Freight companies have a nasty habit of overcharging, and the only way of avoiding falling culprit to it is to check your invoices regularly.

At Freight Cost Solutions, we have  clear  evidence of freight customers being overcharged by 300% and up to $115,000 a month, which unfortunately did not surprise us at all. It is very important to know  how  to  analyse  freight  invoices from freight companies to make sure you’re not one of the many companies being overcharged.     

The validation of all the invoice data using our in-house software enables us to provide the information required to establish where savings can be made.

Here are some key factors to look  out for  when analysing freight invoices :
• Rates – are they correct and in line with your contract?
• Cubic conversion – is that correct?
• Zoning – have the correct zoning been applied?
• Service codes –are the correct codes being used?
• Minimum charges – are they where they belong?

Your  time could be  better spent on other tasks, allowing Freight Cost Solutions to  analyse your monthly bills for you. It’s part of our commitment to our clients and means that you can spend more time and effort dedicated to the things that matter in your business. Our software allows   us   to check each individual consignment to verify that you are not being overcharged in anyway. Many of our customers save thousands every month through this service.

To find out more about our freight auditing services, contact Freight Cost Solutions on 1800 428 348.

WHAT ARE THEY?

HOW ARE THEY APPLIED TO THE DETRIMENT OF MOST OF THEIR CUSTOMERS?

The concept of introducing and applying ‘Industry Standard Rates’ to the freight industry occurred many years ago and remains misunderstood by most of their customers.

Industry Standard Rates enable freight companies to manipulate freight rates proposed to potential customers whilst retaining excessive margins for themselves and their services. This concept is most unreasonable as it inhibits potential customers from obtaining the best freight rates from the marketplace.

When challenged freight companies will deny such a concept exists however it has existed for many years and gives comfort to the freight industry as they endeavour to maintain or improve their margins at the expense of their customers.

The term “cartel” comes to mind, but the concept of freight industry standard rates remains unexposed to most of their customers.

The cost of freight for any business is significant and can be the difference between a business being profitable or striving to survive.

Freight rates proposed to most potential customers are based on discounts applied against Industry Standard Rates subject to freight volume and can vary across the numerous freight providers in the marketplace.

Freight Industry Rates are based and calculated on a cost and margin model well recognised throughout their industry and rewards them, in most cases, with margins difficult to justify for the services they offer.

Even now, understanding the concept of Industry Standard Rates is actually exceedingly difficult for potential freight customers to calculate the discount rate that the volume of their freight justifies.

Freight contracts are mostly negotiated between a potential customer and a Salesperson representing the freight company and their own interests as the Salesperson is invariably incentivised through the commissions they receive.  As a result, most customers will not receive the discount level the volume of their business deserves.

The concept of Industry Standard Rates can be exposed by allowing your freight business to participate in a tendering process. A process that is not highly respected by the freight providers as it exposes the individual rates, they offer allowing comparisons to be made and negotiations engaged in resulting in the best economical fit for your business.

Freight Cost Solutions has a well proven process that, since 2003, has enabled their customers to enjoy substantial reductions in freight costs whilst maintaining or even improving service levels.

A confidential analysis of your business’ freight volumes will be undertaken and compared to those recognised within the industry. The appropriate discount applicable to your volume of freight will be calculated and can be used to challenge the rates offered by the freight companies for your business.

The FCS process is not “rocket science” but it requires a certain skill set, unique software programs and a tenacious approach to the freight industry.

Step One: Invoices detailing the freight activity of your business for at least the last three months are analysed in detail.

Step Two: The movement of freight across zones is determined.

Step Three: This data together with freight volume and the number of consignments is further analysed utilising software programs developed by FCS.

Step Four: The correct discount level justified by your freight spend against Industry Standard Rates and potential savings is calculated.

Contact FCS if you’d like to know more. They are here to help and assist your business to be treated fairly by the freight industry.

How often have you heard the expression” not again” regarding freight deliveries that have gone astray? More often than not, it could be a part consignment or just one item that has not made the journey and it could very easily jeopardise the longevity of a contract.

While most transport companies are pretty good at getting your delivery to the right place, sometimes deliveries can get split up or end up at the wrong destination. When this happens, it can lead to a great deal of frustration and to add insult to injury, your freight provider may even try to charge you more as a result than find the root cause of the problem in the first place.

