Freight Accounting Archives - GlobalTranz

4 Steps for Managing Your Freight Costs with 3PL Freight Services

mzugovic — Tue, 11 Apr 2023 13:00:00 +0000

In the freight industry, shippers of all sizes are constantly on the lookout for ways to manage their daily spend and how to reduce freight costs. Especially for those in purchasing and procurement roles, understanding how certain factors affect shipping costs across the board can be vital to career success. We've compiled some of the top influences on freight shipping rates to help you move towards a shipping strategy that fits your budget and business needs, and put together a brief explanation of how a third-party logistics (3PL) provider can help you reach your goals.

Here are four considerations when learning to manage your freight costs with the help of 3PL services.

1. Understand How Your Freight Shipping Costs Are Calculated

Understanding how shipping companies rate your freight will help you prepare and budget before it's even time to ship. When calculating freight shipping rates, companies consider an array of factors, some of which may be outside their control. Rates are typically calculated by analyzing:

The shipment's product type and classification code — A shipment's NMFC code and associated freight class help the carrier identify how difficult the freight will be to ship. The more difficult a shipment will be (I.e. packages that are bulkier, oddly shaped, or more fragile), the more it will cost to ship.
The shipment speed and distance — Just like with more complex shipments, freight with a faster turnaround time or a longer distance between pickup and delivery points usually costs more to ship. For example, an overnight shipment will likely cost much more than one on a more relaxed time schedule, and FTL freight traveling cross-country will cost more than if it was traveling across town.
Specialized services — Additional fees will also apply for specialty freight shipments, like those that require refrigerated or high-security equipment. Consider the additional services needed for your commodities before booking a shipment!

2. Plan for Additional Freight Shipping Fees and Surcharges

Now that you understand how your freight costs are determined, it's important to plan for any common fees or surcharges that may pop up unexpectedly. Practice makes (nearly) perfect, so familiarizing yourself with these common fees will help you plan for (or even avoid) them in the future! Some fees and surcharges that may get added to your invoice may include:

Fuel surcharges — These rates fluctuate based on market conditions, so do your research or partner with a 3PL to keep up-to-date.
Rural/remote and residential delivery — Rural and residential locations may be more difficult to get to than suburban or urban warehouses and storefronts. Freight shipped to these locations may require special delivery tactics at extra expense.
Incorrect address and redelivery — If a shipment's delivery address is missing or incorrect, the carrier may have to store or return the freight until the address can be corrected. These charges help to compensate the carriers involved for any unnecessary time and resources spent on multiple delivery attempts.
Loading and unloading — If you run a smaller business or are delivering to one without dockworkers, the carrier may charge you to load and unload your freight. Larger companies can avoid this charge by hiring dockworkers to load and unload freight shipments.
Cargo insurance — Many shippers choose to also add on cargo insurance for peace of mind, protecting fragile, perishable and high-value goods against loss, damage and theft.

3. Keep Track of Outside Factors That Affect LTL and FTL Freight Costs

Experienced shippers will have already had many of the previously mentioned cost-raising factors in mind, but there are also many additional factors outside of shippers' control that they may not know about. External factors that may affect the cost of your freight costs include:

The political and economic landscape — Trade wars between countries, agreements and embargoes can all affect global supply chains and cause freight shipping costs to rise. And at the same time shippers work to reduce freight costs, political and economic conditions and the current demand for more cargo space may affect carrier rates.
Government regulations — Did you know that the Department of Transportation mandates that truck drivers must rest after a certain number of hours behind the wheel? That means that carriers aren't making money during certain hours of the day, and that they may, in turn, increase shipping rates to make up for it.
Inclement weather — When road conditions become dangerous and drivers' fields of vision are blocked by heavy fog, rain or snow, transit times may slow or even come to a halt. Plus, if a driver needs to reroute to avoid dangerous conditions, the shipper may get hit with the bill.
Infrastructure and road conditions — As roads are continuously built and used, road conditions and possible routes are constantly changing. New roadways can provide more direct shipping routes and cut costs, while potholes and cracked roads may lead to slower shipping times and an increased risk of damage to your freight.

4. Learn How to Reduce Freight Costs From a 3PL Partner

Once you understand what factors are in play, it's important to put that knowledge to use and create a plan to reduce your freight shipping costs. We know this can quickly become complicated with so many important factors to keep in mind - make this process simpler by partnering with a 3PL!

