(Jorina Fontelera — Thomas Net)
Logistics costs have skyrocketed over the last few years as fuel prices increased and the United States economy spiraled downward. A study by the Council of Supply Chain Professionals (CSCMP) found that logistics costs in the U.S. alone rose by $91 billion in 2007, an increase of 7 percent over the previous year. According to the CSCMP’s 19th annual State of Logistics Report, logistics costs accounted for more than 10 percent of the country’s gross domestic product.
Higher interest rates, the deflating dollar and increased customs and warehousing costs in addition to fuel prices have contributed to the high costs of logistics. In 2007, U.S. businesses spent more than $1.4 trillion on transportation, storage and distribution of goods, according to CSCMP estimates.
“Clearly, there is a cause for concern,” says a new white paper from LTL trucking company Purolator USA Inc. “[B]usinesses cannot exist without logistics, but at the current rate, businesses can’t really afford to exist with them either.”
To combat the rising costs of logistics, companies should reassess each aspect of their transportation and logistics strategy. Here are six factors to consider.
Showing posts with label LTL Freight. Show all posts
Showing posts with label LTL Freight. Show all posts
Tuesday, March 10, 2009
Monday, February 9, 2009
Justified Rates
(Traffic World Online – John Gallagher)
As LTL shippers take advantage of the best leverage over transportation rates they’ve had in decades, they’re finding their influence over how those rates are determined may have taken a hit.
The first arbitration proceeding carried out under the auspices of a revamped National Motor Freight Traffic Association – now operating without the benefit of antitrust immunity, which was eliminated by Surface Transportation Board in December 2007 – revealed that shippers might have to work harder to show why the classification of their products should or should not be changed.
Since 1956, the National Motor Freight Classification has served as the benchmark against which rates are determined, with carriers determining rates on a scale based on a product’s classification. And a classification change often leads to an increase or decrease in the corresponding base transportation rate.
“When they enjoyed antitrust immunity, the NMFTA had the burden of proving the reasonableness of a classification change – that’s out now,” said Fritz R. Kahn, who arbitrated the classification case.
“Effectively the burden has shifted to shippers to prove that the classification is not reasonable.”
The January 22 decision, which involved changing the classification of paint products, was mundane: non-hazardous paint products will keep the same classification, and those deemed to be hazardous will be rated one class higher. But with an estimated 60% of the paints transported now considered to be hazardous, upping the classification – and subsequently the rate which carriers would charge to move them – may not be a small consequence for the $20 billion paint industry. Read more here.
As LTL shippers take advantage of the best leverage over transportation rates they’ve had in decades, they’re finding their influence over how those rates are determined may have taken a hit.
The first arbitration proceeding carried out under the auspices of a revamped National Motor Freight Traffic Association – now operating without the benefit of antitrust immunity, which was eliminated by Surface Transportation Board in December 2007 – revealed that shippers might have to work harder to show why the classification of their products should or should not be changed.
Since 1956, the National Motor Freight Classification has served as the benchmark against which rates are determined, with carriers determining rates on a scale based on a product’s classification. And a classification change often leads to an increase or decrease in the corresponding base transportation rate.
“When they enjoyed antitrust immunity, the NMFTA had the burden of proving the reasonableness of a classification change – that’s out now,” said Fritz R. Kahn, who arbitrated the classification case.
“Effectively the burden has shifted to shippers to prove that the classification is not reasonable.”
The January 22 decision, which involved changing the classification of paint products, was mundane: non-hazardous paint products will keep the same classification, and those deemed to be hazardous will be rated one class higher. But with an estimated 60% of the paints transported now considered to be hazardous, upping the classification – and subsequently the rate which carriers would charge to move them – may not be a small consequence for the $20 billion paint industry. Read more here.
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