DC Velocity - May 2016

NAA-1097 ISS: 4/16

Imagine the Possibilities

Another Sign You Need Apex | #TrueStory

THEY PLAY HIDE-AND-SEEK WITH SCANNERS AND YOU’RE ALWAYS “IT”

FedEx Freight unveils flat-rate pricing for LTL shipments

FedEx Freight, the less-than-truckload (LTL) unit of FedEx Corp., has introduced a flat-rate pricing scheme for freight that can be fit into two versions of corrugated box equipment.

The “FedEx Freight Box” will be offered in two sizes. The larger, which measures 48 by 40 by 38 inches, requires a pallet. The smaller version will come with an integrated pallet. FedEx will provide the equipment, which will then become the customer’s property and can be reused, according to Michael L. Ducker, the unit’s head.

Ducker said the equipment is currently available for use in Dallas and Houston and will be rolled out across the lower 48 states by late summer. He spoke to DC VELOCITY at the NASSTRAC conference in April.

Using the product, a shipper can stuff up to 1,200 pounds of freight into each box and pay a set rate depending on the shipment’s distance—based on eight geographic zones—and time in transit. FedEx Freight offers a faster, premium-priced “Priority” delivery service and a less time-sensitive but cheaper “Economy” service.

Tariff pricing will apply to the shipments, Ducker said. The rates are subject to the general rate increases that LTL carriers traditionally impose at least once a year, and sometimes twice, according to the company’s literature. Hazardous materials are excluded.

Though any shipper can use the product, it is being marketed to small to mid-sized shippers, because they generally have fewer resources than larger shippers to manage shipping dynamics that aren’t their core competency, Ducker said. Offering an “if it fits, it ships” approach to shipping will significantly simplify the process for the small to midsized segment, which accounts for most of the unit’s growth as measured in average daily volumes, Ducker said.

By providing a flat rate for whatever fits
in the boxes, the product also appears to
move the LTL industry closer to a more
uniform approach to pricing and further
away from the commodity “classification”
formula that has governed LTL rates
for 80 years. Under that scheme,
goods are classified based on four
elements—density, stowability,
handling, and liability—that reflect
a shipment’s “transportability.”
Critics maintain the classification
system fails to accurately calibrate a
carrier’s cost of carriage with what
it should charge. As a result, carriers
routinely misclassify their freight
and underprice their trailer space,
critics have said.
Though an increasing number
of carriers are using machines that
calculate a shipment’s dimensions
and how much space it will occu-
py (FedEx Freight has 45 of those
machines, according to Ducker),
many still use tape measures and
rulers to estimate a shipment’s con-
figuration and its fit. The problem is
compounded by the industry’s slow
uptake of IT visibility tools, since it’s
hard for carriers to price what they
cannot see.
Ducker said FedEx Freight does
not view the product as dimensional
pricing by another name. “We look
at it as a product offering,” he said,
adding that “supplying packages to
our customers is a FedEx hallmark.”
Still, he agrees with the basic prem-
ise that the industry needs to move
away from the classification scheme
because it erodes the providers’
basic value proposition. “The only
thing you are selling is space and
speed,” he said.
—M.S.