The Savings Impact of Consolidating Shipments!

By George Muha

Since freight is such a huge cost center at companies and a big part of their sales gets eaten up by freight, I get a lot of calls from sales people asking for ways to lower costs to their customers. The first challenge is trying to convince sales people that freight is a real cost - something I know a lot of accounting and operations people can sympathize with. Hey, I am a sales guy so I am allowed to pick on other sales people.

Actually, all I really need to do is to delve into some simple shipping patterns. There is a really easy way to provide a cost cutting solution to your customers, without lowering your invoice price and without threatening your relationship with your freight carrier. This innovative solution is called consolidation!

It is really amazing with what a little consolidation of shipments to the same customer will do for your cost per lb. The reason for this is that most freight carriers charge less per hundred pounds for heavier shipments than for lighter shipments.

So it will cost you less per hundred lbs for a 1,000lb shipment than it will for a 200lb shipment. In fact, your cost per lb will be less than half for a 1,000lb shipment than for a 200lb shipment.

I have a customer who is based in Cleveland who has particularly high classed items. We recently did a review that showed that they ship three 200lb shipments a week to the same customer in King of Prussia, PA. Each one of these shipments carries a cost per lb of .41 cents. However, if they got their customer to buy one large 600lb shipment at the beginning of the week, then their cost per lb dropped to .24 cents per lb. That is a savings of about $100 a week to that customer!

If you multiply that over a year that is $5,200 in savings to their customer. My customer didn’t have to lower any invoice prices. Plus, their customer was happy because they don’t have to expend the labor to unload the truck three times a week.

What if my customer won’t consolidate orders?

Sometimes getting with customers to consolidate their orders is an eye opening experience for them. A lot of times, they don’t even realize how often they are ordering.

Even with the above situation with the King of Prussia customer. When we approached them, they initially didn’t want to go for it because they didn’t think they were ordering that frequently. In fact, they didn’t believe us when we told them they were shipping three times a week!

It wasn’t until we showed them two years of data of them ordering three times, sometimes four times a week, did they consider listening to us. In this case, it was multiple purchasing people ordering at different times. But now they are ecstatic that they are saving these extra dollars and not clogging up dock space.

I have also found that even customers who won’t or cannot handle a consolidated order, appreciate you looking out for them.

How do we go about reviewing this?

The first thing you need to do is pull out a spreadsheet of all of your shipments for the last quarter and sort them by “customer” then by “date”. Then scroll down and break down all the shipments into week blocks.

Then it is simple. Just get your rating program to price out all of the consolidated orders as if it were one big order. Then subtract them from the total of the multiple freight invoices and there is your savings.

This is not rocket science but it is a great way to provide an excellent cost cutting solution for your customers that does not affect your bottom line!

If you are an LMI customer and you want to look into seeing the impact of consolidating shipment to customers, just contact me and we will perform this review for you.

If you are not an LMI customer and you want to lower your freight cost, the first thing you need to do is have LMI perform a FREE Freight Evaluation. Typically, LMI’s program provides over 20% savings to shippers. Contact me today!

Fuel-Surcharges at an ALL TIME HIGH!!!

I wanted to reach out to you to let you know about something that is slipping under the radar at many companies and effecting your bottom line in a big way...FUEL-SURCHARGES ON FREIGHT BILLS!

Fuel has been skyrocketing every week for the last month. Yesterday, the Department of Energy announced that fuel is at an all time high at $3.81 a gallon (diesel national average). That means motor carriers will be charging 29% extra to your freight bills.

To give you an idea of how dramatic this increase is, on Febuary 18th, 2008 the National Diesel Index was at $3.39 a gallon. Now it is at $3.81. That is a .42 cent difference in three weeks.

To put this into dollar amounts, last year the average Fuel-Charge that you were paying hovered around 15%. That means, this new Fuel-Surcharge will be raising your freight expense by 14%. So if you spent $500K last year in freight, you will be spending $70,000 more if this fuel stays where it is at.

What Can You Do?

Any customer of LMI reading this already knows they have nothing to worry about. Because although their fuel-surcharge is going up a little bit because of this spike, they know it will not make that big of an impact in their bottom line. In fact, LMI's fuel has raised to 12.5% this week. This actually our ALL TIME HIGH fuel-surcharge. But when you compare it to 29% that is being thrust upon everyone else in America, our customers can rest easy.

In fact, LMI's "National Account" status with its carrier partners protects its customers from things like outragous fuel-surcharge spikes, mid-year rate increases and unforeseen accessorial charges.

