A rate quoted by a less-than-truckload (LTL) carrier or a third-party logistics (3PL) provider may not be all that it seems. A shipper receives a base rate that covers the cost of shipping, but what they may not see, and not know about until the bill of lading arrives, is the tab of “accessorial” fees that are charged for cargo services that go beyond the shipping.
According to industry estimates, accessorial charges account for 5% of a typical all-in LTL rate. A shipper’s freight characteristics may make these freight charges unavoidable. Yet, surprise hits to a budget can be mitigated if the shipper knows what it’s being dinged for. No shipper likes to be surprised by being asked to fork over more money after a shipment has already been booked and paid for. Through proper knowledge of accessorials and with the help of shipping consulting, you can help your business save money in shipping costs. Read on to learn more.
Some common-sense rules apply when managing accessorials.
1. Review the carrier’s rules or tariff rate
Each quarter, shippers should review the carrier’s rules or rate tariff because accessorials can change at any time without prior notice. Charges for accessorials and their definitions will typically be in the rules tariff of each LTL carrier and are shown on their website. With the more common shipping and handling companies, for example, the UPS accessorial charges and FedEx accessorial charges are readily available for consumers to view online.
2. Examine the reason for the charge
When accessorials do occur, examine the root cause of the charge to see if patterns exist. Shippers that encounter many of the same types of accessorial charges can shift to other systems that aren’t affected with the same accessorials, such as LTL consolidation.
3. Double-check the details before comparing rate programs
By double-checking the details beforehand, you can save money by avoiding additional fees the carrier might make you pay for failing to discuss some details of the shipment in transportation. Hundreds of dollars may be saved by confirming these small, yet essential, details.
4. Use technological advancements to your advantage
Use technological advancements that are becoming more commonplace in supply chain and transportation management. For example, dimensioning equipment, which has been a staple of the parcel industry for decades, is going somewhat mainstream in LTL. Dimensioners represent a giant leap forward from the old tape measure approach in analyzing shipment dimensions and minimize the post-delivery disputes that result in unnecessary costs and aggravation. Old Dominion Freight Line, Inc., the widely regarded as a well-managed LTL carrier and adept at understanding the balance between cost and price, encourages its customers to use its dimensioners.
The Purpose of LTL Accessorials Within the Industry
It may seem counterintuitive, but accessorial charges can be beneficial to shippers. All an LTL freight carrier sells is time and space. If either is compromised, then carrier productivity is lost and everyone suffers. Freight accessorials are necessary for a carrier to keep its costs in line with revenue without degrading service quality and reliability. Accessorials offset the inefficiencies that are created by certain shipments and make it easier for LTL carriers to charge competitive line-haul prices for the companies and their shipments that don’t require accessorials.
An LTL operation is a complex creature. Unlike full truckload (FTL) deliveries which are linear moves involving one shipper and one carrier, an LTL move involves multiple shippers, more than one truck and driver, and more than one hand-off, all within an intricate hub-and-spoke network. With so many moving parts, it’s easy for one problem consignment to upset the delivery applecart.
LTL operations are likely to get even more complex as carriers venture more robustly into middle and final-mile residential deliveries supporting the e-commerce ordering boom. Parcel carriers, which play in the residential and commercial markets, have 30 pages of accessorials. Many shippers chafe at the ever-increasing abundance of accessorials and often seek out discounted shipping rates to lessen the cost. However, in fairness to the carriers, there are a plethora of scenarios that require them to perform services beyond the basic deliveries. As an extra measure, it is important to understand the difference between FOB shipping vs. destination along with other shipping terms to be most knowledgeable of the reasons behind your quoted rate.
Types of Accessorials
Accessorials come in three broad forms. The first is administrative. Accessorials can occur at the carrier’s terminal because of bill of lading (BOL) errors or omissions that slow transit times and add an additional charge to the shipment. The affected shipments must be pulled out of the transit pipeline to be corrected and addressed.
The second is delivery. The most common accessorial fee here occurs when a carrier tries to deliver and the consignee, or receiver, turns them away. Fees are often the result of a consignee requiring a delivery appointment that wasn’t shown on the bill of lading. Redeliveries may also be required if a driver is detained longer than 30 minutes and must proceed with the delivery schedule; the nature of the LTL freight model—multiple stops for different shippers—means drivers can’t afford to wait more than 30 minutes.
The third is equipment. This includes special equipment like lift gates, forklifts, or pallet jacks. Carriers must carefully schedule these assets due to their limited supply, and they will charge a separate fee for their use. If a shipper fails to advise the carrier of any equipment requirements on the BOL, the shipment will be returned to the terminal until the equipment becomes available. The shipper will pay accessorial fees for the equipment and may be charged re-delivery fees to boot.
