How to avoid these 4 common accessorial fees

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.

Four accessorial fees you need to know

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.

  • Detention fee: If a driver or truck is left waiting for more than 60 minutes (or in some cases 30 minutes) at either the shipper or receiver’s dock, the shipper is charged a detention fee. These fees apply whether you’re shipping to a distributor or directly to a retailer.To avoid detention fees on your end, it’s essential to be prepared for the truck’s arrival with the completed paperwork and load staged. You’ll also need to work with customers and distributors to make sure you’re scheduling deliveries at an optimal time for them. It’s worth your while to take some time to educate your customers and distributors to make sure their unloading process is as efficient as possible and doesn’t open up room for these charges.
  • Call-ahead fee: Previously, some shippers or receivers would request that the carrier call the facility prior to arriving so the staff could prepare for a pickup or delivery. Now, if that request is made, carriers charge for the call.This fee makes it very important for middle market businesses to carefully review the verbiage on all contracts and invoices. Even the slightest implication that extra work is required of the driver results in a call-ahead fee.
  • Non-business hours fee: If a load is picked up or dropped off during a time that is outside the carrier’s standard operating hours, an additional fee is charged. To the best of your ability, try to schedule your pickups and deliveries within their business hours.
  • Lumper fees: This charge covers the cost of hiring a crew at the distributor or retailer’s site to unload the trucks, so the driver doesn’t have to. They tend to come from the carrier but sometimes they are passed on from the retailer.

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.

Protecting profits by preparing for fees

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