With many financial guru's admitting that we are in a recession, with sales being down around the country, with consumers keeping their spending to a minimum and with the rising diesel prices, IT MAY BE TIME TO LOOK AT ONE OF YOUR BIGGEST COST CENTERS = FREIGHT.

LMI would be happy to offer a FREE Freight Cost Analysis to determine the savings to your company. In 2007, the average savings to companies who spent less than $1,000,000 in freight was over 22% savings.

For a FREE Freight Cost Analysis all we would need is copies of recent 30 day sample of recently paid freight invoices. Withen three weeks, we will be able to tell you how much savings will be available to your company immediately.

LMI's services are a non-contractual way to dramatically cut freight costs and streamline freight billing while improving delivery service to your customers.

Please feel free to contact me for your FREE Freight Cost Savings Analysis or to arrange a meeting at your earliest convenience today!

Sincerely yours,

George Muha
Regional Sales Manager
Logistics Management, Inc

Beware When You Hit FREE Freight Levels from your Vendors!

Of course, every buyer in the world wants to buy enough product from their vendor so they can hit their "free freight" threshold. It is always wise to attain this goal if you can. However, you would be suprised how many vendors are continuing to ship collect to its customers who are hitting these FREE levels.

A customer recently brought to my attention that they found out that they were being billed for freight on a shipment that happened to have met the vendor's free freight policy. I emediately got involved. We wanted to contact the vendor on this apparent mistake. But before we did, we went back to see if there happened to be any more that might have slipped through the cracks.

Much to our suprise, there were more than a few from this particular vendor. Then we started to look at other vendors and we found even more. In just a few minutes of digging, we discovered over $1,000 in freight charges that should not have been billed. Of course, my customer was more than agitated.

So we decided to call all of the vendors right there. They all seemed generally concerned and upset as my customer was. Every one of them was quick to credit their customer and a few of them even lowered their free freight threshold on the next order.

But my customer was still pissed that if they didn't happen to stumble on these mistakes, they would have been unjustly billed.

After talking to the vendors, we pretty much determined the problem was basically laziness on the vendors end. The culprit was that the one hand didn't know what the other hand was doing. In other words, the order would come through sales at the FREE Freight level. But the shipping clerk was not looking at the pick ticket close enough. Then, they were shipping the way they normally do for that particular customer.

At the end of this day, I couldn't help to wonder how common this is. So the following day, I called a bunch of my customers and told them this story. I asked them when they had time to review their receivables to see if they are getting billed on orders where they are hitting the FREE Freight Levels.

Sure enough, there were instances where they were getting nailed.

I thought this was epidemic enough that people should be made aware of this. I highly recommend taking some time and dig through some recent vendor invoices.

If you find more than a couple of these, it might be neccesary to make the effort help stop this. One suggestion is to establish a matching process to confirm every thing is billed the way it is supposed to be.

Another is to implement a rule in your purchasing terms that if you are charged for freight on free freight orders than you will charge back your customers for the freight plus a $150.00 fee for making you go through this hassle. Nothing cures laziness better than a chargeback.

There is another thing that one of my customers brought to my attention. They confronted one of their vendors on why they were billed freight when they hit the free freight level. The vendor explained that even though they hit the free freight levels, they shipped it out on two separate bill of ladings. They basically explained that they were penalizing their customer because they didn't have the inventory. Don't buy into that balongna! It is not your fault they don't have the inventory.

All in all, I beleive good vendors try to do the right thing by their customers. However, their are some slimy people and their are some lazy people. A rule of thumb if you decide to thumb through your files, start with the vendors which already raise question marks. That will be the likeliest spot you will find the biggest nuggets of gold first.

ADVERTISEMENT: For a FREE Freight Cost Savings Analysis to determine the savings to your company contact George Muha at (908) 879-2978 or gmuha@lmiservices.com.

Sharpen Your Bill of Lading, Pay Less in Freight

It used to seem like motor carriers would "look the other way" when it came to the way shippers filled out their bill of ladings. As long as the class going along with the description was close to what they were shipping, no one bothered them.

However, now with carriers generating millions with Weight & Inspections, shippers can no longer be lax in this area.

The way it is nowadays is if a shipper does not fill out their bill of lading accurately they get nailed not only with the extra charges but also with a "Weight & Inspection" fee (which can be as high as $30.00).

When visiting with a prospect or even a customer, I always review their bill of lading. Many times there will be a vague description on their bill of lading. In a lot of cases, the description has nothing to do with what their product line.

This past year, a prospect had a hand written description of "TOOLS" on their bill of lading. However, they actually manufacture drive shafts for race cars and other engine parts. They do not ship any kind of tools.

