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August 2009

Action: Delayed Reaction to notices of “Refused” or “On Hand” for freight Shipments for which you are responsible.

Carriers will notify shippers or receivers of material that is on hand on for some reason has been returned, or is awaiting some sort of clearance prior to delivery. This could be the payment of COD charges; shipments refused by customers, or damaged material. But regardless of the reason, prompt disposition is important, because at the end of a specific number of days, the shipments become subject to storage charges. Prompt disposition instructions can avoid this possible exposure. In addition, the carrier holding the shipment assumes the legal responsibility for the products as a warehouseman, which is altogether different than as a carrier. The important consideration is that you do not delay taking appropriate action to mitigate to the fullest possible extent the cost that accrue against this shipment which will then have to be returned into inventory, damage assessed, claims filed and/or the shipment is disposed of in a manner that results in the best total expense. The Logistics group has the prime responsibility although other “Team Group C” members must also be involved.

July 2009
Action: Failure to use legally published Export Rates.

Generally speaking, export rates are published to apply to the various ports of exportation and at lower relative rates than the same product moving between the same two points on a domestic move. The precise purpose for this distinction is not well known except an effort by the carriers to promote is promote commerce or trade that would widen the need for transportation services, international commerce, or the ports negotiating a distinct treatment t But the distinctions do exist in some categories of products and in some geographical areas of the United States. Just be sure that if this distinction results in a lower level of transportation charges on your product, that you avail yourself of these favorable differences in costs. Or alternately if you are on a contract-exclusive arrangement with rail or motor carriers, that the negotiations include some consideration for the encouragement of these type of normally large volume moves through rate considerations, or the absorption of some of the port accessorial charges. “Team Group C” has the execution responsibility.

May 2009
Action: Proper notification to Railroad carriers to establish appropriate and timely strike protection Rues.

It is critically important that transportation personnel be kept up to the minute on the possibility of a strike. Protection against very high demurrage costs offset by being sure proper rules is in effect to mitigate excessive costs. The demurrage can occur to apply on cars at the plant awaiting loading, loaded cars not yet released, and cars of materials inbound, but which have been placed on construction placement awaiting orders to switch into the plant. The difference between strike mitigated demurrage charges and normal demurrage are very large indeed. Proper rules in carrier tariffs, or specific items in contracts are very important. All of these mitigating opportunities must be placed when the first striker shows up at your plant site! There are very many steps, which can be taken to protect your operations, but they must assuredly be accomplished and in place BEFORE the strike activity begins! It can be done later, but not very well if at all. For example, during extremely tight supplies of fuel to operate the plant, advance leasing of extra tank cars WHEN THEY ARE AVAILABLE will provide a cushion to permit normal plant operations. But you must arrange when the supplies are available and not when every one wakes up and the strike is on and the plant is NEAR to shutting down production! “Team Group C” has the execution responsibility.

November 2008
Action: Making sure all tariff required notations are included on the Bill of Lading.

Surprisingly, it is not unusual for some critically important data to be omitted from bills of lading. Failure to execute section 7 of the bill of lading, for instance, or some other instances such as described on C.O.D.’s can also result in higher costs. Section 7 of the bill of lading simply relieves the shipper of any expenses associated with the service provided the product that was precipitated by any actions of the receiver and over which the shipper had no control or responsibility. Absent the Section 7 signing at the time the bill of lading is initially executed, however leaves the railroad free to bill the shipper for excessive cost that are the responsibility of the receiver of the merchandise. Addresses or phone numbers of the notify party, instructions about an appointment required prior to delivery, etc. Each omission has different results to correct, but all have a single constant attribute – they all “cost money.” These costs are usually described by carriers as “accessorial charges” and in some instances can result in higher extra costs than the original cost for the transportation service itself! “Team Group C” has the general responsibility but the prime execution for this action belongs with the Logistics group.

September 2008
Action: Failure to audit charges for railroad provided maintenance for privately owned rail cars.

Railroad cars must be maintained to Association of American Railroads (AAR) standards, as well as meet all safety mandates. If the fleet is relatively small, this maintenance is arranged with the railroads to accomplish this at point of occurrence. The charges are specified in a guide published by the AAR and include charges for parts and labor. Because the arrangements separate carrier and owner repair cost, the billed charges are rather complicated, and errors are easily found in the actual dollar charges made to owners. These actual charges should be audited against the authorized charges for errors in submittal of invoices. Whether the repairs are routine or extensive, and an evaluation is made as to the portion that is attributable to railroad error, and the part that is owner’s responsibility. Outside qualified car repair facilities are readily available and they are also helpful in separating the owner vs. rail responsibility for any repairs performed on your cars. It is also wise to seek outside bids for repairs of this nature as generally this can result in lower overall costs and a quicker return to service of the damaged car. It requires a very extensive knowledge of the rail repair processes and an audit is usually more productive if it is done by qualified outside audit service firms. The service charges are usually a percentage of all recoveries from the audit process. The Logistics group has the action responsibility and this would of course be the “Team Group C” total area of interest and responsibility.

August 2007
Action: Failure to adequately protect against the possibility of duplicate billing by carriers and payments by shippers.

Carriers make every effort to avoid this sort of billing errors. Regardless of their best efforts, this type of error is not unusual. Well designed computerized freight payment systems have various types of built in duplicate payment checks, but even these are not perfect. A manual check for duplicates is better than nothing, but not very much, if there are a large number of bills being processed for payment. There continues to be duplicate payment bills presented by carriers. Some of these are not a deliberate effort to double-bill but occur because of the manner the carrier’s particular systems are set up. For instance any computerized program can be set up to check for duplicate freight bills based on the PRO Number. The computer can be set up to search for a set historical period of time, and to throw out any bills for manual review, which exceed the reasonable search-back period of the program. But carriers may automatically re-bill if payment has not been received in 4-6 weeks or a couple of months, depending on the payment credit arrangements. If the bill is re-issued an identifying letter may be added to the PRO number. The computer is not smart enough to be able to read a carrier’s billing procedures and will automatically treat the number plus letter PRO as a new bill number and no duplicate review will catch it as a duplicate. So this bill will be paid! (A second time – or sometimes more often than that!) One other method of reducing the need for the program to search through a tremendous bank of historical data, is to set a time limit of beyond which no bills will be paid if presented more than 6 or 12 months prior to final presentation. Special handling can be given any legitimate bill that is presented in this manner, providing is not past the statutory time limit for carrier billing. The responsible implementing group is primarily Logistics with the others in the “Team Group C” with design assistance provided by “Team Group B.”

April 2007
Action: Know the Rules and Regulations with respect to International Shipments

Rules for documentation, packaging, terms of sale, marking of packages, export or import duties, customs regulations, including duty drawback, letters of credit, are only a small part of the complexities of international business trade. To complicate matters even more, the rules and regulations are unique by country and in some instances result in some rather severe penalties for failure to comply with what would appear to be nit picking, such as the precise size and location of the markings on each package. Custom regulations are also complicated and cumbersome, but essential to assure the proper delivery of exported or imported goods. Failure to show the country of origin as part of the markings is an egregious violation and could subject the goods to impoundment, stiff penalties and perhaps total loss of the goods in question. I have seen all of these options exercised by the customs agents. Curiously, you might get different interpretations from the customs agent in charge at different ports in the U.S. and especially in all foreign ports. All of this requires in-house expertise or alternately you can rely on third party service providers who are expert in this field and can guide you (for a fee) so as to avoid the land mines associated with the non‑compliance of EVEN innocent errors. Assistance in abiding by these sometimes onerous rules and regulations are available and are discussed in other ACTION items located elsewhere in this presentation. It is the duty of “Team Group C” to identify these requirements, seek appropriate input from other affected members of the organization from Team Groups A & B”. Once this is done, appropriate implementation policies and procedures need to be drawn and disseminated to all individuals affected by them. THEN you can efficiently participate in the lucrative global market.

November 2006
Action: Know the Rules and Regulations with respect to International Shipments

Intermodal shipments are available in which trailers are loaded onto rail equipment between key rail points at levels of service and distances, that can often meet over the road service. There are some rumblings in the rail sector that indicate they are finally waking up to “on-time delivery” and “premium charges” between key sectors such as Chicago and the West Coast. Also being promoted are hot-shot Intermodal services that includes expedited tracking of each container, between Washington and Oregon, San Francisco and Los Angeles. This is not intended as a complete list of services that are available but are intended as examples of the variety of services that can be considered. But I am sure you understand how important it can be to make the right selection for whatever level of service your customers may need or require.

The important thing to learn from this, is that you should be aware that there are some services that are worth a premium of some sort, and other, even high priced services that are NOT required by the receiver. Nor do they merit the much higher costs. If you KNOW this much of a customer’s needs, AND you know which alternative service level will meet the service requirements, you can make a substantial difference in satisfying your customer AND controlling your costs. Ignorance is NO excuse! This is the key responsibility of “Team Group C” but might also involve other members in “Team Group B” who should be concerned about some of the issues in this decision and aware of the basis on which service decisions are being made and the cost/benefits associated therewith. (But also see No. 47 below!)

September 2006
Action: Failure to Execute Section 7 of the Bill of Lading.