Why do deliveries get off track?

Poor labelling can be one reason why deliveries go astray, but in the vast majority of cases we see, it’s down to the transport company’s processes, or lack there of. Processes are important in any business but when you’re dealing with a vast amount of freight going in and out at any one time, as well as the logistics of getting everything on the right truck within the right timeframe, processes are absolutely crucial.

Processes can help ensure that everything goes where it’s meant to go at the right time and most importantly, that its whereabouts is tracked. Knowing where your freight is at any given time is an important function of any good process and it means that if it does end up in the wrong place, at least you can find it. A good system will be able to get your delivery back on track in the shortest possible time frame.

How can misdirections be reduced?

One contributing reason could be poor warehouse practices, such as poor labelling of products and con note details not be addressed properly. If the warehouse follows good work instructions and the labels and con note details are strictly followed, then the transport company must be held responsible for any misdirection.

One of the hallmarks of a good freight provider is that they have strong, solid systems. If there is a mistake, a good system will let the freight company staff see where the error occurred so they can prevent it happening again. If your deliveries are continuously split and you can’t get a straight answer as to why, chances are your freight company doesn’t have a good method in place to manage compatible versus incompatible freight.

Processes are essential to all aspects of freight service delivery, and good processes usually mean a more efficient service and fewer issues overall. If your freight provider can’t tell you clearly what their processes are and how they work, and can’t provide you with a clear explanation of where your freight is and how it got lost, it may be time to look elsewhere.

We see too many customers putting up with poor service from their freight provider. Misdirected and split deliveries can cost your business money and disrupt your processes, not to mention the hassle and extra cost of having to locate the missing consignment and get it back on track.

A freight audit can help you see exactly how service issues are impacting your bottom line and ensure you’re getting the highest possible level of service from your provider. Speak to us to find out how it works and how a freight audit can help your business over the long term.

Who is responsible if your goods are damaged during transit?

This is very often a question that is never asked by a company when setting up a freight contract.

It is imperative that insurance for transit damages is discussed when entering into a contract with a freight provider, depending on the type of freight that is being handled.

More often than not, your freight company will claim immediately that they are ‘Common Carriers’ and that they are not responsible for the condition of the goods when getting your freight from A to B.  But what actually happens when they arrive in the warehouse in less than perfect condition?

Damaged goods can create massive headaches for you, which will impact your business bottom line and cause rifts with your service provider, especially when it comes to deciding who is financially responsible for the damage.

It makes sense that if your delivery was signed over to the freight company, and inspected for the quantity and condition of the goods at that time, you should be able to claim for the costs from your freight company.

The question of who is responsible for damaged goods should be something you discuss upfront and get clearly communicated in writing whenever you sign on with a new freight service. Dependent upon your freight expenditure and company size, you may get a credit for the goods or the cost of the actual connote at least.

Unfortunately, claiming back your costs from your freight company can be a lengthy and stressful process, and many freight companies may try to place the responsibility on you by claiming that your packaging was inadequate or the goods were already damaged before they were signed over.

If you want to avoid a drawn-out battle with your freight company over your damaged goods, here are a few tips:

• Get an agreement in writing stating who is responsible for your consignment at different stages.
  
  
• Make sure that when you hand over a delivery, it’s inspected by the freight company and they sign to say that the goods are intact.
  
  
• Ensure you follow best practices when it comes to packaging your goods, especially if they contain anything delicate or breakable. Don’t forget that your goods may be sitting outside in direct sunlight for lengthy periods of time and protect temperature sensitive goods appropriately.
  
  
• Ask your freight provider about the policies and systems they have in place to ensure the quality of their deliveries. There are industry wide stacking and palletising procedures that are designed to ensure the chance of breakages and damages are limited.

 Make sure your provider is using these procedures and their employees are adequately trained.

If your goods are constantly arriving at their destination with damage this could be due to bottom or top stacking during transportation. If you regularly transport delicate or sensitive goods that are prone to damage you will need to take extra care when choosing your freight service to ensure they take all reasonable precautions to ensure your delivery arrives in perfect condition.

The above can be negotiated by Freight Cost Solutions when entering into a contract. After all we have been in this business for the last eighteen years.

