Demystifying LTL Freight Classification
Joel A. Herman
The National Motor Freight Classification® (NMFC®) system can be overwhelming. However, manufacturers that understand how carriers classify freight can find creative ways to lower their costs for less-than-truckload (LTL) shipments.
Factors that Affect Freight Rates
The NMFC groups commodities into 18 classes based on the following four characteristics: density, stowability, handling and liability.
The lowest and least expensive class to ship is class 50, which includes durable, high-density items that fit neatly on a standard pallet. The highest is class 500, which includes gold dust (high liability) and ping-pong balls (low density). Carriers also consider other factors, such as weight, distance and packaging.
Since the end of 2012, many commodities have seen their freight classifications change under the NMFC system. These include computer equipment, medical kits, hand tools and televisions. More changes are expected in the future. In evaluating your freight cost structure, consider some creative ways to qualify for lower freight classes. These include:
- Master the Bill of Lading (BOL)
This contract between shipper and carrier specifies what is being shipped, where it came from and where it is going. Mastering this document can help you identify NMFC loopholes.
For example, you may qualify for a lower classification by declaring a “released value” on the BOL that is below the commodity’s standard NMFC released-value range. Or, for shipments near the next density break, consider artificially inflating the density to qualify for a lower freight rate. This practice, known as “bumping,” must be indicated on the BOL. Both strategies, however, require strict compliance with NMFC and carrier-specific rules.
- Code Shipments Carefully
Freight classifications vary depending on what is being shipped and how it is packaged. Changes in your packaging and manufacturing specifications may affect your customary freight classifications. Carriers have the right to challenge classifications listed on every BOL. If you are wrong, you may incur extra reclassification fees on top of the incremental shipping costs.
- Adjust Packaging
You may qualify for a lower rate by reducing a container’s size or handling requirements or the probability of incurring damage during transport. For instance, consider shipping goods disassembled for easier stacking or securing cartons with banding or breakaway adhesive to minimize breakage.
- Seek Outside Perspectives
A consultant who specializes in manufacturing can audit your freight processes for misclassifications and inefficiencies. Ultimately, you may decide in-house resources are insufficient to effectively manage freight costs and, instead, hire a third-party logistics company.
Turn Lemons into Lemonade
Manufacturers that understand the ever-changing NMFC rules reap more than short-term cost savings. They can turn shipping from the source of their daily headaches into a competitive advantage. For more information on LTL Freight Certification, contact Joel Herman at [email protected] or call him at 312.670.7444. Visit our website for more information about the Manufacturing and Distribution Group.