An easily overlooked provision in the body of the bill of lading is section 7. This section reads “subject to section 7 of conditions, if the shipment is to be delivered to the consignee without recourse on the consignor, the consignor shall sign the following:

The carrier shall not make delivery of this shipment without payment of freight and all other lawful charges_________________________________(SIGNATURE OF CONSIGNOR)
A receiver can be responsible for charges due the delivering carrier in addition to the transportation charges that were paid by the consignor. Since the shipper has no control over how these charges were due, nor responsibility or control over them, it is important to tell the carrier, that the receiver (consignee) must pay those extra charges and there is no recourse to the consignor (shipper) if section 7 is signed by the consignor at the time of issuance of the bill of lading. There are several conditions listed for the application of section 7 on the back of the bill of lading, and if your shipments are subject to the carriers’ tariff rules and provisions, these provisions can change or effect how Section 7 is applied to your shipments. Depending upon the results of the failure to sign Section 7, this is primarily the responsibility of “Team Group C.” However, some actions might require a review with some of the members of “Team Group B.”

April 2006
Action: Failure to execute C.O.D. clause on Bill of Lading

Occasionally it is necessary for a shipment to be made that requires that the receiver pay for the product before it can be released to the receiver by the carrier. There are many reasons for this, but one example would be poor credit risk of the receiver. These shipments are unusual and therefore require some very special notations on bills of lading to insure that the carrier is fully informed about how to arrange for the payment prior to delivery. Failure to properly inform the carrier can result in some very substantial losses, with no recourse to the carrier, since proper notices were not given at the time the shipment was picked up and the bill of lading was executed. The process of establishing this need might require input from the large Team List A, the party of responsibility to execute properly the Bill of Lading to protect the ultimate collection for the product from the receiver would be Logistics along with possible interest by others shown in “Team List C.”

March 2006
FAILURE TO ESTABLISH IN-TRANSIT ARRANGEMENTS

The use of this special provision in tariffs is an old procedure which covered such things as weighing, milling, marking, packing, storing, inspection etc., while the products were shipped to an intermediate point for the performance of any of the sort of value added services listed above. Generally the local rate was paid to the intermediate point. When shipped to the final destination the difference between the through rate from the original point of shipment to final destination less the amount previously paid to move the product to the intermediate were paid to complete the transaction. There was a requirement to maintain all records necessary to be able to identify the shipments made to the intermediate point and which were eligible for the discounted total charges. This arrangement tended to keep shipments tied to the mode that published such arrangements, most often railroads. This procedure is gradually being replaced with appropriate contract arrangement. However, with so many consolidating of services being performed by third party service providers today, this sort of arrangements should be reviewed for possible application. The “Make to Order” services being offered by computer companies such as Compaq, Dell and Gateway would fit this sort of scenario, although I doubt seriously that these companies ever considered this approach! There is a value attached to this arrangement to the transportation company or the 3rd. party Logistics service provider, since the payment of transportation charges to the intermediate point assures them of a future “captive” haul to the final destination and storage and handling charges will accrue on the product while it was awaiting final release. This is the primary reason why the carrier’s or 3rd. party Logistics service providers should have an interest in this sort of arrangement. This arrangement is normally the Logistics group that has the primary responsibility along with others shown in “Team List C”.

February 2006
FAILURE TO SPECIFY THE PROPER RELEASE VALUATIONS IF PROVIDED FOR IN THE TARIFF OR CLASSIFICATION DESCRIPTION

While articles of extraordinary value are prohibited for shipment via motor carrier, there are many articles that have differing ratings related to the amount of value declared for the product on the bill of lading. Item 99400 of the National Motor Freight Classification, lists a value of less than $1.50/lb @ class 100, a released value of $1.50 but less than $5.00 is classified at class 250, and value in excess of $5.00 but less than $7.50 at class 300. If the shipper fails to execute the released valuation, charges will be assessed on the basis of the class for the highest value, or on the basis of class 300 in place of a possible class 100 or 250! Proof of the actual value must be provided before an adjustment will be made. This is as opposed to a simple value declaration on the original bill of lading. This is only an example of a product with this potential for excess costs. There are of products subject to a released valuation class rating in the classification. These sorts of restrictions can also appear in carrier rate tariffs, rules tariffs, or specifically included in contracts.

Small package shipment carriers like UPS and Fed all have a value restriction and offer to provide at an additional cost whatever additional insurance you may wish in order to cover excess valuation liability. Are you sure, your product isn’t in one of these categories? It is critically important to know for sure and to take appropriate action to protect your products the very best possible protection. You can even establish that you do not wish to pay for excess insurance coverage to a carrier, go to an Independent Insurance Company such as a Parcel Insurance Provider or establish an internal self insurance coverage which is usually less than the insurance offerings by most carriers. Finally, carriers are not liable for consequential damages unless negotiated and in a special contract or reference in the quoted rates. Consequential losses are such costs as shutting down a production line or missing a sales promotion. The logistics group should have primary responsibility of assuring the proper execution of a bill of lading to insure against unknown magnitude of losses in the event of a catastrophic failure on the part of the carriers. A recent tunnel explosion in an important connector sector of a rail carrier in Baltimore has resulted in catastrophic losses including the cancellation of several scheduled major league baseball games, an inconvenience to motorists and incalculable costs to repair the physical damage. It would be soothing to know that if you had a product that was involved in any way in that situation that your liability is covered by appropriate level of insurance protection. Of course there are others in the corporation who would have a keen interest in the manner of handling this contingency but the “Logistics Team B” would be the candidate for a joint knowledge of the effort to properly protect your products while in transit or at rest in a distribution center.

January 2006
PROPER DEFINITION OF PRODUCT SO IT CAN BE CONSIDERED AS A “RECYCLABLE OR WASTE MATERIAL” ITEM.

Products which can properly be classified or described as a “recyclable” are generally given a lower classification, or special rate consideration apparently an effort on the part of the carriers to be sensitive to environmental implications, or because of past requirements of the ICC which forced this differentiation. Regardless of the reasons, the fact is that such considerations exist and that the shipper should be aware of this and appropriately takes advantage whenever possible. Finally, there is a specific exemption, which totally exempts recyclables from the requirement to pay so called undercharges from auditors for bankrupt carriers. The point to consider is whether negotiations could include special consideration for a product since it contributes to the re-cycling needs and is generally a relatively low valued product. The National Motor Freight Classification has a special alphabetical listing for “WASTE MATERIALS GROUP” under item # 194120 that covers a very substantial listing of just such descriptions. It goes from Apple Pomace to Waste packing and it has some interesting conditions that are unique to these sorts of products. There are also differentiations relating to value and. or density that must be adhered to. But generally speaking, the proper utilization of these types of classifications when appropriately and legally establishes lower ratings that results in improved costs as compared to the same products when shipped in their original pristine condition. The prime responsible party should be the “Team List C” with the specific assignment to Logistics.

December 2005
BILL OF LADING ERRORS THAT RESULT IN:

  • Re‑delivery charge because of erroneous address.
  • Accessorial charge because of address changed to non-commercial address& the loss of discount.
  • Errors in showing shipment count as specific number of pallets rather than “24 Pallets containing 40 cartons each.” Settlement for loss or damage is based on a specific amount “per unit”
  • Incorrect weight for products.
  • Transposition of numbers that result in higher rates, weights and charges.
  • Miss‑description in violation of tariff, classification, or contract required descriptions.
  • Loss of product because of failure to properly specify on the bill of lading the degree of protection required for safe delivery of product being shipped.
  • Specifying unnecessary temperature control environment of product while in transit or at rest awaiting deliver.
  • Failure to sign Section 7 of Bill of Lading – (See also Action # 20 for more information for more details on this issue.)

The above covers a great number of areas, all relating to the single aspect of excessive costs because of these potential errors on the bill of lading. Unfortunately, all of them occur regardless of how careful anyone may be or wants to be. Some of the excess costs can be very serious, and should be avoided. Chocolates being shipped in the middle of winter without temperature controls can result in a very costly damage claim. On the other hand, the same shipment made on a 90+-degree day and traveling in an unprotected trailer would be an equal disaster. The same lack of temperature control for shrimp or fish from the west coast or Louisiana in the summer would result in the same sort of catastrophe! If the shipper failed to specify the requirements for temperature protection, the carrier is not responsible for any losses of this nature.


If protection is specified or are included in part of specific provision in a contract, and the losses occur, then the carrier and his insurance provider must cover such losses except for acts of God or some five other extraordinary exceptions. It is important to specify protective services every time they’re required to protect the quality of the products being transported. Personnel in List “Group C” would have the primary executing responsibility.

November 2005
Selection of optimum service/cost port for imports:

All the requirements outlined in no. 10, are equally valid in making a determination regarding the optimum cost port for imports. It is important to understand that the terms of sale are very critical in assigning responsibility for the various costs that may be incurred while the products are in transit from the foreign origin to final destination in the USA. Experience has determined that the seller is not nearly as capable in making the lowest cost decisions for occurrences in the United States, simply because of their lack of proximity and detailed geographic knowledge. Furthermore the US buyer can combine his outbound tonnage with his inbound tonnage to gain an advantage in volume clout in rate negotiations. On the other hand, it is probably also true that the foreign exporter has the better knowledge of local rules regulations and costs in his “back yard” than you might have, sitting in the USA and waiting for the shipment to arrive.