If you don’t have experience or in-depth knowledge of the transport industry, it’s easy to assume that the big brand freight companies do all their hauling themselves.

This is actually far from the truth. The transit times of a freight company are largely dependent on smaller, line haul companies. The major transport companies use sub-contractors to transport goods between major cities and regional locations. This is useful to know if you want to get an understanding of how freight companies work and the different variables that impact their transit times, proof of deliveries and other service factors.

Even though you might see a truck branded by a major transport company driving down the freeway, there’s a good chance that while the trailer may be owned by the transport company and branded accordingly, the truck itself is probably owned and operated by a smaller line haul company (sub-contractor).

Welcome to the Freight Cost Solutions “Industry Standard Rates Test” for interstate freight. This simple test can determine how your freight rates really compare to the market. It only takes a couple of minutes and it’s 100% FREE! 

Read each question and click on the appropriate response. Answer quickly as your first response is usually correct. The score results can be found below the questions.

Working out how much you are paying for your freight without the expertise is a baffling experience at best. With so many different mathematical formulas to consider, it’s easy to wonder if freight companies are just pulling numbers from thin air (or somewhere else) when they send you that quote. Understanding the way your freight costs are calculated is essential if you want to avoid being ripped off, and to give yourself the best possible chance of saving money.

As well as understanding your kilo rate, minimum charges, and basic charges, you will need to come to grips with your cube to deadweight ratio. This is critical if you want to ensure that you aren’t paying too much for your freight. Cube to deadweight ratio is a key factor in determining your freight rates and it has a big impact on your overall freight costs. We recently assisted a customer who unknowingly agreed to a 250 cubic conversion factor with a freight company for air freight when they should have been on a 167 cubic conversion factor! That in itself equates to a 33% saving just on cube without any rate adjustment.

The idea of working out cube to deadweight ratio is based on the idea that items being transported are calculated both on their weight and also on the amount of space they are expected to take up. A box of feathers may be lighter than a box of nails, but they still take up space, which needs to be accounted for. Carriers will claim upfront that they need to charge a 250 (cartons) or 333 (pallets) to be profitable. But take note, cube can be negotiated. Additionally, the majority of linehaul trucks have a mixture of heavy freight as a base and pack lighter freight on top. This maximises their vehicle capacity utilisation as well as cost effectiveness. Essentially, by charging a 250 cube for light freight they are double dipping.

If your company’s freight spend is under $3,000 per month, carriers will either deny you an account or charge you like a wounded Spanish bull. But, if you spend from $60,000 to $25,000,000, the rates offered by Carriers will become competitive and more generous.

Carriers within the transport sector are no different to any other industry. They compete against each other and have Industry Standard Rates based on freight volumes. As the operational costs of large carriers are similar to their competitors, by design or by default there exists rate similarities and competitiveness across specific freight volumes.

So, note an important fact here … your monthly or annual freight expenditure is irrelevant to you achieving the correct discount level, but do not tell the Carriers your current freight expenditure. What you do need to share is the volume of freight you distribute and the individual consignment detail. This should include item numbers per consignment, the actual physical and charged weight, and the cubic dimensions.

More than likely, your company’s freight volumes increase every year due to compound growth. Because of this, it’s hard for most to accurately ascertain what rates offered by a carrier are competitive after three years of distribution growth. Just because you achieved rate discounts 2 or 3 years ago does not mean that today you’re on competitive rates.

Formulas and mathematical calculations can provide a “smoke and mirrors” effect that even the savviest customers are often taken in by. What appears on the surface to be a fantastic rate can be more than meets the eye upon further investigation.

One technique that many freight companies use is to charge pallet rates in place of kilo and full truck rates. While pallet rates may sound like a simple and straightforward way to pay for your freight, there are some potential pitfalls. We have seen cases where customers have been charged for pallets at a certain weight, when in fact they were much lighter. This can lead to a much higher per kilo weight than the industry average.

Add to this the fact that many transport companies charge different rates for different numbers of pallets. This might work out reasonably well if you have a small number of pallets, but we have encountered situations where customers were sending full trucks to be shipped and were being charged the same rate as a company sending 8 pallets. 

This higher volume should have attracted a much higher discount, and considering the quantity they were shipping, their rates were pushed well above what they should have been.