Spot rates
one-time fee a shipper pays for a load at current market pricing
short-term transactional pricing that reflects the real-time balance of supply and demand in the market
during the pandemic, stop rates are very high due to high demands and low supplies
spot rates provided the carrier is normally good for 24 hours
Best if:
primary and backup carriers don’t accept a lane at their rate
urgent or unexpected shipment is needed (kinda like bounce load where we are time-sensitive I guess?)
Contract/Primary rates
Longer-term (normally 12-months, but can range from a quarter, 6 months, 2 years)
Benefits:
consistent, reliable
more predictable and stable
lower costs than spot rates
Determined by:
Bid process
A shipper or customer will bid
Best to get contract pricing when you have a predictable freight environment
Win-win for both carriers and shippers b/c:
carriers get fixed rates
shippers give committed load volume
Other fees
Fuel surcharge
a fee added on at the time of shipping
Since fuel price is volatile and unpredictable, it’s not reasonable to ask a carrier to lock in fuel pricing at the time of a bid
fuel and diesel prices change and are published weekly
Accessorials
fees that carriers will charge the shipper
added at the time of shipment; normally after a shipment is delivered
it’s better for shippers to be fair with accessorials charges; you don’t want to keep acc. charges way down that hurt your relationship with carriers
hard to predict in advance
if you’re putting them into your budget, it’s best to look at last year’s accessorials
Examples
detention
delayed loading/unloading time
as a shipper, you can control this by looking at which facilities tend to have higher detention charges over a course of a quarter/year
stop off charges
lumper fees
layovers
driver work
if the driver has to assist in reworking or unloading a truck
liftgate
lumpers
LTL vs. Intermodal
Process of LTL spot quote (from customer’s point of view)
Customers can quote in a variety of ways:
1. Directly with a customer rep
Email info like pickup address, delivery address
Customer rep send back a list of rates from various carriers & transit times for each rate
2. Input information themselves on the system
select accessorials like lift gates, limited space, etc.
Variables to keep in mind for pickups/dropoffs
some vendors only require pickups/dropoffs at certain times of the day or certain days of the week; not 24/7
if not communicated clearly, it incurs extra fees for delays, etc.
At least 24-48 hour lead time for pickup is needed
Can you negotiate rates?
2019? Yes. At this moment? Nah.
Long-term agreements may help
Cheapest rates are not always the best!!!
It can be delusional because the rates may not include hidden fees (lift gates, fuel surcharges, limited pickups, etc.)
Reliability, Credit of the 3PL provider play a big part when deciding on which provider to choose.
If you choose the one with the cheapest rates, your customer may suffer; therefore, in the long term, it’s not ideal.
Intermodal
shipping freights over “rail”
10-15% cheaper than truckload
Things to consider:
capacity
time, seasonality
During peak season (September ~ December), many imports nearby ports like LA.
Avoid lanes nearby those areas during peak season
distance (> 700 miles)
loads that are not time-sensitive are good-fit
you can’t change the shipment time or location during the shipping process
Mini Bid
when there’s an influx of shipments all of a sudden and primary carriers have met their commitments, you might do a mini bid to get extra capacity for a quarter or 6 months. ds- helps keep consistency during inconsistency
provide carriers competitive rates
provide shippers reliable capacity
Misc.
The pandemic made dramatic changes in the logistics industry:
E-commerce jumped 10 years in the last 1.5 year
Trying to replicate Amazon’s 2-day delivery, which can’t be done in a typical way ==> 3PL comes into play
Spot quote (when customers reach out to customer rep for shipments)
Do
provide as much info as possible upfront
location, hours, contacts (phone #, email), lift gates, limited space, etc.
ask questions
do you need people to unload?
Don’t
generalize your request
guesstimate the dimension or total weight of a shipment, etc.
LTL vs truckload (TL)
Truckload
a.k.a. FTL (Full Truckload)
Flat/Fixed rates whether the truck is full or part of the truck
Your freight is the only shipment on the truck
Carrier ships straight from origin to destination
more pallets than LTL
> 10,000 lbs
only one destination
LTL
Less than Truck Load
Truck is full but with shipments from different companies/customers
Pay only for what you use
cost-effective for 150 lb < loads < 10000 lb
typically one to six pallets
Prices for an LTL shipment are determined by:
weight
pick up location
class
destination zip codes.
Ideal for:
sending pallets to two or more destinations
short-haul of high-volume shipments that don’t meet the criteria for FTL
like amazon’s fulfillment service where you pay for the space you use
Regulated by National Motor Freight Traffic Association
classifies freight based on commodity, density, and ease of transport
Standard LTL determined by shipment’s origin and destination, size, and any accessorials required
Project freight
freight out of a certain origin or to a certain customer
e.g) when there’s a food roadshow, a group of carriers will move around with the show crew which is not a typical lane (could include delivery to a residential area, not a warehouse)
Type of Parties
Carriers
Shippers/Customers
Brokers
connect shippers and carriers and oversee the movement of freight
rarely own warehouses, trucks, or physical freight items.