Know the meaning of the INCOTERMS and the implications these have on the way you do your global business is mandatory because of their importance to a successful execution of this responsibility. Failure to know or comply with the requirements can result in some very serious costs and many of these costs are not recoverable under any circumstances. In addition there can be some serious legal complications associated with failure to comply with export or import regulations. The INCOTERMS have been revised from time to time and keeping current is an absolute necessity. These are critically since they determine that point at which title passes, and when responsibility for the product being sold or purchased occurs. A substantial assumption of responsibility and you must know exactly when that occurs and at which point that the product is the responsibility of the buying or the selling party. The Logistics group should be the lead responsible entity, but the total group in “Team Group A”should be aware and involved in providing input to any major analysis and process of evaluating costs and benefits before implementations by the Logistics Group.

October 2005
Selection of Optimum port comparing cost and service exports:

It is essential that all cost elements be reviewed periodically when making export shipments on a regular basis. There are a very surprising large number of cost elements, which differentiate each of the ports and these can change from time to time. The comparison measures also vary substantially from port to port. All are extremely critically important! Some of these are:


  • Distance from shipping point to Port – transit days to destination.
  • Distance to destination port- Transit days to destination.
  • Frequency of sailings.
  • Balance of inbound volume versus outbound to the specific foreign destination.
  • Facilities and ancillary services, i.e. number of free storage days, container handling efficiency etc.,
  • Number of truck or rail carriers serving the port and the willingness of carrier managers at the various ports to new innovative approaches to reducing costs and the sharing of such benefits.
  • Union relationships with management. Not surprisingly, there are significant variations between the ports on this issue, and taking the proper approach, this issue can result in beneficial results to all parties.
  • Receptivity of port management to new approaches for reducing costs.
  • Receptivity of union management to the same thing. This is critical in the event of a threatened strike or an actual strike developing. (But don’t START these negotiations AFTER the strike begins! – It’s too late!)
  • Reducing the ports to be used to the lowest number of ports to increase importance of concentrated volume.
  • Whether ports are affected by severe or seasonal weather should be considered. Example: Great Lakes ports for navigation season in the summer time should be considered BUT do not forget to check ALL OF THESE COSTS BEFORE MAKING THIS DECISION. Case in point: If imports or exports originate from or are destined to the Far East. Consider re-negotiating all rates or charges including temporary storage, handling and loading or unloading fees or extra savings if packing & packaging is improved. Total transit time from origin port to final destination is a critical element, because of the difference in inventory carrying costs associated with the alternative transit times. Using the West Coast ports for ALL season movements through those ports increases total volume will also give you a greater negotiating clout.
  • Congestion of general area, which can affect the efficiency of transportation and causes delays in departures of product from the port area.
  • Product handling costs vary greatly from port to port and a comparative analysis must be done. I f volume is changed or there are significant improvements in the manner your shipments are being shipped, then negotiations for improvement in charges for specific packaging or handling cost improvements should be initiated and are appropriate.
  • Temporary storage costs and minimum number of free days are often negotiable but always negotiate before the final selection of a port has been determined!
  • In making port cost comparisons be sure to include the inventory carrying costs of the total time from arrival of the product at the port to delivery at inland destinations. Reducing this time factor can have some very positive results in savings of inventory dollars, reduction in warehousing and handling costs and of course transportation costs.
  • Consider pooling of volume products of similar handling characteristics through partnering with some sort of shippers’ association. Be sure that the association is cleared by the Department of Justice to avoid any shippers’ potential anti-trust problems.

Most of these items have some impact on costs (of various kinds and magnitude) or service or both. Most ports continuously vie to attract volume shipments through their facility and are receptive to discussions that will increase the tonnage throughput of their particular port. In particular, do not forget to evaluate total transit time from to and between all origins & all destinations ports being evaluated, as TIME in-transit translates to an important element in setting inventory levels, and safety stocks to determine replenishment frequency. But most critical is the value of the product and inventory carrying costs associated with inventory. All of these are important cost elements to be sure, but are the prime responsibility of the Logistics Team. One day’s delay in the routine movement of imports in a study reported an assigned value of $22.00 per day in inventory carrying costs for the imported or exported product that was being imported and exported by the millions every year. So TIME is the valuable commodity to protect in making any evaluation of your operations. The key actor in this analysis and recommendations and final implementation has to be the Logistics group, but others shown in “Team Group A” has many very good reason for input and participation in the review and sign-off on the selection process and recommendations. (See also No. 11).

September 2005
Evaluating total cost trade-offs between container vs. break-bulk on International shipments

Most international shipments are well suited to be moved in a container load environment. This is an excellent alternative to shipping products via a break bulk service. Break bulk shipping entails added costs that can sometimes be overlooked in making cost comparisons. Often marking requirements are different and usually fewer markings overall on container shipments. It may only require marking each pallet, rather than each unit on a pallet. The actual packaging requirements are very different, since the break bulk ocean shipment environment is a great deal harsher than the demands for safe packaging when moving in container lots or in consolidated small lots moving in a single container. The container transit time between any two ports is usually much faster and this means lower inventory costs. Simpler paperwork, less potential for pilferage is all quantifiable advantage to container-oriented shipments for export or import. The paper work for international clearance of export shipments is also much simpler (albeit, still complicated) on shipments moving in container lots. The handling costs per unit of product are altogether different, but be sure you are capturing all of the costs, since there may often be increased as well as decreased costs easily quantified. There are also costs and benefits which are difficult to measure such as a better delivered product to the customer because of appearance or a better handling characteristic. Better security for the product against pilferage and vandalism is also a plus. If you use a Forwarder or Export/Import Freight Broker, seek assistance from them in providing relevant cost or data information. The decision for selecting the method to use for international shipments and to analyze the alternative costs belongs to the Logistics “Group Team B,” but again it is imperative that everyone in this particular group is aware of the costs as well as the benefits associated with this effort and their contributions are well understood and appreciated by everyone in the designated group. Otherwise you run the risk of the loss of the benefits which real synergism develops from the correct development of this project.

August 2005
Once established, failure to use the properly established classification description and rating:

Surprisingly, errors often are made in the description of a product on bills of lading, even if the proper description has been established with the classification board. The exact and full description must be used and preferably a specific national motor freight classification item number typed or pre‑printed on each bill of lading. Failure to properly describe and apply the proper classification, gives the carrier the opportunity to use its classification “expertise” to properly rate the product. The possibility of the carrier always being correct is rather remote! But you can be sure that if there is a rating alternative more favorable to the carrier, that’s the decision that will be made!

This sort of missed opportunity to protect against excess transportation costs can be a substantial loss, and yet the actual freight “rates” are correct but the “base” from which the charges are derived is from an incorrectly used description of the product. This can easily lead to invalid cost projections in locating new production facilities or in evaluating the proper distribution center configuration. Even the actual payment of the billed charges will appear to be perfectly correct as audited, particularly if audited by using an exclusive computerized based system.
This could result in a serious cost error that could easily be corrected, by taking appropriate corrective action. If you are not sure, ask for help from your prime carrier or the staff at the National Motor Freight Classification. The staff is very helpful and can guide you on what your options may be in correcting any classification problems. The staff is highly competent and is usually extremely helpful in answering questions, since input from the shippers is sought on all publicly docketed issues and is part of their Agreement which permits them to take collective classification actions and obtain anti-trust immunity. The responsible corporate parties in executing the proper description have to be the “Team Group C.” Establishing the class rating itself may consider enlisting the input from members of “Team Group A.”

July 2005
Establishing the lowest reasonable classification rating for the product:

One of the few carrier collective ratemaking actions, which are in existence after the 1980 ICC de‑regulation, is the retention of anti‑trust immunity for establishing of classifications for products that are to be shipped via motor freight. Setting the classification rating is a very basic and fundamental requirement in setting the base on which freight charges will be billed as long as the product is shipped on an LTL basis.

June 2005
Failure to adequately protect against the possibility of duplicate billing by carriers and payment by shippers:

Carriers make every effort to avoid these sorts of billing errors. Regardless of their best efforts, this type of error is not unusual. Well designed computerized freight payment systems have various types of built in duplicate payment checks, but even these are not perfect. A manual check for duplicates is better than nothing, but not very much, if there are a large number of bills being processed for payment.

There continues to be duplicate payment bills presented by carriers. Some of these are not a deliberate effort to double-bill but occur because of the manner in which the carrier’s particular billing system is set up. For instance any computerized program can be set up to check for duplicate freight bills based on the PRO Number. The computer can be set up to search for a set historical period of time, and to throw out any bills for manual review, which exceed the reasonable search-back period of the program. But carriers may automatically re-bill if payment has not been received in 4-6 weeks or a couple of months, depending on the payment credit arrangements. If the bill is re-issued an identifying letter may be added to the PRO number. The computer is not smart enough to be able to read a carrier’s billing procedures and will automatically treat the number plus letter PRO as a new bill number and no duplicate review will catch it as a duplicate. So this bill will be paid! (A second time – or sometimes more often than that!)
One other method of reducing the need for the program to search through a tremendous bank of historical data, is to set a time limit of beyond which no bills will be paid if presented more than 6 or 12 months prior to final presentation. Special handling can be given any legitimate bill that is presented in this manner, providing it is not past the statutory time limit for carrier billing.
[1] The responsible implementing group is primarily Logistics with the others in the “Team Group C” with design assistance provided by “Team Group B.”
[1] See TRAFFIC WORLD June 18, 2001 on “Carrier Bullying”

May 2005
Poor Audit Procedures Both of Shippers and Carriers

Once bills have been presented, a lax attitude or a poor job of monitoring the correctness of the rates that are being used to arrive at the charges can lead to excess payments for transportation charges.

