Dimensional Pricing in Less Than Truckload (LTL) Shipping
Technology continues to grow and change exponentially. There always seems to be a better phone or more impressive gadgets on the market. The shipping and logistics industry is no exception. Dimensional pricing is gaining traction in the less than truckload (LTL) sector. But what exactly is it? In short, dimensional pricing utilizes laser or photo technology to identify weight, height, width and depth of the shipment. This is also known as the dimensional weight. In the current LTL market, pallet size and the items' NMFC® classification(s) determines much of the shipping cost. Although this pricing method does help the carrier understand exactly which commodities are being shipped, many factors make this method less than ideal.
Issues with the current LTL pricing structure include:
- Lack of visibility into the density of the shipment
- Less-than-accurate sizing information (often due to height of the pallet)
- Changes to BoL due to imprecise details about the shipment
Dimensional pricing helps eliminate LTL pricing issues by providing accurate measurements and photographic evidence of the exact shipment. The result is less guesswork for LTL carriers. Understanding the exact dimensions of each pallet allows the trailer to be packed much more efficiently.
Benefits of dimensional pricing include:
- More accurate delivery times by reducing delays due to:
- Overweight re-handlings
- Unforeseen lack of capacity
- Inefficient trailer loading
- Precise sizing information
- Fewer exceptions and rebills
- Increased productivity for both the shipper and carrier
- A better understanding of the exact pricing for a shipment
Some proponents of dimensional pricing believe this system will eventually be adopted by all carrier companies and may replace the NMFC's class code system. One barrier to doing so for many carriers is the cost of new technology. Although dimensioning tools continue to become more affordable (60-70% cost decrease since 2012), additional costs come with creating new processes, including:
- Training and support
- Repairing and replacing broken tools
- Technology obsolescence
Despite these roadblocks, dimensional pricing has the potential to greatly improve the LTL market. The current class code system has a variety of issues, primarily due to reclassifications and new items added to the NMFC system. This allows for even more user error due to a lack of awareness of changes to class codes. In addition, many LTL freight calculators fail to provide accurate information. The industry's eventual adoption of dimensional pricing seems inevitable for both carriers and shippers. Additional visibility into pricing and a better understanding of the pallet size helps improve efficiencies, resulting in a higher rate of on-time deliveries for LTL shipments. Today's transportation and logistics market is fraught with challenges, and dimensional pricing can eliminate many uncertainties. What do you think about the future of LTL pricing? Discuss your thoughts on dimensional pricing and class codes with other carriers and shippers on LinkedIn, Facebook and Twitter!