3PLs like GlobalTranz take on the difficult tasks of maintaining a strong carrier network, providing protection for all your freight shipments, analyzing the state of the shipping market and more so that you can focus on growing your business. 3PLs help keep shipping costs manageable by negotiating carrier rates and advising shippers on how to minimize fees and surcharges. Plus, with managed transportation solutions, you can focus on more pressing areas of your business.

Manage Your Freight Spend Like Never Before with GlobalTranz

While 3PLs can't control external factors, they have the expertise to interpret trends and create workarounds to maintain a healthy supply chain. If you're looking for a long-term shipping partner that can help reduce and manage your freight shipping costs, connect with an expert today to see how GlobalTranz can help maximize your shipping success.

The post 4 Steps for Managing Your Freight Costs with 3PL Freight Services appeared first on GlobalTranz.

Freight Bill vs. Bill of Lading: Knowing the Difference Is Key to Effective Logistics

mzugovic — Thu, 01 Sep 2022 05:00:00 +0000

To capture the most value from your logistics department, it is important you know the terminology from the industry. No matter what kind of enterprise you represent (manufacturing, distribution, any company that ships freight), shipping documents are part of a unified network of standards developed by logistics providers to help you get your freight from your own facilities to the end-user or from your supplier to you via inbound freight. As a result, you can start to understand more about the most fundamental logistics processes simply by knowing certain key terms.

Further, when you are discussing logistics services and terminology with experts from a third-party logistics company, you want to have a strong idea of what bottom-line value such services can capture. After all, no outside expertise can be justified if the ultimate value is not made clear to all parties. That being said, knowing logistics terminology is key in the communication process between you, the shipper (customer of the 3PL), and the 3PL service provider. That way you can better hold the 3PL accountable for the products and logistics solutions provided and laid out in the logistics service level agreement.

Freight Bill or Bills of Lading? What’s the Difference?

One of the most common questions that arise when we first bring on a customer has to do with the freight bill and bill of lading. While these shopping documents are similar in most contexts, there are key differences between the bill of lading and the freight bill. Failing to know these can lead to misunderstandings that might undermine an otherwise mutually beneficial business relationship not only between your third-party logistics provider, but also with carriers, suppliers, and ultimately customers.

What are bills of lading(BOL)?

Bills of lading are official documents, which may be admissible in a court of law, that precisely name and enumerate the items to be transported during a freight shipment. They are issued by the shipping company (the carrier hauling your freight) or in our case, as a third-party logistics company, by your 3PL that provides overall logistical support to meet the customer’s needs.

When composing these bills of lading forms, it is important to provide weight, value and description of every item to be shipped. These bills (remember NOT the freight bill) represent the agreement between the shipper and the logistics provider or carrier that spells out where the freight will be collected, where it will be transported, and when the freight will arrive. Traditionally, this bill also serves as a title to the goods thus described; in other words, it can serve as an official description of loan collateral.

In effect, this bill makes explicit the “service level agreement” that exists between a freight company and its customer. When determining whether a company has met its obligations, this bill is often the paramount source. For that reason, both customers and freight companies have a vested interest in ensuring these bills are accurate. Disputes can be avoided when all parties involved take steps to ensure these documents have been thoroughly checked over.

What is a Freight Bill?

Freight invoices are different from bills of lading in that they do not serve as a key piece of “evidence” in any dispute. While freight bills should match up closely to their bills of lading counterparts, they can also include additional charges (such as accessorials), information, or stipulations that serve to clarify the information on the bill of lading document. When you are looking for an “invoice” to examine as part of a focused logistics improvement effort, you will generally use this bill rather than the original lading documents. Examples of using the freight bill for improvement are during the freight audit process. If you are using a third-party logistics provider, included in the agreement should be a freight audit and freight payment service (also known as freight accounting).

In effect, these freight bills are similar to other invoices for professional services your business might collect. Although they may seem less important during the freight shipping process, they should be retained long term. If you are using a transportation management system provided by the 3PL or some other company, have a requirement that these freight bills and bills of lading are stored and available electronically. Because GlobalTranz automatically populates both shipping documents, every one of our customers’ freight bills, we have been able to save millions in cases where human error has led to erroneous charges on your freight bill.

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