Furthermore, while a post audit does recover the over charges, there are losses associated with this process since the charges are not recovered until long after they have been paid. If done in house a post audit requires staff time to perform the post audit, which is of course a cost. If done by outside auditors the fees are usually assessed as a percentage of the money recovered, so the money retained by the outside audit firms is an expense generally charged to the transportation budget.
Today there are any numbers of computerized freight audit software programs, which can make the auditing job a great deal easier. Generally the cost for doing the audit in-house is lower than the cost for outside services. However in these days of “head counting” this does require the staffing and or training of a competent staff. And of course, the cost of software programs designed specifically for this sort of job. Logistics is the responsible party along with other “Team Group C” for implementing “Team Group B” might be involved in the design and final approvals process for freight bill payments.

April 2005
Incorrect charges as a result of errors on the part of the shipper or in the presentation of charges:

There is a general perception that freight bills presented for payment are always correct. This is not necessarily so. This is the reason for concern about the manner in which bills of lading are issued and freight charges are paid.

All transportation charges need to be audited and corrected prior to payment. Auditing is required to be sure they are your bills, audited for correctness of rates, audited for correct extensions, reviewed for failures to apply correct discounts, audited to be sure all ancillary charges are applicable, audited for correct classification ratings and for compliance with specified carrier selections, and audited to confirm validating backup documents are attached as required. Preparation of the bill of lading and including the exact charges for the correct rate on the bill of lading when the bill of lading is issued is an excellent way to control the errors, but DOES NOT guarantee perfection of execution by the carriers who prepare a freight bill to bill for the transportation charges.
This is a lonesome task at best and the responsible group that has to assure correctness of charges must be Logistics. Accounting doesn’t like to pay freight bills. In most operations freight bills are NOT treated by accounts payable as a normal accounts payable bill. One reason is that there is rarely any reason to treat these freight account payables and earn a discount, but rarely carrier asses a penalty for failure to abide by credit terms published in their tariffs. There are time limits for filing of claims for over-charges or errors in billing of any kind. And excessive delays in payment however can result in serious service cut-offs. Not a good customer service result! “Team Group C” should have the prime responsibility for executing or arranging to properly administer the auditing function.

March 2005
Sequential Load/Unload Delivery Program:

A well conceived, designed and implemented program for providing a valuable service level to customers is the creation of a contract or a proprietary controlled delivery system. The design should include a guarantee of on‑time delivery (no fabricated excuses, please!) for orders received for shipment by a specified cut‑off time of day. The design should include periodic and regular cost alternative analysis to insure that the proprietary program is the best economic alternative offering the exact same commitment to service and cost controls.

The system must be designed to insure that scheduled “runs” are made on the specified date, and deliveries are made on the specified time commitment. The ideal sequence is for the receiver to automatically “open the receiving gate” and hold the unloading dock position at the scheduled delivery time and never expect any different delivery without prior notice and serious reasons for the service failure. This system automatically eliminates the need to even consider a “ship next day” policy, unless, of course you really need to!
Then of course – do it! But this system can guarantee to reduce the number of DC’s needed to service your customers, reduce inventories and all associated costs, permits a high customer service level, reduces handling costs and reduces back orders resulting from better inventory control provided by such a system. A reduction in DC’s may mean enlarging others, but in the process the DC staff can be up-graded because of the greater activity resulting from such changes in DC configuration. In fact there are so many “winners” that I have never identified a single looser in the implementation, or in the results of this sort of system.
Again Logistics personnel are responsible for creating and executing to plan. Logistics must design the program. The selling of the program includes individuals in “Team List A,” but the final responsibility to initiate the project, obtain appropriate approvals and make it work all belongs to Logistics.

February 2005
Failing to consolidate small shipments

One of the single largest potential gold mines for cost savings is the ability to consolidate small Shipments. Reductions in costs of as much 40 to 80% are possible, and surprisingly, simultaneously improving customer service levels! Large volumes of small shipments demand a good program of consolidation in order to optimize the best possible cost/service/benefit options. ([1]) A lot of shippers try to do this on a manual basis, which is better than nothing, but not MUCH better!

However, no automated order processing system should be installed without substantial attention to creating a program for a computerized assisted order consolidation program. The computerized system should have the ability for the transportation group to automatically check orders on the day an order is scheduled to ship, check orders scheduled on the prior day and checking orders scheduled on the day after the scheduled day to the same zip code and also to contiguous zip zones for possible consolidation. This capability must be part of any good order processing system in order to obtain the maximum benefits out of a consolidation program.
In addition there are other “paper work” savings such as eliminating the need for individual bills of lading, and the invoicing is expedited with fewer invoices, fewer accounts receivables because of fewer check payments etc. These savings could very well be as important as the freight dollar savings. Order handling, and the rules of handling and an understanding why the decision has been made must be fully understood by everyone directly and indirectly affected by the execution of these rules.
Importantly, all of these entities should be involved in the development of these rules that will have a profound affect on each area of responsibility. The ability to minimize or eliminate the need for carriers to make more than a single pick-up on the same day also reduces his unit pick up costs and helps improve service on the delivery to your customer. But it also saves you the difference in your costs. For instance, paying three minimum charges of three LTL shipments from Boston to Chicago to the same consignee and totaling 500 pounds, costs $241.44 vs. $104.50 as a 500 pound consolidated 500 lb. shipment or savings of 57%! ([2]) But in the final analysis, it is the logistics group that has to design, initiates, AND sell the program to everyone in the “Team Group A.” Then if approved, Logistics is charged with the responsibility of properly implementing and administering this program in order to achieve the maximum possible benefits. [1] -Rates as of 7-30-01 from Yellow Freight – Existing discount not calculated but would be additional savings. [2] See “Consolidation 101”– By: Matt Bernstein – PARCEL SHIPPING & DISTRIBUTION 2001 – Special issue October 2001

January 2005
Selecting a mode of transportation without regard to cost/service options

Often, decisions are made based on a perception that a simple rule such as “all shipments must be made within 24 hours”; must always be via air or some other premium type service. There are generally alternate less costly means to accomplish the same delivery or service requirements. For instance, many if not most over night air shipments going relatively short distance such as 3‑400 miles actually move over the road.

Many regional motor carriers provide next day service at greatly reduced costs. These same carriers could, if requested provide a delivery equal to many alternatives offered at highly inflated costs. Also, many shippers have an ingrained prejudice against intermodal shipments, but on the other hand, they also think UPS is great! UPS is one of the largest intermodal shippers in the world! Probably many a shipment by UPS has gone by intermodal anyway, but under the UPS label! LTL carriers are developing “fast lanes” with guaranteed service or you do not pay the charges. (But be sure you review Action No. 101 for a thorough discussion on small package issues.) Service failures are expensive.
Finally, “ship next day” does not necessarily mean the best service! Sometimes waiting another day may permit a better LTL consolidation and in this process improve or equal service over the “next day.” very importantly reduces your costs!! Importantly carriers publish service days between any two points, but these are NOT the actual transit times to expect.
Check your service needs, your costs, the available service, and then make your informed decision. You will be glad you did! Logistics personnel must involve all affected parties making the POLICY decision in this proposed action before implementation to insure that each specific responsible entity knows how their specific area will be affected and what the benefits are to be realized from the implementation. In the policy decision outlined above, the individuals that should be involved are identified in “Team Group A“.

December 2004
Added Costs Due To September 11, 2001

Due to the events of September 11, 2001 airlines have been forced to increase their security measures. All packages must be more closely scrutinized to avoid a repeat of the World Trade Center and Pentagon disasters. The impact of this for shippers will be a slight slowdown in transit times and added costs.

Some Brokers and Airlines have instituted a Security Charge. But be aware not all airlines have done this and some that are have applied the charges only for selected lanes. Make sure you obtain a revised rate schedule from your broker or airline to be sure how severely this will impact your cost. It is always a “best practice” to have not only your rates in writing but all applicable accessorial charges as well. This not only assures accurate billing but also protects you from future undercharge claims.
Also, work closely with your brokers and carriers on any revisions to transit times. The earlier you can prepare a shipment, increases the amount of time that the carrier has to make your delivery commitment and in many instances can also reduce your cost. If you would like to learn more about added freight costs due to hidden assessorial charges or savings that can be achieved through better use of transit times, click on the contact us icon on the left side of this screen.

August 2009

Action: Delayed Reaction to notices of “Refused” or “On Hand” for freight Shipments for which you are responsible.
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Carriers will notify shippers or receivers of material that is on hand on for some reason has been returned, or is awaiting some sort of clearance prior to delivery. This could be the payment of COD charges; shipments refused by customers, or damaged material. But regardless of the reason, prompt disposition is important, because at the end of a specific number of days, the shipments become subject to storage charges. Prompt disposition instructions can avoid this possible exposure. In addition, the carrier holding the shipment assumes the legal responsibility for the products as a warehouseman, which is altogether different than as a carrier. The important consideration is that you do not delay taking appropriate action to mitigate to the fullest possible extent the cost that accrue against this shipment which will then have to be returned into inventory, damage assessed, claims filed and/or the shipment is disposed of in a manner that results in the best total expense. The Logistics group has the prime responsibility although other “Team Group C” members must also be involved.

