Carriers that absorbed price cuts and deferred maintenance to contain costs, are now raising prices to regain margins lost during the recession.  Fuel costs that have risen about 20-30% recently, due to tighter supply, Middle East instability, and other factors, are also driving up LTL freight costs.

 

“When industry freight costs rise, it’s more important than ever to find the best price,” states Kenny Mealer, Shipping Manager of CrossRidge Precision Inc., an Oak Ridge, Tenn.-based company offering precision machining and assembly of aerospace, automotive, nuclear, heavy truck and industrial products and components. 

 

While most manufacturers can expect rising shipping rates as the economy improves and carriers regain lost ground, the most proactive are seeking to partner with a professional, third party logistics provider (3PL).  This can save manufacturers an extra 18 to 25% off already heavily discounted LTL freight costs, if they routinely make multiple shipments to multiple locations and work with numerous freight carriers.  For every $100,000 in freight costs, that’s an extra $18,000 to $25,000 in savings.

 

How can a 3PL lower freight costs beyond a company’s existing discounts?  By negotiating additional discounts based on the 3PL’s relationship, reputation, and volume business with established carriers.

“A good 3PL will analyze current rates and freight requirements, then bid out the work to qualified freight companies hungry for the work,” explains Larry May, owner of Freight Management Systems (FMS), a Knoxville, Tenn.based 3PL routing approximately 20,000 freight moves each year.  “An established 3PL, brokering a large volume of business with major carriers, can negotiate much better discounts than the manufacturer.”

 

“Many factors affect how a freight rate is calculated: product classification, density, weight, value, distance moved, and damageability, for example,” says May.  “But the higher the NMFC classification, the higher the shipping rate, which is why getting it right is key.”

 

Working with a good 3PL can also contain the hidden costs of freight such as chasing down quotes, invoices and documentation, which can require a substantial in-house staff if done internally.  It can also help to prevent potential production line slows or shut downs when needed parts are unexpectedly held up.