The rise of dimensioning machines will make LTL trailer space allocation more efficient than ever, reports DC Velocity. For nearly eight decades, LTL carriers have been “giving away their trailer space” – at least enough of it to make a difference in their revenues and profits and leave the backdoor open for rate cuts. But change is in the air, and it’s being driven by so-called dimensionializing machines that precisely calculate the amount of space a shipment will occupy in a trailer.
The machines allow the carrier to price its capacity based on the amount of space a shipment takes up, and not rely on a “78-year-old commodity classification formula that, over time, has robbed carriers of billions of dollars of legitimate revenue, often due to the carriers’ own missteps.”
The machines measure a shipment’s dimensions – arrived at by multiplying length, width, and height – and provide proof of their calculations. The machines are pricey, about $80,000, but with a payoff said to be as quick as 30 to 60 days, demand from carriers wanting to put shippers on a space-occupied pricing plan is rising.
As the equipment gains popularity, the sun appears to be slowly setting on the old formula used to rate LTL shipments in the U.S. The National Motor Freight Classification (NMFC) system, developed during the Great Depression, classifies goods rather “unscientifically,” based on four elements – density, stowability, handling, and liability – that reflect a shipment’s “transportability” and not derived from the dimensions of the actual shipment. Says the article: “By relying on metrics that don’t accurately calibrate their cost of carriage with what they should charge, carriers routinely misclassify their freight and underprice their trailer space.”
The current classification methodology has also failed to keep up with the times. It was not designed to accommodate the changes in modern-day production methods, where goods tend to be lighter and generally cube out in a trailer before they weigh out.
Whatever the case, carriers have also historically acquiesced to the shipper’s interpretation of the classification, afraid to lose business. Unsurprisingly, carriers are encountering shipper resistance to changing the status quo.
Todd Polen, Old Dominion’s vice president of pricing and costing, said the carrier tries to show shippers that moving from class to dimensional rates would eliminate arduous negotiations over commodity classes, end freight payment disputes, and preclude the need to constantly update classification criteria.
“The simplicity is the sell,” Polen said. However, until 70 to 80 percent of the largest LTL carriers roll them out (and carriers following suit properly understand how to use these tools to rationalize their own costs) don’t expect them to go mainstream anytime soon.
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