Common LTL Accessorials
Below is a list of accessorial charges, though certainly not all of them:
Inside Pickup and/or Inside Delivery
This applies when all or part of a shipment is not directly accessible or adjacent to a doorway or dock. Drivers will typically only pick up freight from the end of the dock, known in LTL parlance as “bumping docks.” Drivers are not allowed to enter a person’s home unless a special service such as 2-man delivery, “white glove,” or deluxe delivery is arranged. Inside pickup still applies even if the driver has to move a shipment from the back of a garage into the truck, or from a business interior into a truck. To avoid an accessorial charge, freight must be placed at the end of a loading dock if it’s a commercial shipment, placed onto the back of the truck individually (with assistance from family or friends) if a residential shipment, or wherever a truck will back up to if a liftgate service (see below) has been requested.
Residential Pickup, Delivery, and Appointment
This refers to a pickup or delivery at a residential area, such as a home or a residence business. It is important to put this on the BOL because not all carriers will serve certain residential areas due to the narrow fit of their streets. If this happens and you failed to specify a residential area, additional charges will be incurred, like re-delivery, in addition to residential charges.
A liftgate is a hydraulic machine at the back of a truck that allows for the unloading and loading of freight from the trailer. Liftgate service is taken care of by the carrier, but can carry an additional cost ranging from $40 to $100 per liftgate.
Limited Access Fee
This is when the freight is picked up or delivered to a location that is difficult to access or has signs that indicate as such. These can include airports, farms, churches, military bases, schools and ranches.
Protect from Freezing Fee
This can apply when the shipper or receiver requests that shipment be protected from freezing.
Because loading and unloading the freight is outside of a carrier’s job requirements, a driver will charge for any time incurred in performing the labor. This is known as a “lumping” fee that is passed on to the shipper.
Weight and Inspection Fee
One of the more contentious fees, this occurs after a carrier inspects and reweighs a shipment and discovers the weight or freight “classification”—each shipment is assigned a freight class based on multiple metrics—differs from what appears on the BOL. Aside from the additional costs, it is an administrative headache and a possible source of tension between the shipper and carrier.
Second, parcel carriers operate in the residential and commercial arenas and confront a wide range of delivery scenarios that often give rise to the need for accessorial fees. Historically, LTL carriers have only bumped docks. But as they cross into the e-commerce realm, they will encounter the same delivery challenges that parcel carriers take for granted.
Understanding Parcel Accessorials
Similarly to LTL, parcel shippers need to be aware of accessorials. A transaction with a relatively modest base rate can balloon to two or three times that because of “accessorial” charges imposed by your carrier for services it claims to go beyond shipment pick-up and delivery. As the steward of your company’s shipping spend, should you accept without pushback of the increasing burden of accessorial charges? The answer is, for the most part, no, as long as you know what to look for.
Parcel accessorials run the gamut from residential surcharges, delivery area surcharges, extended delivery area surcharges, charges based on a parcel’s dimensions rather than its actual weight, additional handling fees, oversize fees, second delivery fees—the list goes on and on.
Some accessorials are legitimate. Carriers should be appropriately compensated when they are asked to do more than pick up and deliver. The change in distribution patterns spawned by the e-commerce revolution has added complexity to carrier operations, especially when it involves the handling of non-conveyable, large-format items that are becoming more commonplace. These are costs that typically need to be recouped.
What is the Purpose of Parcel Accessorials?
Why is this happening? Obviously, FedEx and UPS strive for profitable revenue. They also compete vigorously, regardless of the duopoly they’ve long held on business-to-business (B2B) traffic. It is common for the carriers to slash base rates to big shippers if it results in market share gains. However, rate discounting can compromise their ability to generate profitable revenue. So, they increasingly turn to accessorial charges to compensate.
There’s a good reason why. Accessorials have no price caps, follow no annual timetable, and can be tough to challenge once they’re in place (again, unless you know what to look for).
FedEx and UPS continue to change their rules and thresholds to expose more shipments to these added charges. As a result, it is naive to expect the carriers to take their feet off the accessorial pedals.
Avoiding the Extra Costs
A good analogy of the concept of accessorials is the construction of a house. The builder utilizes their volumes to lower the costs for items such as fixtures or upgrades. Most likely, they have also chosen items that require easy installation due to added efficiencies and cost savings. However, say the homeowner doesn’t like the faucet or wants to upgrade to granite counters. Every upgrade or change takes resources and time for the builder to hunt down and install the upgrades. These additional requests will cost extra. So it goes with LTL and parcel accessorials. Some companies may not notice these charges entirely without the help of a parcel audit software that can help identify errors and incorrect FedEx or UPS accessorial charges. At Shipware™, our team has expertise in logistics optimization to ensure that you save yourself from unnecessary shipping costs. Reach out today and identify all the incorrect charges that may be contributing to your business’ shipping inefficiencies.