What are all the flakes of FAK?

LTL costing and pricing has always been a daunting task. Cargo is offered in all shapes and sizes. The composition of the cargo is constantly changing. Pricing was determined by an 87-year-old system that assigns numerical classifications from 50 to 500 to all LTL cargo. There are 18 product categories.

To simplify the problem, decades ago the LTL gods came up with a classification known as all types of cargo (FAK). The FAK rate was reached by calculating the weighted average of multiple shipments with different classifications.

The idea behind creating one general charge is to eliminate the hassle of detailing each item in the bill of lading (BOL) and allow the carrier to weigh and measure each cargo to fit the appropriate specific cargo. It was to save time and money in deciding if you were doing it. class. In the years following the deregulation of car carriers in 1980, FAK became the least reluctant road for shippers, many of whom lost knowledge of the internal transportation sector and many LTL pricing.

In many cases, FAK allowed shippers to get off easily. This is because cargo bids based on classification often justify higher prices based on the particular class classified otherwise.

But over the decades, it has become clear that treatments are worse than illnesses. Reliance on FAK rates has left carriers on the table through undisciplined costing practices. The shipper was not motivated to provide the exact dimensions before bidding, even though the tape measure could make a fairly accurate calculation in minutes.

The lack of transparency makes FAK a hotbed of distrust. There is an argument that plain vanilla charges will be used if the carrier cannot verify the shipper’s information, or if the shipper is not confident in the accuracy of the carrier’s charges. Shippers were also suspicious of frequent carrier reweighing and reclassification. This has always led to soaring fares long after the item was bid.

The use of FAK has been a sign of trust issues and lack of accountability that have plagued LTL for 100 years. “If a carrier wants to cheat, they can cheat. If a shipper wants to cheat, they can cheat,” he has worked in the industry for 46 years. LTL consultant Don Newell said.

Cat and mouse

C. Thomas Barnes, Chief Revenue Officer of the transportation technology platform MyCarrier and a longtime executive at LTL, said FAK is a “cat and mouse” game that operates to deceive each other. Rather than physically measuring the dimensions of the cargo and pursuing the clarity that accompanies reaching fair rates, FAK proponents have undercharged, overcharged, and re-charged the LTL industry at rates of hundreds of millions of dollars. Create a “cloud of confusion” that unnecessarily spends weighing and reclassifying. According to Burns, it costs money in a myriad of deteriorations.

Fortunately, at least for the career community, many things have changed. Carriers offer FAK on demand, but FAK is rarely used. Scooter Sayers, a longtime executive at ABF Freight System Inc., an LTL consultant and LTL carrier, said carriers are more disciplined in cost analysis and pricing and total revenue than the mechanisms used to reach them. It states that it is focusing on. A unit of ArcBest Corp. (NASDAQ: ARCB).

Familiar carriers will cut the risk of accepting slightly profitable FAK cargo into the overall price, Sayers said. This is especially true if the carrier is considering bidding from a stranger, he added.

Third-party logistics providers with more LTL cargo than ever are increasingly requiring customers to submit shipping dimensions in BOL prior to bidding. The intermediary then works with the carrier to verify the accuracy of the document.

According to Burns, non-3PL MyCarrier has always required customers, primarily small and medium-sized shippers, to provide dimensions for all BOLs.

A dimension to rescue?

Perhaps the most important development is the proliferation of dimensional measuring machines that are very close to capturing the exact dimensions of the cargo. The machine provides accurate and indisputable information, ensuring that the carrier sets the price of the cargo appropriately and does not frequently push back from the shipper.

The Australian company Parcel Tools is taking the dimensional model one step further. We have developed a relatively inexpensive mobile tape measure device and software package called CubeTape. ParcelTools founder Tony Bauer said the device, which is expected to launch in the U.S. this summer, will be sold to shippers so that drivers can easily upload cargo dimensions before they arrive. I said there is.

The end result of all this is that the carrier is fairly compensated for the space occupied on the trailer and there is no dispute over the charges. “If you want to get the best carrier price, eliminate FAK and give the carrier the ability to make a profit,” Sayers said. “Don’t let them do bad things [freight] Good thing because it means risk. “

Still, FAK will withstand unless there is a reason other than the shipper and carrier being able to stay within the comfort zone. Newell, the proponent of the classification system, said FAK is still important because classification is still in use and companies are reluctant to move to the new.

“People are afraid of what they don’t know,” added Barnes of MyCarrier.

Mr. Newell said that FAK and the classification system that feeds it will eventually disappear. But the end will take longer than people would expect, he said. According to Sayers, “I’m not willing to return it because there are too many shippers stuck in the 1990s or I’m proud of FAK.”

The FREIGHTWAVES TOP 500 On the For-Hire Carriers list ArcBest (No.26).

The FREIGHTWAVES TOP 500 On the For-Hire Carriers list ArcBest (No.26).

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