What a Bill of Lading Should NOT Look Like

This description leaves too much up to interpretation by the carrier.

What was interesting in this example is that when we properly classified their products, most of the engine parts were actually a lower class than the class the carriers were billing them at under "TOOLS".

By doing nothing more than helping them to fill their bill of lading properly they lowered their freight cost by about 12%. Of course, the president of that company and I are friends for life now.

Don't laugh, this happens more than you think. In fact, many companies I call on are putting vague descriptions on their bill of ladings that are actually getting billed higher than if the description was properly filled out.

Most companies are really not at fault though. Basically what seems to be the culprit most is that years ago, a local trucking rep came in to help the shipper to properly fill out the bill of lading. Back then, they told the shipper of a description that they felt they could "get away with" or they actually gave the correct description. But through the years, two things have happend. First, the carriers have sharpened their inspecting skills, and second the National Motor Freight Classification has updated many of their classes (either higher or lower).

Now, incentive craved dock workers and clerks search out flaws in bill of ladings. Their goal is to generate revenue. The vaguer it is the better. That is because if any part of the bill of lading is left to speculation, they will speculate at the highest possible class.

What can you do?

There are two things that you can do to eliminate carrier inspections. First, get the weight right. Once the carriers determine you to be one who "guesses low on weight", then you are flagged in their system. You will be nailed every time.

Second and most important: be as accurate as possible with your description. Make sure you have the most up to date NMFC number followed by the description (the way it is read in the NMFC). What happens is, when your bill of lading is properly filled out, the clerk at the carrier is more likely to move to the next bill of lading. But when it is vague, that is when they have you in their evil web.

What a Bill of Lading SHOULD Look Like

This is the text book way to fill out a bill of lading.

It is very important to follow these instructions more than ever. Transportation guru's are actually predicting sometime in the not too distant future, that carriers will scrap this class system altogether and use shipment density to rate freight. Some carriers are actually measuring pallets and boxes when they come to pick up freight now. You may have seen them doing this and wondered why they were doing it.

How do I do I properly fill out our bill of lading?

Simple, contact me. I'd be glad to help. LMI subscribes to the National Motor Freight Classification and has experts on hand to ensure your bill of lading is properly filled out.

Here is my contact info:

George Muha
P - (908) 879-2978
E - gmuha@lmiservices.com

CFO's Lead the Charge in Lowering Freight Costs

By Timothy Walsh, VP Sales, Logistics Management Inc.

Taking a lead role on freight cost management and business processes in this cost center is often off the radar screen for most CFO’s and Controller’s, and probably is as interesting to a finance manager as G/L accounting is to a shipping manager.

You know that your company wants to deliver your orders to customers and move raw materials at the lowest cost, without loss, damage or exceptions. However, CFOs, Controllers, and finance managers do not typically get involved in this area, even though it can often be a TOP 5 cost center they preside over.

At most companies, freight cost reduction and associated business process management decisions are logically entrusted to the shipping or operations staff. This "gray area" of financial control is assumed to be objectively scrutinized by the shipping and purchasing departments who make the daily decisions over the costs generated on the movement of inbound, outbound, and drop shipments.


The expectation of the finance department is that the shipping/traffic department has the knowledge, initiative, objectivity and company interests in mind when spending hard earned dollars on transportation purchases. This assumption and lack of strict accountability and transparency over freight spending, can cost many companies dearly in unnecessary freight expense and administrative costs.

Of course, every company wants to achieve the optimum combination of best service at lowest cost, and these decisions are obviously made by the shipping and purchasing people based on the requirements at hand. At face value, it many not seem necessary for the financial manager to be involved in such operational issues, as they do not directly affect them.


However, a large and growing number of financial executives are interjecting themselves into the logistics and freight cost management business process. In particular, they want to insure that every effort is being made to maximize the overall corporate benefits that can be achieved by benchmarking this non core-competency, by engaging the services now available from logistics outsourcing firms.

The logistics cost center is too significant for controllers or CFOs to ignore. Many have found that they can easily secure tens and even hundreds of thousands of dollars in immediate cost savings by outsourcing routine logistics functions and by leveraging lower rates and fuel surcharges through group purchasing facilitated by a high quality logistics service partner.


Like every other major cost area within the company, CFOs, Controllers and senior financial managers are benchmarking this cost center and if benefits can confirmed, engaging reputable freight cost management services to significantly reduce freight costs, freight administration and payment functions. Companies can also secure enhanced expertise and technical resources to enhance controls over freight spending.