Freight Forwarders
negotiates transportation rates with the carriers
contract with a carrier to move the goods.
provides cargo insurance to protect the goods transported.
take possession of cargo
they need warehouses, trucks, packing supplies, and personnel
arrange the shipping of freight for their customers
may store products for their customers
organizes shipments for individuals or corporations to get goods from origin to destination
guides through the transportation of customers' cargo, requesting the documents customers require for the transportation and border crossing. - advises customers on the rules and procedures for importing and exporting goods to a specific country.
Broker vs. Freight Forwarder
Broker
coordinates the connection between shippers and carriers
Freight Forwarder
takes possession of the freight and often stores, packs, and ships it.
e.g.) Penske, DHL
Type of Trucks
Dry Van
most common type of trailer
can haul a variety of products, both short and long distances.
fully enclosed trailer where the freight is typically loaded and unloaded from the rear of the trailer
great job of protecting cargo
Flatbed
flat and has open sides and back
allows the cargo to be loaded and unloaded from the sides or the back of the trailer without interference from the trailer itself
Reefer
refrigerated container
can also carry dry goods and other temperature-sensitive loads
more expensive
Back-haul vs. Front-haul vs. Over-haul
Back-haul
return trip back from the destination point to the point of origin
Utilizing the backhaul saves time, money, and environmental resources.
Front-haul
origin to destination
Over-haul
Intermodal vs. Multimodal
Intermodal
I thought it referred to “transportation on rails”?????
process of moving cargo between a variety of different transportation methods (freight, air, motor carriers, etc.), but all under the same company.
Multimodal
similar to intermodal in that it moves cargo via multiple methods
but under different companies for each provider
LIFO vs. FIFO
LIFO
Last In, First Out
last products in are the first products to be shipped out
FIFO
First In, First Out
first products to come into the warehouse are the first products to be shipped out
Deciding which you want can affect your product’s quality, especially if it’s food-related
Misc.
Dead-head
has no cargo moved within a trip
e.g) a truck goes from Nashville to Minneapolis with guitars, but it comes back to Nashville empty; that is a dead-head trip.
happens because of supply and demand; there might be more demand out of China than bringing more products into China.
Ideally, products coming out would be equal to products coming in for environmental and financial reasons, but often this is not the case.
FSC (Fuel Surcharge)
a fuel fee that accounts for the region and the distance traveled
price of fuel fluctuates => FSC is negotiable
Goods in Transit
products that have been shipped out but haven’t yet been received by the customer
also called: "transit inventory" or "stock in transit"
Freight Forwarding firms
leader in the logistics industry
Not 3PL but large companies (like DHL) that ship large volumes of goods over land, air, and ocean
combines many goods into large shipments that they can ship for lower rates than competitors
Their volume allows for them to offer low rates than they could otherwise
Order Fulfillment
kinda like Amazon’s fulfillment service where Amazon takes care of shipping your items
let’s say you are a candle-making factory
when a warehouse or 3PL provider receives your client’s orders through your company and packages and ships them out for you – without you having to touch a single piece of packing tape
With pandemic, many small online stores are getting bigger, with more orders than they can handle without dedicating their entire home to piles of boxes and stacks of labels
Kitting
when you pre-assemble individual items into ready to ship kits
great option if you have a top-selling order (e.g. your 3 most popular items or a new client gift package) that you ship regularly
Having your order fulfillment provider kit them upfront will save you time and money in the long haul.
Embargo
an order to restrict the hauling of cargo
placed between countries to prohibit exporting or importing in general, or just on a specific product.
Actual Time of Arrival (A.T.A.)
the time a container, cargo, railcar, etc. arrives at a certain point
Cross Docking
unloading cargo from a truck and then directly loading it out on outbound trucks with almost no warehouse time in between
great option for clients who want to reduce costs of warehousing and labor, but the timing needs to be right to send out all the products right away
Replenishment
process of moving products and resources from a secondary warehouse location to the primary warehouse location
sole mission is to help keep inventory flowing through the supply chain and not skip a beat with the customer’s demands of the product
Helps keep inventory levels consistent and deliver on client orders in a timely fashion.
Reverse Logistics
managing and focusing on the logistics of the products after the sale (everything from returns, recycling, and repairs, to the management and sale of surplus products)
About 7% of a company’s gross sales are used up by return costs; from managing returns to getting rid of surplus or expired stock
Pool Distribution
Nope. Not a distribution of swimming pools! lol
regular distribution of orders to multiple destinations within a certain geographic region
goods are shipped to regional centers to be shipped out regularly to smaller local cities and clients
Instead of making multiple long-haul trips from Oregon to New Hampshire, a company can have a regional pool distribution center in Connecticut for the entire NE seaboard
cost-saving way to make smaller shipments regularly to many clients.
Reference:
https://www.youtube.com/watch?v=g1usE9qk-wA&list=WL&index=16&t=948s
https://www.dtsone.com/know-difference-ltl-shipping-truckload-shipping/
https://citi-cargo.com/
https://truckstop.com/blog/dry-van-vs-reefer-which-is-best/
https://mexicomlogistics.com/why-shippers-use-a-freight-forwarder/
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