July 2009

Action: Failure to use legally published Export Rates.
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Generally speaking, export rates are published to apply to the various ports of exportation and at lower relative rates than the same product moving between the same two points on a domestic move. The precise purpose for this distinction is not well known except an effort by the carriers to promote is promote commerce or trade that would widen the need for transportation services, international commerce, or the ports negotiating a distinct treatment t But the distinctions do exist in some categories of products and in some geographical areas of the United States. Just be sure that if this distinction results in a lower level of transportation charges on your product, that you avail yourself of these favorable differences in costs. Or alternately if you are on a contract-exclusive arrangement with rail or motor carriers, that the negotiations include some consideration for the encouragement of these type of normally large volume moves through rate considerations, or the absorption of some of the port accessorial charges. “Team Group C” has the execution responsibility.

May 2009

Action: Proper notification to Railroad carriers to establish appropriate and timely strike protection Rues.
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It is critically important that transportation personnel be kept up to the minute on the possibility of a strike. Protection against very high demurrage costs offset by being sure proper rules is in effect to mitigate excessive costs. The demurrage can occur to apply on cars at the plant awaiting loading, loaded cars not yet released, and cars of materials inbound, but which have been placed on construction placement awaiting orders to switch into the plant. The difference between strike mitigated demurrage charges and normal demurrage are very large indeed. Proper rules in carrier tariffs, or specific items in contracts are very important. All of these mitigating opportunities must be placed when the first striker shows up at your plant site! There are very many steps, which can be taken to protect your operations, but they must assuredly be accomplished and in place BEFORE the strike activity begins! It can be done later, but not very well if at all. For example, during extremely tight supplies of fuel to operate the plant, advance leasing of extra tank cars WHEN THEY ARE AVAILABLE will provide a cushion to permit normal plant operations. But you must arrange when the supplies are available and not when every one wakes up and the strike is on and the plant is NEAR to shutting down production! “Team Group C” has the execution responsibility.

November 2008

Action: Making sure all tariff required notations are included on the Bill of Lading.
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Surprisingly, it is not unusual for some critically important data to be omitted from bills of lading. Failure to execute section 7 of the bill of lading, for instance, or some other instances such as described on C.O.D.’s can also result in higher costs. Section 7 of the bill of lading simply relieves the shipper of any expenses associated with the service provided the product that was precipitated by any actions of the receiver and over which the shipper had no control or responsibility. Absent the Section 7 signing at the time the bill of lading is initially executed, however leaves the railroad free to bill the shipper for excessive cost that are the responsibility of the receiver of the merchandise. Addresses or phone numbers of the notify party, instructions about an appointment required prior to delivery, etc. Each omission has different results to correct, but all have a single constant attribute – they all “cost money.” These costs are usually described by carriers as “accessorial charges” and in some instances can result in higher extra costs than the original cost for the transportation service itself! “Team Group C” has the general responsibility but the prime execution for this action belongs with the Logistics group.

September 2008

Action: Failure to audit charges for railroad provided maintenance for privately owned rail cars.
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Railroad cars must be maintained to Association of American Railroads (AAR) standards, as well as meet all safety mandates. If the fleet is relatively small, this maintenance is arranged with the railroads to accomplish this at point of occurrence. The charges are specified in a guide published by the AAR and include charges for parts and labor. Because the arrangements separate carrier and owner repair cost, the billed charges are rather complicated, and errors are easily found in the actual dollar charges made to owners. These actual charges should be audited against the authorized charges for errors in submittal of invoices. Whether the repairs are routine or extensive, and an evaluation is made as to the portion that is attributable to railroad error, and the part that is owner’s responsibility. Outside qualified car repair facilities are readily available and they are also helpful in separating the owner vs. rail responsibility for any repairs performed on your cars. It is also wise to seek outside bids for repairs of this nature as generally this can result in lower overall costs and a quicker return to service of the damaged car. It requires a very extensive knowledge of the rail repair processes and an audit is usually more productive if it is done by qualified outside audit service firms. The service charges are usually a percentage of all recoveries from the audit process. The Logistics group has the action responsibility and this would of course be the “Team Group C” total area of interest and responsibility.

September 2007

Action: Failure to collect proper mileage allowance for privately owned rail cars.
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Railroads are required to compensate private owners of railroad equipment because these private owners are supplying a transportation instrumentality that the railroads are legally required to furnish themselves. This is done through mileage allowances, which vary with many factors and the largest single factor is value of the car furnished and perhaps the degree of revenue utilization derived by the railroads. These mileage allowances are paid by each railroad directly to the specified agent or the owner, and only for the miles traveled on each railroad. Usually, if indeed not always, paid by the railroads. But because of the possibility of earnings on the same trip using connecting railroads, the detailed reporting and auditing of the real mileage earnings is a monumental task. With this much effort involved, you can bet your bottom dollar that errors are going to be made – and they are! This is a ready-made opportunity for errors in the actual miles traveled and actual dollars paid for each car. The monitoring of these payments is important and can easily be done by setting up a standard computer program to cover the mileage and the payments expected on the moves of each car. Errors are then corrected with the reporting railroad and a reconciliation of mileage and dollars developed. Recoveries procedures may vary by the different railroads, but the process is a tedious, but profitable one if done correctly. If you have not audited these payments, or do not know how to do it, outside audit firms can perform this service for a fee, usually at a percentage of the recoveries. Special time limit for past-due recoveries is applicable and may vary by railroad rules. I have seen collections of as much as $600,000 of past due claims for settlement errors on mileage earnings. So watch this potential very carefully. It is always amazing how many simple errors occur whenever high volume billings are involved and recoveries are overlooked. Logistics is the key responsible party, along with others in “Team Group C”.

August 2007

Action: Failure to adequately protect against the possibility of duplicate billing by carriers and payments by shippers.
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Carriers make every effort to avoid this sort of billing errors. Regardless of their best efforts, this type of error is not unusual. Well designed computerized freight payment systems have various types of built in duplicate payment checks, but even these are not perfect. A manual check for duplicates is better than nothing, but not very much, if there are a large number of bills being processed for payment. There continues to be duplicate payment bills presented by carriers. Some of these are not a deliberate effort to double-bill but occur because of the manner the carrier’s particular systems are set up. For instance any computerized program can be set up to check for duplicate freight bills based on the PRO Number. The computer can be set up to search for a set historical period of time, and to throw out any bills for manual review, which exceed the reasonable search-back period of the program. But carriers may automatically re-bill if payment has not been received in 4-6 weeks or a couple of months, depending on the payment credit arrangements. If the bill is re-issued an identifying letter may be added to the PRO number. The computer is not smart enough to be able to read a carrier’s billing procedures and will automatically treat the number plus letter PRO as a new bill number and no duplicate review will catch it as a duplicate. So this bill will be paid! (A second time – or sometimes more often than that!) One other method of reducing the need for the program to search through a tremendous bank of historical data, is to set a time limit of beyond which no bills will be paid if presented more than 6 or 12 months prior to final presentation. Special handling can be given any legitimate bill that is presented in this manner, providing is not past the statutory time limit for carrier billing. The responsible implementing group is primarily Logistics with the others in the “Team Group C” with design assistance provided by “Team Group B.”

April 2007

Action: Know the Rules and Regulations with respect to International Shipments
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Rules for documentation, packaging, terms of sale, marking of packages, export or import duties, customs regulations, including duty drawback, letters of credit, are only a small part of the complexities of international business trade. To complicate matters even more, the rules and regulations are unique by country and in some instances result in some rather severe penalties for failure to comply with what would appear to be nit picking, such as the precise size and location of the markings on each package. Custom regulations are also complicated and cumbersome, but essential to assure the proper delivery of exported or imported goods. Failure to show the country of origin as part of the markings is an egregious violation and could subject the goods to impoundment, stiff penalties and perhaps total loss of the goods in question. I have seen all of these options exercised by the customs agents. Curiously, you might get different interpretations from the customs agent in charge at different ports in the U.S. and especially in all foreign ports. All of this requires in-house expertise or alternately you can rely on third party service providers who are expert in this field and can guide you (for a fee) so as to avoid the land mines associated with the non‑compliance of EVEN innocent errors. Assistance in abiding by these sometimes onerous rules and regulations are available and are discussed in other ACTION items located elsewhere in this presentation. It is the duty of “Team Group C” to identify these requirements, seek appropriate input from other affected members of the organization from Team Groups A & B”. Once this is done, appropriate implementation policies and procedures need to be drawn and disseminated to all individuals affected by them. THEN you can efficiently participate in the lucrative global market.

