Shippers, LTL carriers girding for changes in NMFC rating system

Shippers and less-than-truckload (LTL) carriers are continuing their adjustments and preparation for major changes in classification ratings of their freight shipments that begin on July 19 and will continue throughout the year.

Density ratings go from 11 subcategories to 13. Generic headings are being grouped. About 2,000 items are being eliminated from a list of 5,000 items.

Enlightened trucking executives are hoping these density-based changes will create dialogues with shippers to find common ways to cut costs and create efficiencies in freight moves and dock practices.

The overall goal is modernization of a practice that is both viewed as essential and arcane. In fact, it’s a bit of both with a system that dates to 1935.

The National Motor Freight Traffic Association (NMFTA) is implementing significant updates to the National Motor Freight Classification (NMFC) system this year. These changes aim to simplify and modernize the classification process, making it more efficient and user-friendly for shippers, carriers and third-party logistics providers (3PLs).

As a leading logistics provider, Northeast LTL giant Pitt Ohio is committed to helping shippers navigate these changes seamlessly. It recently held a webcast on the subject to help shippers familiarize themselves with the changes.

Most LTL carriers are embracing these changes. They are hoping their shippers do as well. It’s about shippers understanding their risks, learning how to provide accurate information on bills of lading and understanding that space is money in transportation.

“It’s distance, it’s time and it’s space,” Pitt Ohio Chief Marketing Officer Geoff Muessig said of the major characteristics that drive classifications.

But over time, weight has taken on less importance when compared to density. Most LTL carriers are using dimensional measuring machines to target freight that might cube out before it weighs out, Muessig said.

“There are some commodities in the NMFC guide that are unchanged since 1935,” Scooter Sayers, Business Development Director for LTL Solutions at Cubiscan, said on the Pitt Ohip-hosted webcast. “There are some bad proxies for density. The best density is how much space does this piece of freight take up.”

Shawn Galloway, Pitt Ohio VP of Pricing, said if you get the density correct, chances are freight will be rated (and priced) correctly.

Density, loadability and packability are the major characteristics that govern the changes coming. Of those, assigning a density scale is the most vital, industry experts said.

Chris Junkin, Manager of Outbound Transportation Solutions at Webstaurant, which supplies restaurants among its more than 500,000 store-keeping units (SKUs), says he always “tries to hone in” on exactly what commodity he is precisely shipping.

“We’re trying to take the guesswork out of what our vendors must do at the time of shipping,” Junkin said.   

To prepare for the upcoming changes, Webstaurant is using a simplified bill of lading that includes weight, distance, type of product and other information. Webstaurant then picks the correct density code to make it easier on its carrier base.

Webstaurant is using the original NMFTA codes. He estimates that as many as 85% of all codes will be changed when the NMFC changes are fully in place.

Pitt Ohio’s Galloway said he is encouraging shippers to start to plan for changes now – not when the program comes live on July 15.

Muessig said those shippers who are unprepared for these changes will be at a disadvantage. “For those shippers who don’t prepare early, I can see significant billing issues on the back end,” Muessig said.

“The more we understand what’s coming, we can head off these problems at the pass,” Muessig said.

Dimensioners are common at both carriers’ and shippers’ docks these days. Muessig joked that sales of dimension-measuring machines should jump in the coming months.

Webstaurant’s Junkin said its process starts with a Transportation Management System (TMS) reading of its freight. Then it starts a dimension-measuring process. Finally, with all that data in hand already, Webstaurant starts using TMS to find carriers with the precise amount (and dimensions) of its freight.

“Space is money,” Pitt Ohio’s Galloway said.

As more freight goes to a new classification-based rating, there theoretically should be fewer errors in rating freight and thus less haggling over freight rates, these experts said.

Pitt Ohio’s Galloway said he is pushing back on shippers who use the FAK – Freight All Kinds – as a fallback to complicated classification questions. He said that will not pay off for shippers in the long run.

“Customers are going to pay more when there is an FAK involved,” Galloway said. “It gets more risky with these changes.”

“Carriers don’t want risk,” Sayers said. “FAK rates are going to go up. You’re paying more today for FAK rates, Mr. Shipper. You will be paying even more come July 15.”

That’s because the national LTL carriers have been investing in preparing for these changes for several years.

To prepare for density-based pricing, shippers should understand their risk. “It’s going to be super critical for shippers to understand which of their commodity ratings are going to change,” Sayers said.

Basically, the LTL industry is trying to duplicate the success the small package industry (and Amazon) has had in accurately measuring and packaging their products to save space on their trucks.

Shippers are being urged to expand their dialogue with carriers. Regional LTL carriers will have different weight and balance requirements than long-haul national carriers. Location (and backhaul possibilities) will likely determine a carrier’s rate, which can change.

“The only way to know is to have that conversation with your carrier,” Pitt Ohio’s Muessig said.

Each shipper’s freight volume and velocity determines the appeal of buying dimension measuring machinery. There are different systems designed for various sized shippers.

“You need a system that retains dimension-measuring data,” Sayers of Cubicscan said. There are different solutions in dimensional-measuring technology based on a shipper’s size and freight characteristics.

“It comes down to having a really good process in place,” Sayers said. “Talk to your carriers about it. Ask them what they think. At the end of the day, you as a shipper want to have a system in place that the carriers trust.”