LTL Panel's Essential Guide to Adapting to New Freight Classification Codes

In the ever-evolving landscape of logistics and transportation, the introduction of new freight classification codes presents both challenges and opportunities for businesses engaged in Less Than Truckload (LTL) shipping. As these codes are critical for determining shipping rates, transit times, and handling requirements, understanding their nuances is essential for maintaining competitive advantage in the marketplace.

This essential guide aims to equip industry professionals with the knowledge and tools necessary to adapt seamlessly to the latest freight classification changes. By delving into the intricacies of the new codes, we will explore how they impact pricing structures, compliance, and overall supply chain efficiency. Additionally, we will highlight best practices for recalibrating shipping strategies to align with these updates, ensuring that your operations remain both cost-effective and efficient.

With expert insights and practical tips, this guide serves as a comprehensive resource for freight shippers, logistics managers, and supply chain professionals looking to navigate these changes with confidence. As the freight industry continues to evolve, staying informed and proactive is not just beneficial—it's essential for long-term success. Join us as we embark on this journey to demystify new freight classification codes and enhance your shipping operations.

Pitt Ohio-hosted panel discusses best practices ahead of NMFC changes

Understanding your freight dimensions and familiarizing yourself with the new classification codes is essential for less-than-truckload (LTL) shippers, as discussed in a recent panel focused on impending changes in freight categorization. The National Motor Freight Traffic Association (NMFTA), a nonprofit organization that oversees LTL commodity classifications, is in the process of overhauling a rating system that has been in place for nearly 90 years. This initiative aims to encourage a density-based approach to freight categorization, enabling carriers to provide accurate upfront pricing for shipments and ultimately streamline the supply chain.

While the National Motor Freight Classification (NMFC) system will continue to focus on the four fundamental freight characteristics—density, handling, stowability, and liability—there will be a greater emphasis on density. The density ratings will expand from 11 subprovisions to 13, while generic categories will be consolidated. Approximately 2,000 items will be removed from an existing list of 5,000 in this latest update.

The Proposed Revisions

The proposed revisions were unveiled last month and are currently open for public feedback. The finalized changes will be implemented on July 19. During a panel hosted by carrier Pitt Ohio, experts advised shippers to begin incorporating the new class codes into their bills of lading and ensure that all relevant information, including weight and dimensions, is accurate.

“Most LTL carriers utilize a costing model, and it's crucial for shippers to ensure that density is correctly represented in pricing agreements,” emphasized Shawn Galloway, vice president of pricing at Pitt Ohio. “If our costs and pricing are fundamentally based on density, it’s only logical for freight invoicing to align with this principle.”

The primary cost determinants for LTL carriers include distance, time, and space. While distance and time are straightforward metrics found on a standard bill of lading, determining space has historically posed a challenge. Carriers have often relied on weight-based coding, but the increasing adoption of freight dimensioning technology is simplifying this aspect, leading to more precise pricing.

“Getting the density correct, combined with a reliable dataset, gives you a 90% likelihood of achieving a competitive, sustainable price,” Galloway noted. The NMFC updates are anticipated to reduce instances of reclassifications, reweighing, and unexpected charges on final freight bills. Galloway recommended that shippers engage in proactive communication with their primary carriers to ensure their freight is prepared efficiently and to implement necessary changes with dock personnel immediately.

“Without accurate dimensions on the bill of lading, it will be challenging to assess the impact of these changes,” Galloway remarked. “Carriers will also struggle to assist if they lack this information readily available.” Shippers are also at risk of financial losses by allowing their freight to default to a freight all kinds (FAK) classification. This often occurs with shippers who do not invest in dimensioning technology and fail to provide comprehensive shipment details upfront, forcing carriers to make assumptions and consequently build in additional margins to mitigate the risk of underpricing a load.

“Carriers aim to minimize risk,” explained Scooter Sayers, director of business development for LTL Solutions at Cubiscan, a company specializing in freight dimensioning technology. He indicated that shippers using FAK pricing could face increased costs once the new changes are implemented.

“It’s akin to a grocery store charging the same price per pound for all types of beef, whether it's ground or tenderloin. To offset potential losses, they would raise the average price significantly,” he added. Geoff Muessig, executive vice president and chief marketing officer at Pitt Ohio, highlighted that carriers are likely to allocate their resources to shippers who adapt to these changes promptly, particularly during market upswings when capacity becomes limited.

“When the market demands more equipment, carriers will position their resources for maximum profitability, which will favor those who understand their costs. For shippers who delay their adaptation, the consequences could be far more severe,” Muessig cautioned.

In Conclusion

Adapting to the new freight classification codes is not merely a compliance requirement but an opportunity for companies to streamline their logistics and enhance operational efficiency. The LTL Panel's insights provide a valuable framework for understanding these changes and implementing effective strategies to navigate them. By fostering clear communication with carriers, investing in employee training, and leveraging technology, businesses can better position themselves to meet the demands of this evolving landscape. Embracing these new standards will not only facilitate smoother freight operations but also contribute to improved customer satisfaction and overall competitiveness in the marketplace.

If you want to stay updated with a wide range of trends, actionable insights, and innovative solutions in the trucking, freight, and logistics industry, stay connected to us.

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