November 2006

Action: Know Service/Cost Option for Each Mode of Transportation
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Intermodal shipments are available in which trailers are loaded onto rail equipment between key rail points at levels of service and distances, that can often meet over the road service. There are some rumblings in the rail sector that indicate they are finally waking up to “on-time delivery” and “premium charges” between key sectors such as Chicago and the West Coast. Also being promoted are hot-shot Intermodal services that includes expedited tracking of each container, between Washington and Oregon, San Francisco and Los Angeles. This is not intended as a complete list of services that are available but are intended as examples of the variety of services that can be considered. But I am sure you understand how important it can be to make the right selection for whatever level of service your customers may need or require.
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The important thing to learn from this, is that you should be aware that there are some services that are worth a premium of some sort, and other, even high priced services that are NOT required by the receiver. Nor do they merit the much higher costs. If you KNOW this much of a customer’s needs, AND you know which alternative service level will meet the service requirements, you can make a substantial difference in satisfying your customer AND controlling your costs. Ignorance is NO excuse! This is the key responsibility of “Team Group C” but might also involve other members in “Team Group B” who should be concerned about some of the issues in this decision and aware of the basis on which service decisions are being made and the cost/benefits associated therewith. (But also see No. 47 below!)

September 2006

Action: Failure to Execute Section 7 of the Bill of Lading.
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An easily overlooked provision in the body of the bill of lading is section 7. This section reads “subject to section 7 of conditions, if the shipment is to be delivered to the consignee without recourse on the consignor, the consignor shall sign the following:
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The carrier shall not make delivery of this shipment without payment of freight and all other lawful charges_________________________________(SIGNATURE OF CONSIGNOR)
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A receiver can be responsible for charges due the delivering carrier in addition to the transportation charges that were paid by the consignor. Since the shipper has no control over how these charges were due, nor responsibility or control over them, it is important to tell the carrier, that the receiver (consignee) must pay those extra charges and there is no recourse to the consignor (shipper) if section 7 is signed by the consignor at the time of issuance of the bill of lading. There are several conditions listed for the application of section 7 on the back of the bill of lading, and if your shipments are subject to the carriers’ tariff rules and provisions, these provisions can change or effect how Section 7 is applied to your shipments. Depending upon the results of the failure to sign Section 7, this is primarily the responsibility of “Team Group C.” However, some actions might require a review with some of the members of “Team Group B.”

April 2006

Action: Failure to execute C.O.D. clause on Bill of Lading
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Occasionally it is necessary for a shipment to be made that requires that the receiver pay for the product before it can be released to the receiver by the carrier. There are many reasons for this, but one example would be poor credit risk of the receiver. These shipments are unusual and therefore require some very special notations on bills of lading to insure that the carrier is fully informed about how to arrange for the payment prior to delivery. Failure to properly inform the carrier can result in some very substantial losses, with no recourse to the carrier, since proper notices were not given at the time the shipment was picked up and the bill of lading was executed. The process of establishing this need might require input from the large Team List A, the party of responsibility to execute properly the Bill of Lading to protect the ultimate collection for the product from the receiver would be Logistics along with possible interest by others shown in “Team List C.”

March 2006

FAILURE TO ESTABLISH IN-TRANSIT ARRANGEMENTS
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The use of this special provision in tariffs is an old procedure which covered such things as weighing, milling, marking, packing, storing, inspection etc., while the products were shipped to an intermediate point for the performance of any of the sort of value added services listed above. Generally the local rate was paid to the intermediate point. When shipped to the final destination the difference between the through rate from the original point of shipment to final destination less the amount previously paid to move the product to the intermediate were paid to complete the transaction. There was a requirement to maintain all records necessary to be able to identify the shipments made to the intermediate point and which were eligible for the discounted total charges. This arrangement tended to keep shipments tied to the mode that published such arrangements, most often railroads. This procedure is gradually being replaced with appropriate contract arrangement. However, with so many consolidating of services being performed by third party service providers today, this sort of arrangements should be reviewed for possible application. The “Make to Order” services being offered by computer companies such as Compaq, Dell and Gateway would fit this sort of scenario, although I doubt seriously that these companies ever considered this approach! There is a value attached to this arrangement to the transportation company or the 3rd. party Logistics service provider, since the payment of transportation charges to the intermediate point assures them of a future “captive” haul to the final destination and storage and handling charges will accrue on the product while it was awaiting final release. This is the primary reason why the carrier’s or 3rd. party Logistics service providers should have an interest in this sort of arrangement. This arrangement is normally the Logistics group that has the primary responsibility along with others shown in “Team List C”.

February 2006

FAILURE TO SPECIFY THE PROPER RELEASE VALUATIONS IF PROVIDED FOR IN THE TARIFF OR CLASSIFICATION DESCRIPTION
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While articles of extraordinary value are prohibited for shipment via motor carrier, there are many articles that have differing ratings related to the amount of value declared for the product on the bill of lading. Item 99400 of the National Motor Freight Classification, lists a value of less than $1.50/lb @ class 100, a released value of $1.50 but less than $5.00 is classified at class 250, and value in excess of $5.00 but less than $7.50 at class 300. If the shipper fails to execute the released valuation, charges will be assessed on the basis of the class for the highest value, or on the basis of class 300 in place of a possible class 100 or 250! Proof of the actual value must be provided before an adjustment will be made. This is as opposed to a simple value declaration on the original bill of lading. This is only an example of a product with this potential for excess costs. There are of products subject to a released valuation class rating in the classification. These sorts of restrictions can also appear in carrier rate tariffs, rules tariffs, or specifically included in contracts.
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Small package shipment carriers like UPS and Fed all have a value restriction and offer to provide at an additional cost whatever additional insurance you may wish in order to cover excess valuation liability. Are you sure, your product isn’t in one of these categories? It is critically important to know for sure and to take appropriate action to protect your products the very best possible protection. You can even establish that you do not wish to pay for excess insurance coverage to a carrier, go to an Independent Insurance Company such as a Parcel Insurance Provider or establish an internal self insurance coverage which is usually less than the insurance offerings by most carriers. Finally, carriers are not liable for consequential damages unless negotiated and in a special contract or reference in the quoted rates. Consequential losses are such costs as shutting down a production line or missing a sales promotion. The logistics group should have primary responsibility of assuring the proper execution of a bill of lading to insure against unknown magnitude of losses in the event of a catastrophic failure on the part of the carriers. A recent tunnel explosion in an important connector sector of a rail carrier in Baltimore has resulted in catastrophic losses including the cancellation of several scheduled major league baseball games, an inconvenience to motorists and incalculable costs to repair the physical damage. It would be soothing to know that if you had a product that was involved in any way in that situation that your liability is covered by appropriate level of insurance protection. Of course there are others in the corporation who would have a keen interest in the manner of handling this contingency but the “Logistics Team B” would be the candidate for a joint knowledge of the effort to properly protect your products while in transit or at rest in a distribution center.

January 2006

PROPER DEFINITION OF PRODUCT SO IT CAN BE CONSIDERED AS A “RECYCLABLE OR WASTE MATERIAL” ITEM.
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Products which can properly be classified or described as a “recyclable” are generally given a lower classification, or special rate consideration apparently an effort on the part of the carriers to be sensitive to environmental implications, or because of past requirements of the ICC which forced this differentiation. Regardless of the reasons, the fact is that such considerations exist and that the shipper should be aware of this and appropriately takes advantage whenever possible. Finally, there is a specific exemption, which totally exempts recyclables from the requirement to pay so called undercharges from auditors for bankrupt carriers. The point to consider is whether negotiations could include special consideration for a product since it contributes to the re-cycling needs and is generally a relatively low valued product. The National Motor Freight Classification has a special alphabetical listing for “WASTE MATERIALS GROUP” under item # 194120 that covers a very substantial listing of just such descriptions. It goes from Apple Pomace to Waste packing and it has some interesting conditions that are unique to these sorts of products. There are also differentiations relating to value and. or density that must be adhered to. But generally speaking, the proper utilization of these types of classifications when appropriately and legally establishes lower ratings that results in improved costs as compared to the same products when shipped in their original pristine condition. The prime responsible party should be the “Team List C” with the specific assignment to Logistics.

December 2005

BILL OF LADING ERRORS THAT RESULT IN:
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  • Re‑delivery charge because of erroneous address.
  • Accessorial charge because of address changed to non-commercial address& the loss of discount.
  • Errors in showing shipment count as specific number of pallets rather than “24 Pallets containing 40 cartons each.” Settlement for loss or damage is based on a specific amount “per unit”
  • Incorrect weight for products.
  • Transposition of numbers that result in higher rates, weights and charges.
  • Miss‑description in violation of tariff, classification, or contract required descriptions.
  • Loss of product because of failure to properly specify on the bill of lading the degree of protection required for safe delivery of product being shipped.
  • Specifying unnecessary temperature control environment of product while in transit or at rest awaiting deliver.
  • Failure to sign Section 7 of Bill of Lading – (See also Action # 20 for more information for more details on this issue.)

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The above covers a great number of areas, all relating to the single aspect of excessive costs because of these potential errors on the bill of lading. Unfortunately, all of them occur regardless of how careful anyone may be or wants to be. Some of the excess costs can be very serious, and should be avoided. Chocolates being shipped in the middle of winter without temperature controls can result in a very costly damage claim. On the other hand, the same shipment made on a 90+-degree day and traveling in an unprotected trailer would be an equal disaster. The same lack of temperature control for shrimp or fish from the west coast or Louisiana in the summer would result in the same sort of catastrophe! If the shipper failed to specify the requirements for temperature protection, the carrier is not responsible for any losses of this nature.
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If protection is specified or are included in part of specific provision in a contract, and the losses occur, then the carrier and his insurance provider must cover such losses except for acts of God or some five other extraordinary exceptions. It is important to specify protective services every time they’re required to protect the quality of the products being transported. Personnel in List “Group C” would have the primary executing responsibility.

