newsmakers
UPS Freight, the less-than-truckload (LTL) unit of UPS
Inc., has rolled out a pricing program based on the density
of a customer shipment rather than the traditional formula,
under which rates are determined by the characteristics of
commodity classes, or “classification.”
Jack Holmes, president of UPS Freight, told attendees
at the NASSTRAC annual conference in mid-April that
the new pricing is being introduced to “shippers who are
demonstrating interest” in it. He acknowledged that “some
people are scared off by it,” preferring to stick with the
pricing program they know.
Holmes said that all carriers are looking at migrating to a
density-based pricing program. “It’s coming, but I can’t say
when it would be the norm,” he said.
The program, which UPS Freight has been refining for
several years, would replace the classification model with
a simplified model where rates would be set depending
on tiers of a shipment’s density. A high-density shipment
like ball bearings, which are both heavy and small, would
generate a low rate per hundredweight because it occupies
less space in a truck. By contrast, a product like lampshades,
which are light but outsized, would be assessed a higher rate
because it takes up more relative space in the vehicle.
Traditionally, rate classes have been defined by the
National Motor Freight Traffic Association (NMFTA)
and made available through the National Motor Freight
Classification (NMFC). There are 18 freight classes, with
products classified by weight, length, and height; density;
ease of handling; value; and liability. Generally, the lower
the NMFC class number, the lower the freight rate.
AN END TO THE GUESSWORK
Freight classes are designed to help shippers get standardized pricing for their shipments when working with different carriers, warehouses, and brokers. Over the decades,
however, carriers have encountered problems with shipments assigned a status known as “freight, all kinds” (FAK),
an all-inclusive freight class given by carriers to customers
that ship commodities with varying classes. Carriers frequently assign a low FAK class to a variety of shipments that
would justify a higher number. Often, shipments must be
reclassified and reweighed, a time-consuming process that,
though necessary, could generate ill will between shippers
and carriers.
Moving to density-based pricing would streamline the
pricing mechanism, end the guesswork of FAK pricing,
provide a more equitable rate structure, and take the NMFC
out of the picture, advocates have said. In addition, critics
of the classification structure say it creates no incentive for
shippers to adopt good pricing practices and has been a
headwind for carriers to earn their cost of capital.
Several years ago, William J. Logue, president of FedEx
Freight, the LTL unit of FedEx Corp., said the move to
density-based pricing would be a “game-changer” for LTL
if adopted. It is believed that adoption by UPS Freight and
FedEx Freight, units of arguably the country’s two most
visible transportation brands, would influence other LTL
carriers to follow suit. FedEx Freight did not respond to a
request for comment.
Density-based pricing has been used for years in the
parcel business, where FedEx and UPS have their roots.
UPS Freight making move to
density-based pricing, chief says
go figure …
$105 million
The amount of money it would cost UPS Inc.
annually if every driver were delayed five minutes each day.
SOURCE: COMPANY DATA
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logistics management solutions, has achieved
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Management System and Retail Store Inventory
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accolades
