Your company produces a great product and you need to get your product to your customers. additionally, you need complete control over shipping that product. But do you have complete control? It isn’t enough to package, schedule and maintain visibility of each load – you also have to understand the tariffs of each carrier and know when you might be on the hook for any unexpected fees.
Imagine your dismay when an invoice for a $2000 shipment totals at $2300. You only had $2000 in the budget for this shipment. Where did that extra $300 come from? The invoice gives no information explaining these mysterious “fees” and now the budget is offset by unforeseen costs. Chances are your company is dealing with Accessorial Fees – the bane of shippers and the boon of carriers.
What are Accessorials?
Accessorials are fees incurred from any additional services performed by the carrier during the shipping process.
Any (and I mean any) service performed in addition to the agreed upon service of driving is subject to an accessorial fee. Shippers often don’t account for these fees assuming that the whole shipping process comes as a package deal. However, this is not the case.
In fact, many carriers hire consultants to analyze the shipping process, find the small details that aren’t charged, and create custom accessorial fees for the carrier. Because of this, every carrier has different accessorials. Accessorials, then, become a major source of revenue for carriers. Common fees include:
- Inside or Non-dock Delivery
- Reweigh, Reclassification, and Inspection
- Oversized Freight
- Layovers and Detention
- Lift Gate, Pallet Jack, and Shrink Wrap
It is all but impossible to find a comprehensive list of accessorial charges, however, this list from The Balance is a good place to start.
Large businesses are often insulated from accessorials. Any business who ships a large enough quantity of freight or has a fleet their own may doge the bullet altogether. Regardless, most large businesses are still subject to ambiguous and incidental fees unless otherwise negotiated.
On the other hand, SMBs often do not have the negotiating power or the resources to keep carriers from imposing accessorial charges without their knowledge. At the same time, carriers often know that shippers aren’t familiar with what will trigger an accessorial fee and they will take full advantage of the ignorance.
The truth is, even if a shipper accounts for accessorials in the budget, accessorials are incredibly difficult to budget for because: 1) carriers are introducing new fees all the time and 2) incidents and small issues are an inevitability of shipping. How can you, as a shipping manager, plan for inevitable accessorial fees? We have a couple suggestions for how you can beat the tyranny of accessorials.
Know your Carriers’ Accessorial Policies
First things first, never go into a relationship with a carrier blind. Do the research. What do they charge for? How much do they charge? Does their global positioning offset the fees they incur compared to another carrier? The answers to these questions may determine whether or not $5000 haul becomes a $6000 haul. It can become that drastic.
There are no standards or regulations for what constitutes an accessorial or how much the carrier can charge for the additional service. However; carriers are required by law to publish their accessorial policies for shippers. An Example of this would be Old Dominion Freight Lines Tariff Policy. Finding these lists can be as simple as a Google search and save your company thousands every quarter.
Negotiate Policies in Contracts
Luckily for the shipper, carrier accessorial fees are often flat rates. The fee for every diversion mile or border crossing will remain the same every time it occurs for the carrier in question. This gives you, the shipper, an advantage when negotiating contracts.
Contracting with a carrier, you have every right to negotiate and dispute fees the carrier has in place. A healthy business relationship must be mutually beneficial. The more you ship with a specific carrier, the more important you are to them as a customer, the more leverage you have in negotiating your rates.
If their set price for detention time is 30 free minutes and then $1.75 for every additional minute, negotiate for 40 free minute and $1.50 for additional minute. If they charge $80/hr. for loading and unloading, it is reasonable to negotiate the price down to $60/hr.
Along with the various other benefits to contracting with a carrier, establishing tariffs and contracted rates are a benefit to you, the shipper, because you get lower rates, and to the carrier, because they secured a long term client. It’s a win-win.
Remember to reevaluate your contract regularly. More than just evaluating the contract – it is most important to evaluate your invoices/your data. Are you constantly getting the same accessorial fee – it is always when you ship to a specific customer? Drilling down on this data is what will help you understand accessorials and how to mitigate them.
Study the industry and look for trends that could change the rates you currently have. If you don’t evaluate your contract, your previously low rates become stagnant in the market and you’ll find yourself paying more than the industry average.
Dispute Unwarranted Fees
When you receive that invoice for the $2000 shipment and it reads $2300, be comfortable with disputing the charge with the carrier. Accessorials can be tricky and slide into your invoices without your knowledge. Often, the carrier hardly even evaluates the invoice before it is submitted to the shipper. This is where having a partner who specializes in processing freight invoices can be paramount to your success.
Whether warranted or unwarranted, disputing claims can become a nasty business if the carrier puts up enough of a fight. In the case that it becomes too much of a liability to justify the cost, paying the fee may be advisable. However, even when they are warranted, you can still plead for leniency under the umbrella of ignorance and have the fees reduced or removed.
Improve Your Freight for Shipment
Fortune favors those who properly prepare, and this couldn’t be truer than it is in shipping. The more work you put into preparing and scheduling the freight before it goes into the hands of the carrier, the smaller the chance that excess accessorials will be charged on your account.
Ensure your packaging is up to code and reasonably easy to transport. Be prepared to have your employees load the truck rather than have the driver do it. Be efficient in your processes to reduce detention and layover time. All these things respect the carrier and will reduce your overall cost.
Coincidentally, most accessorials take place at delivery; therefore, it becomes vital to communicate with the consignee to ensure that every detail of the delivery is taken care of in order to avoid additional charges incurred by the receiver and not necessarily the shipper. If details fall between the cracks, you will be liable for fees you weren’t responsible for incurring.
There will be instances when your shipment will require such additional services as a toll road or a non-dock delivery. Be prepared to pay certain fees and work to negate any fees that are unnecessary. For those fees that will most certainly be incurred, plan ahead – include them in the budget and negotiate those fees in your contract.
Partner With a 3PL
The above suggestions are just an introduction to the accessorial fight. Dealing with these fees within your own company can be daunting and exhausting. Many companies are just ready to surrender to the additional fees because of the complications involved.
But your company does not need to fight the battle alone. By partnering with a 3PL that specializes in accessorial negotiation, you can rest easy knowing the burden is no longer on your shoulders.
A 3PL with invoice auditing and accessorial expertise knows how to communicate with shippers in negotiations to reduce fees and establish contracted rates. 3PLs work on behalf of the shipper and have years of experience dealing with the same logistical issues that plague your company. Rest assured, you are getting the best rates and all unnecessary fees are being vetted and disputed.
Additionally, by having a personal account manager with dedicated customer service, your company will have access to the latest data for negotiating contracts. Having someone from the outside to analyze your shipping data and shipping habits ensures that no stone is left unturned in re-evaluating your shipping practices.
You are not alone in the fight. A 3PL is on your side. Accessorials are scary but they aren’t unbeatable.