November 2005

Selection of optimum service/cost port for imports:
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All the requirements outlined in no. 10, are equally valid in making a determination regarding the optimum cost port for imports. It is important to understand that the terms of sale are very critical in assigning responsibility for the various costs that may be incurred while the products are in transit from the foreign origin to final destination in the USA. Experience has determined that the seller is not nearly as capable in making the lowest cost decisions for occurrences in the United States, simply because of their lack of proximity and detailed geographic knowledge. Furthermore the US buyer can combine his outbound tonnage with his inbound tonnage to gain an advantage in volume clout in rate negotiations. On the other hand, it is probably also true that the foreign exporter has the better knowledge of local rules regulations and costs in his “back yard” than you might have, sitting in the USA and waiting for the shipment to arrive.
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Know the meaning of the INCOTERMS and the implications these have on the way you do your global business is mandatory because of their importance to a successful execution of this responsibility. Failure to know or comply with the requirements can result in some very serious costs and many of these costs are not recoverable under any circumstances. In addition there can be some serious legal complications associated with failure to comply with export or import regulations. The INCOTERMS have been revised from time to time and keeping current is an absolute necessity. These are critically since they determine that point at which title passes, and when responsibility for the product being sold or purchased occurs. A substantial assumption of responsibility and you must know exactly when that occurs and at which point that the product is the responsibility of the buying or the selling party. The Logistics group should be the lead responsible entity, but the total group in “Team Group A”should be aware and involved in providing input to any major analysis and process of evaluating costs and benefits before implementations by the Logistics Group.

October 2005

Selection of Optimum port comparing cost and service exports:
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It is essential that all cost elements be reviewed periodically when making export shipments on a regular basis. There are a very surprising large number of cost elements, which differentiate each of the ports and these can change from time to time. The comparison measures also vary substantially from port to port. All are extremely critically important! Some of these are:
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  • Distance from shipping point to Port – transit days to destination.
  • Distance to destination port- Transit days to destination.
  • Frequency of sailings.
  • Balance of inbound volume versus outbound to the specific foreign destination.
  • Facilities and ancillary services, i.e. number of free storage days, container handling efficiency etc.,
  • Number of truck or rail carriers serving the port and the willingness of carrier managers at the various ports to new innovative approaches to reducing costs and the sharing of such benefits.
  • Union relationships with management. Not surprisingly, there are significant variations between the ports on this issue, and taking the proper approach, this issue can result in beneficial results to all parties.
  • Receptivity of port management to new approaches for reducing costs.
  • Receptivity of union management to the same thing. This is critical in the event of a threatened strike or an actual strike developing. (But don’t START these negotiations AFTER the strike begins! – It’s too late!)
  • Reducing the ports to be used to the lowest number of ports to increase importance of concentrated volume.
  • Whether ports are affected by severe or seasonal weather should be considered. Example: Great Lakes ports for navigation season in the summer time should be considered BUT do not forget to check ALL OF THESE COSTS BEFORE MAKING THIS DECISION. Case in point: If imports or exports originate from or are destined to the Far East. Consider re-negotiating all rates or charges including temporary storage, handling and loading or unloading fees or extra savings if packing & packaging is improved. Total transit time from origin port to final destination is a critical element, because of the difference in inventory carrying costs associated with the alternative transit times. Using the West Coast ports for ALL season movements through those ports increases total volume will also give you a greater negotiating clout.
  • Congestion of general area, which can affect the efficiency of transportation and causes delays in departures of product from the port area.
  • Product handling costs vary greatly from port to port and a comparative analysis must be done. I f volume is changed or there are significant improvements in the manner your shipments are being shipped, then negotiations for improvement in charges for specific packaging or handling cost improvements should be initiated and are appropriate.
  • Temporary storage costs and minimum number of free days are often negotiable but always negotiate before the final selection of a port has been determined!
  • In making port cost comparisons be sure to include the inventory carrying costs of the total time from arrival of the product at the port to delivery at inland destinations. Reducing this time factor can have some very positive results in savings of inventory dollars, reduction in warehousing and handling costs and of course transportation costs.
  • Consider pooling of volume products of similar handling characteristics through partnering with some sort of shippers’ association. Be sure that the association is cleared by the Department of Justice to avoid any shippers’ potential anti-trust problems.

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Most of these items have some impact on costs (of various kinds and magnitude) or service or both. Most ports continuously vie to attract volume shipments through their facility and are receptive to discussions that will increase the tonnage throughput of their particular port. In particular, do not forget to evaluate total transit time from to and between all origins & all destinations ports being evaluated, as TIME in-transit translates to an important element in setting inventory levels, and safety stocks to determine replenishment frequency. But most critical is the value of the product and inventory carrying costs associated with inventory. All of these are important cost elements to be sure, but are the prime responsibility of the Logistics Team. One day’s delay in the routine movement of imports in a study reported an assigned value of $22.00 per day in inventory carrying costs for the imported or exported product that was being imported and exported by the millions every year. So TIME is the valuable commodity to protect in making any evaluation of your operations. The key actor in this analysis and recommendations and final implementation has to be the Logistics group, but others shown in “Team Group A” has many very good reason for input and participation in the review and sign-off on the selection process and recommendations. (See also No. 11).

September 2005

Evaluating total cost trade-offs between container vs. break-bulk on International shipments
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Most international shipments are well suited to be moved in a container load environment. This is an excellent alternative to shipping products via a break bulk service. Break bulk shipping entails added costs that can sometimes be overlooked in making cost comparisons. Often marking requirements are different and usually fewer markings overall on container shipments. It may only require marking each pallet, rather than each unit on a pallet. The actual packaging requirements are very different, since the break bulk ocean shipment environment is a great deal harsher than the demands for safe packaging when moving in container lots or in consolidated small lots moving in a single container. The container transit time between any two ports is usually much faster and this means lower inventory costs. Simpler paperwork, less potential for pilferage is all quantifiable advantage to container-oriented shipments for export or import. The paper work for international clearance of export shipments is also much simpler (albeit, still complicated) on shipments moving in container lots. The handling costs per unit of product are altogether different, but be sure you are capturing all of the costs, since there may often be increased as well as decreased costs easily quantified. There are also costs and benefits which are difficult to measure such as a better delivered product to the customer because of appearance or a better handling characteristic. Better security for the product against pilferage and vandalism is also a plus. If you use a Forwarder or Export/Import Freight Broker, seek assistance from them in providing relevant cost or data information. The decision for selecting the method to use for international shipments and to analyze the alternative costs belongs to the Logistics “Group Team B,” but again it is imperative that everyone in this particular group is aware of the costs as well as the benefits associated with this effort and their contributions are well understood and appreciated by everyone in the designated group. Otherwise you run the risk of the loss of the benefits which real synergism develops from the correct development of this project.

August 2005

Once established, failure to use the properly established classification description and rating:
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Surprisingly, errors often are made in the description of a product on bills of lading, even if the proper description has been established with the classification board. The exact and full description must be used and preferably a specific national motor freight classification item number typed or pre‑printed on each bill of lading. Failure to properly describe and apply the proper classification, gives the carrier the opportunity to use its classification “expertise” to properly rate the product. The possibility of the carrier always being correct is rather remote! But you can be sure that if there is a rating alternative more favorable to the carrier, that’s the decision that will be made!
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This sort of missed opportunity to protect against excess transportation costs can be a substantial loss, and yet the actual freight “rates” are correct but the “base” from which the charges are derived is from an incorrectly used description of the product. This can easily lead to invalid cost projections in locating new production facilities or in evaluating the proper distribution center configuration. Even the actual payment of the billed charges will appear to be perfectly correct as audited, particularly if audited by using an exclusive computerized based system.
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This could result in a serious cost error that could easily be corrected, by taking appropriate corrective action. If you are not sure, ask for help from your prime carrier or the staff at the National Motor Freight Classification. The staff is very helpful and can guide you on what your options may be in correcting any classification problems. The staff is highly competent and is usually extremely helpful in answering questions, since input from the shippers is sought on all publicly docketed issues and is part of their Agreement which permits them to take collective classification actions and obtain anti-trust immunity. The responsible corporate parties in executing the proper description have to be the “Team Group C.” Establishing the class rating itself may consider enlisting the input from members of “Team Group A.”

