Up until very recently, middle market companies contacted carriers on an as-needed basis and paid the spot pricing determined at the time of the call. While this system worked for a time, the 2018 transportation crisis resulted in a significant increase in transportation costs. As the economy boomed, carriers struggled to keep up with demand, putting pressure on an already stressed system. Carriers responded by not only increasing pricing, but by charging businesses accessorial fees. These fees are at an all-time high and can be up to $200,000 in total.
Though the economy has slowed in 2019, many middle market businesses are still feeling the effects of increased accessorial fees. To protect themselves and their profit margins, middle market businesses need to take the time learn about these accessorial fees—and how to avoid them.
The 2018 transportation crisis was caused by two primary capacity challenges—a lack of skilled drivers and a lack of vehicles to carry goods. Most accessorial fees attempt to compensate for one of those two issue. They’re either meant to incentivize shippers and receivers to keep trucks moving or attract and retain drivers and dispatchers with better wages.
These four accessorial fees are the most common seen at FortéOne and can have a huge impact on middle market businesses.
When negotiating pricing with carriers and customers, always discuss lumper fees so there’s an understanding of who’s responsible for them. Otherwise you’ll automatically be charged for the labor after the fact and those costs can be quite high.
Though these four fees are very common, there are a number of other accessorial fees that carriers are now pushing out, and they can add up quickly. Middle market businesses should know how their supply chain operates to avoid as many of these fees as possible. Communicate the importance of efficiency in getting trucks loaded and unloaded to your shipping and receiving departments and encourage employees to be prudent in their scheduling. Make sure those drafting invoices and contracts are extremely cognizant of the language used to avoid any unnecessary fees. Essentially, the entire organization needs to be on board with processes that maximize efficiency.
Finally, it’s imperative to remember the people writing the reports that translate to additional fees. Historically, businesses didn’t give much thought to drivers and how they were treated when waiting for their truck to be loaded or unloaded. But your treatment of them directly impacts how they write their report. This has caused many companies to create drivers lounges with free coffee and a comfortable place to sit and wait. A driver is less likely to report a detention fee if they’re comfortable in a lounge than if sitting in the front seat of their truck.
If you need help understanding accessorial fees and standardizing your pricing to cover them, call the experts at FortéOne. Our transportation and supply chain management consultants can help with everything from contract negotiations and setting product pricing to analyzing and streamlining internal processes.
Contributor: Philip Franz