Inspected Shipment - Bumping up the Weight

This may be a bit obscure, but I've been encouraging my clients to add a clause to their contracts that requires a carrier to bump up the weight of a shipment subject to a class rating based on density when that shipment is inspected.

Item 171 in the NMFC states articles rated by density and make reference to that item may have their weight "bumped" up to secure a lower rating. For instance, a shipment which has a density of 3.60 lbs. PCF (class 250) can have its cube multiplied by 4 lbs. PCF and bump the weight up to receive a class 150 rating. That bumping of the weight is required to be noted on the Bill of Lading at the time of the shipment.

The problem comes when carriers' Weight & Inspection departments inspect a shipment which shows one density and find it's a different density. Many times, shippers calculate their density based on the packaged product whereas the carriers are determining the density based on how it is palletized for shipment. That is correct but it reaps a considerable windfall for the carriers. Understandably, carriers are hoping for that "Gotcha" shipment as their revenue goes up, needless to say.

Some years ago, we wrote a clause into a client's contract to buffer this effect. The provision stated that if a carrier inspects the shipment and finds that the density is incorrect, they are required to bump the weight up to secure the lower rate. Other clients have also used the same language.

This is very "outside the box", but I think more companies should consider this approach. The benefits are clear for shippers who have this language.

Here's an example from yesterday. A client's supplier shipped six pallets of plastic drums without any formal NMFC description, showing a total weight of 1800 lbs. The carrier inspected the goods and found it had a cube of 469.44 Cubic Feet for a density of 3.83 lbs. PCF at class 250.

Ironically, the bill was rated as 2000 lbs. and if you used that weight, the density would be 4.26 lbs. PCF. Of course, that's not how it's done. Using the bumping clause language for inspected shipments, the weight would bump to 1878 lbs. and move at the same 2000 lbs. rate albeit at a class 150 rate. In this case, it would reduces the bill by more than half.

As you can see such language in your contract can control your freight costs a great deal.

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No need for an audit?

I was reading an article in the October 2007 issue of Logistics Management magazine by Ray Bohman about Cube based LTL pricing. The article looks at an alternative to the standard pricing using class ratings established by the National Motor Freight Classification (NMFC). It was an interesting article and worth reading.

What jumped out at me while reading it was this line: The system is also designed to eliminate freight bill auditing by outside firms. While I understand what the system's creators are getting at, I would suggest that there is always a need to have someone look at your bills. We have found mistakes under any number of pricing systems, whether class rated shipments under the NMFC; mileage rates, flat rates. As I said in my initial post on this blog, as long as human beings are pressing the buttons, there will be mistakes. Simpler rating systems might reduce the possible ways mistakes can happen, I don't think they will ever go away completely.