June 2005

Failure to adequately protect against the possibility of duplicate billing by carriers and payment by shippers:
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Carriers make every effort to avoid these sorts of billing errors. Regardless of their best efforts, this type of error is not unusual. Well designed computerized freight payment systems have various types of built in duplicate payment checks, but even these are not perfect. A manual check for duplicates is better than nothing, but not very much, if there are a large number of bills being processed for payment.
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There continues to be duplicate payment bills presented by carriers. Some of these are not a deliberate effort to double-bill but occur because of the manner in which the carrier’s particular billing system is set up. For instance any computerized program can be set up to check for duplicate freight bills based on the PRO Number. The computer can be set up to search for a set historical period of time, and to throw out any bills for manual review, which exceed the reasonable search-back period of the program. But carriers may automatically re-bill if payment has not been received in 4-6 weeks or a couple of months, depending on the payment credit arrangements. If the bill is re-issued an identifying letter may be added to the PRO number. The computer is not smart enough to be able to read a carrier’s billing procedures and will automatically treat the number plus letter PRO as a new bill number and no duplicate review will catch it as a duplicate. So this bill will be paid! (A second time – or sometimes more often than that!)
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One other method of reducing the need for the program to search through a tremendous bank of historical data, is to set a time limit of beyond which no bills will be paid if presented more than 6 or 12 months prior to final presentation. Special handling can be given any legitimate bill that is presented in this manner, providing it is not past the statutory time limit for carrier billing.
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[1] The responsible implementing group is primarily Logistics with the others in the “Team Group C” with design assistance provided by “Team Group B.”
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[1] See TRAFFIC WORLD June 18, 2001 on “Carrier Bullying”

May 2005

Poor Audit Procedures Both of Shippers and Carriers
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Once bills have been presented, a lax attitude or a poor job of monitoring the correctness of the rates that are being used to arrive at the charges can lead to excess payments for transportation charges.
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Furthermore, while a post audit does recover the over charges, there are losses associated with this process since the charges are not recovered until long after they have been paid. If done in house a post audit requires staff time to perform the post audit, which is of course a cost. If done by outside auditors the fees are usually assessed as a percentage of the money recovered, so the money retained by the outside audit firms is an expense generally charged to the transportation budget.
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Today there are any numbers of computerized freight audit software programs, which can make the auditing job a great deal easier. Generally the cost for doing the audit in-house is lower than the cost for outside services. However in these days of “head counting” this does require the staffing and or training of a competent staff. And of course, the cost of software programs designed specifically for this sort of job. Logistics is the responsible party along with other “Team Group C” for implementing “Team Group B” might be involved in the design and final approvals process for freight bill payments.

April 2005

Incorrect charges as a result of errors on the part of the shipper or in the presentation of charges:
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There is a general perception that freight bills presented for payment are always correct. This is not necessarily so. This is the reason for concern about the manner in which bills of lading are issued and freight charges are paid.
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All transportation charges need to be audited and corrected prior to payment. Auditing is required to be sure they are your bills, audited for correctness of rates, audited for correct extensions, reviewed for failures to apply correct discounts, audited to be sure all ancillary charges are applicable, audited for correct classification ratings and for compliance with specified carrier selections, and audited to confirm validating backup documents are attached as required. Preparation of the bill of lading and including the exact charges for the correct rate on the bill of lading when the bill of lading is issued is an excellent way to control the errors, but DOES NOT guarantee perfection of execution by the carriers who prepare a freight bill to bill for the transportation charges.
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This is a lonesome task at best and the responsible group that has to assure correctness of charges must be Logistics. Accounting doesn’t like to pay freight bills. In most operations freight bills are NOT treated by accounts payable as a normal accounts payable bill. One reason is that there is rarely any reason to treat these freight account payables and earn a discount, but rarely carrier asses a penalty for failure to abide by credit terms published in their tariffs. There are time limits for filing of claims for over-charges or errors in billing of any kind. And excessive delays in payment however can result in serious service cut-offs. Not a good customer service result! “Team Group C” should have the prime responsibility for executing or arranging to properly administer the auditing function.

March 2005

Sequential Load/Unload Delivery Program:
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A well conceived, designed and implemented program for providing a valuable service level to customers is the creation of a contract or a proprietary controlled delivery system. The design should include a guarantee of on‑time delivery (no fabricated excuses, please!) for orders received for shipment by a specified cut‑off time of day. The design should include periodic and regular cost alternative analysis to insure that the proprietary program is the best economic alternative offering the exact same commitment to service and cost controls.
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The system must be designed to insure that scheduled “runs” are made on the specified date, and deliveries are made on the specified time commitment. The ideal sequence is for the receiver to automatically “open the receiving gate” and hold the unloading dock position at the scheduled delivery time and never expect any different delivery without prior notice and serious reasons for the service failure. This system automatically eliminates the need to even consider a “ship next day” policy, unless, of course you really need to!
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Then of course – do it! But this system can guarantee to reduce the number of DC’s needed to service your customers, reduce inventories and all associated costs, permits a high customer service level, reduces handling costs and reduces back orders resulting from better inventory control provided by such a system. A reduction in DC’s may mean enlarging others, but in the process the DC staff can be up-graded because of the greater activity resulting from such changes in DC configuration. In fact there are so many “winners” that I have never identified a single looser in the implementation, or in the results of this sort of system.
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Again Logistics personnel are responsible for creating and executing to plan. Logistics must design the program. The selling of the program includes individuals in “Team List A,” but the final responsibility to initiate the project, obtain appropriate approvals and make it work all belongs to Logistics.

February 2005

Failing to consolidate small shipments
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One of the single largest potential gold mines for cost savings is the ability to consolidate small Shipments. Reductions in costs of as much 40 to 80% are possible, and surprisingly, simultaneously improving customer service levels! Large volumes of small shipments demand a good program of consolidation in order to optimize the best possible cost/service/benefit options. ([1]) A lot of shippers try to do this on a manual basis, which is better than nothing, but not MUCH better!
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However, no automated order processing system should be installed without substantial attention to creating a program for a computerized assisted order consolidation program. The computerized system should have the ability for the transportation group to automatically check orders on the day an order is scheduled to ship, check orders scheduled on the prior day and checking orders scheduled on the day after the scheduled day to the same zip code and also to contiguous zip zones for possible consolidation. This capability must be part of any good order processing system in order to obtain the maximum benefits out of a consolidation program.
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In addition there are other “paper work” savings such as eliminating the need for individual bills of lading, and the invoicing is expedited with fewer invoices, fewer accounts receivables because of fewer check payments etc. These savings could very well be as important as the freight dollar savings. Order handling, and the rules of handling and an understanding why the decision has been made must be fully understood by everyone directly and indirectly affected by the execution of these rules.
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Importantly, all of these entities should be involved in the development of these rules that will have a profound affect on each area of responsibility. The ability to minimize or eliminate the need for carriers to make more than a single pick-up on the same day also reduces his unit pick up costs and helps improve service on the delivery to your customer. But it also saves you the difference in your costs. For instance, paying three minimum charges of three LTL shipments from Boston to Chicago to the same consignee and totaling 500 pounds, costs $241.44 vs. $104.50 as a 500 pound consolidated 500 lb. shipment or savings of 57%! ([2]) But in the final analysis, it is the logistics group that has to design, initiates, AND sell the program to everyone in the “Team Group A.” Then if approved, Logistics is charged with the responsibility of properly implementing and administering this program in order to achieve the maximum possible benefits.

[1] -Rates as of 7-30-01 from Yellow Freight – Existing discount not calculated but would be additional savings.
[2] See “Consolidation 101”– By: Matt Bernstein – PARCEL SHIPPING & DISTRIBUTION 2001 – Special issue October 2001

January 2005

Selecting a mode of transportation without regard to cost/service options
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Often, decisions are made based on a perception that a simple rule such as “all shipments must be made within 24 hours”; must always be via air or some other premium type service. There are generally alternate less costly means to accomplish the same delivery or service requirements. For instance, many if not most over night air shipments going relatively short distance such as 3‑400 miles actually move over the road.
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Many regional motor carriers provide next day service at greatly reduced costs. These same carriers could, if requested provide a delivery equal to many alternatives offered at highly inflated costs. Also, many shippers have an ingrained prejudice against intermodal shipments, but on the other hand, they also think UPS is great! UPS is one of the largest intermodal shippers in the world! Probably many a shipment by UPS has gone by intermodal anyway, but under the UPS label! LTL carriers are developing “fast lanes” with guaranteed service or you do not pay the charges. (But be sure you review Action No. 101 for a thorough discussion on small package issues.) Service failures are expensive.
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Finally, “ship next day” does not necessarily mean the best service! Sometimes waiting another day may permit a better LTL consolidation and in this process improve or equal service over the “next day.” very importantly reduces your costs!! Importantly carriers publish service days between any two points, but these are NOT the actual transit times to expect.
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Check your service needs, your costs, the available service, and then make your informed decision. You will be glad you did! Logistics personnel must involve all affected parties making the POLICY decision in this proposed action before implementation to insure that each specific responsible entity knows how their specific area will be affected and what the benefits are to be realized from the implementation. In the policy decision outlined above, the individuals that should be involved are identified in “Team Group A“.

December 2004

Added Costs Due To September 11, 2001
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Due to the events of September 11, 2001 airlines have been forced to increase their security measures. All packages must be more closely scrutinized to avoid a repeat of the World Trade Center and Pentagon disasters. The impact of this for shippers will be a slight slowdown in transit times and added costs.
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Some Brokers and Airlines have instituted a Security Charge. But be aware not all airlines have done this and some that are have applied the charges only for selected lanes. Make sure you obtain a revised rate schedule from your broker or airline to be sure how severely this will impact your cost. It is always a “best practice” to have not only your rates in writing but all applicable accessorial charges as well. This not only assures accurate billing but also protects you from future undercharge claims.
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Also, work closely with your brokers and carriers on any revisions to transit times. The earlier you can prepare a shipment, increases the amount of time that the carrier has to make your delivery commitment and in many instances can also reduce your cost. If you would like to learn more about added freight costs due to hidden assessorial charges or savings that can be achieved through better use of transit times, click on the contact us icon on the left side of this screen.

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