Financial managers often become aware of inefficiencies that may have been swept under the rug or ignored inadvertently without senior management visibility. Finance managers better understand opportunities that may be available by sharing logistics information and costs across the various enterprise departments (sales, marketing, customer service, purchasing) to achieve higher levels of profitability and sales with an increased understanding of how logistics costs effect each area.


For example, can your sales force, quote a complete price including shipping and a delivery date, or do they have to get back to the customer later? Does your marketing department understand the impact of different "free shipping" offers on average order size and associated shipping costs?

Finance managers should take the lead role in freight cost management because it is a major cost center and they have the objectivity and analytical skills necessary to insure that every cost reduction and business process improvement opportunity is investigated and implemented. They also have the authority to minimize cross departmental resistance to business process changes that can benefit the organization.

Also, in contrast to financial executives who routinely investigate solutions to reduce costs throughout the company, I have found (during 20 years selling 3PL services), that shipping and traffic mangers often dismiss the opportunity to discuss freight cost containment and business process outsourcing. They often will not even entertain an appointment with a solutions provider, even when ROI is significant and they know that other companies are benefiting from such outsourcing programs.

This is why business process outsourcing companies, who specialize in freight cost management, target controllers and CFO’s. Furthermore, it is common for the shipping staff to have strong personal relationships with their preferred trucking companies causing a loss of objectivity and incentive to investigate any other options for cost reduction or process improvement. It is not hard to make carrier relationships, rates and tariffs seem overly complicated in order to insulate themselves from accountability or questions from financial managers.

My experience over the past 20 years at a logistics outsourcing firm has confirmed that cross-departmental benefits, savings and process improvements are best understood and implemented by the financial management of a company. Controllers and CFOs understand the bottom line impact of both soft and hard savings that an outsourced business solution can offer.

The unique skills that financial executives routinely use to analyze and implement process improvements can be used in the transportation area, with great savings as the prize. Don't be scared off by the strange vocabulary and terms. A quality outsourcing firm can quide you through the process to improve your understanding of this major cost center and to identify opportunities.

TIM WALSH has worked in the transportation industry for over 25 years. For the last 20 years, as VP of Sales for Logistics Management, Inc., he has helped companies understand and more effectively manage their North American transportation needs. You can contact him at 908-879-2940 or by email at twalsh@lmiservices.com

Speed Up Your Cashflow Today!!!

Recently I was visiting a potential customer who is disobeying the number one commandment in business, "Thou shalt not slow down thine own cash flow." It really amazes me sometimes how unfocused companies can get. You don't need a business degree to know that getting paid should be your number one priority. Slowing it down should get people fired. But enough companies are aparently asleep on this topic that I thought I would write about it.

In this particular situation, the company I visited was slowing down their cash flow by not billing for their goods until they received an invoice from the freight carrier. Years ago, this might have been a common practice. Sometimes an unforeseen accessorial charge would be in a freight bill that the company did not estimate for (such as a liftgate fee). So it was worth waiting to get the correct charges rather than being forced to collect on an additional fee from the customer (which we know how that usually works).

This company told me they invoice their customer 5-7 days after the shipment went out. This is because they wait until they get the bill, then it sits for a day or two until the billing clerk gets to it.

But there is NO REASON to operate this way anymore. Not in 2008. The trucking companies have made their websites so resourceful (they actually have been doing this for years but for those slow pokes we'll act like its new) that you can get anything you want from them. You can pull a bill of lading or a delivery receipt. You can find out tranist times, terminal locations and freight rates. You can even create a bill of lading from these sites. That's right, you don't have to buy pre-printed bill of ladings anymore. (I apologize for putting you to sleep, but beleive me some people have no clue about these efficiencies)

These websites are great. And the best tool for speeding up your cashflow most carrier websites have a detailed report of all the shipments that went out for the day which also includes the freight rates. Yep, believe it. At the end of the day, most major carriers will post all the shipments for that day and the charges that go along with them.

See freight charges on far right hand corner.

This allows companies to get their invoices to their customers out the same day or the day after a shipment goes out. There is no need to wait for the paper copy to come in the mail anymore.

If your company is waiting for a freight invoice from a trucking company before you invoice your customer, lets get with it. Change it today and add a week to your cashflow.

The company I met with, which was the inspiration for this article, almost kissed me at this novel idea. This was FREE information I gave to them, so I am passing it along to you for FREE as well.

This is just another tip from the Freight Savings Guys! If you want freight savings tips emailed to you as they come out just subscribe to the RSS Feed at the top of this blog.