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May 12, 2014 3:30 AM, EDT

LTLs Using Dimension Scanners to Improve Pricing Accuracy

By Rip Watson, Senior Reporter

This story appears in the May 12 print edition of Transport Topics.

YRC Worldwide, in an effort to boost profits, has joined a growing number of less-than-truckload carriers to use dimensioners, a type of scanning device, to more accurately determine shipment characteristics.

YRC is acquiring 38 machines that measure freight-shipment dimensions to ensure the company is properly compensated for its services, Chief Financial Officer Jamie Pierson told Transport Topics.

“There is no way now to ever catch misrated or misdimensioned freight,” Pierson said.

Dimensional pricing includes the height, length and width of a package.

Density-based pricing is gaining more attention in an LTL industry that for decades has relied on the National Motor Freight Classification pricing system.

The NMFC system groups freight into “classes,” which are numerical groups based on similarity of multiple transportation characteristics in addition to density, such as stowability and handling.

Satish Jindel, principal at Jindel Consulting, said a shift to pricing based on density will allow carriers to adapt their rates more quickly than they would if they used the NMFC classification process. Density-based pricing also could help shippers who package their freight more efficiently, he said.

“NMFC has stayed around because dimensioning technology wasn’t available or cost effective,” Jindel said.

Currently, YRC, which ranks No. 5 on the Transport Topics list of the 100 largest U.S. and Canadian for-hire carriers, uses a manual process with tape measures to validate dimensions on selected shipments while moving 1 million shipments monthly.

“Dimensioners will allow us to more appropriately charge those customers whose freight occupies a lot of cube on our trailers,” Pierson said. That is important because YRC Freight typically “cubes out” before reaching the trailer’s weight limit.

Carriers such as Saia Inc., which ranks No. 22 on the for-hire TT100, and Southeastern Freight Lines, which ranks No. 27, already use dimensioners.

“We are moving more and more toward [density-based] pricing,” Saia CEO Rick O’Dell told TT. “The current [NMFC] system is really unfair to us and the customer” because it “bears a minimal relationship to actual transportation costs.”

“Dimensioners have provided us an opportunity to collect the most accurate data available so that we can provide the company with accurate costing and our customers with consistent, more-precise pricing,” he said.

“With dimensioners, there is no way for customers to game the system,” said YRC’s Pierson, adding that some third-party logistics and corporate customers “try to take advantage of . . . all carriers” by misrepresenting freight.

“We want to get fairly paid for the service we provide — nothing more and nothing less,” he said.

Braxton Vick, senior vice president of corporate planning for Southeastern Freight Lines, said his company is testing a dimensioner at an Atlanta facility after a successful deployment for shipments between Florida and Puerto Rico.

Southeastern first used dimensioners there to comply with rules that require accurate dimension data for all ocean freight. The unit measured shipments in 8 seconds with accuracy within a quarter of an inch.

“We were extremely pleased with the speed and accuracy,” Vick said, as the accelerated process allowed Southeastern to bill shipments in less than one minute.

Pierson said dimensioners will “position us to accommodate a shift in the markets toward density-based pricing methodologies.”

Separately, FedEx Ground said it will switch to dimension-based pricing on Jan. 1.

One carrier testing density-based pricing is UPS Freight, a unit of UPS Inc., which ranks No. 1 on the for-hire TT100. Spokeswoman Sandy Adkins told TT that’s an option available to all customers who want it by the end of the year.

“While we believe that density based pricing is a long-term destination for the LTL industry, it will remain optional,” she said.

“I don’t know that [dimensioners] will lead to density-based pricing anytime soon,” said Vick. “Shippers have not taken to it at all.”

Paul Dugent, pricing vice president at Estes Express Lines, which ranks No. 15 on the for-hire TT100, said shippers showed “very little interest” in a density-based tariff that was published in 2001.

“As a result, dimensional pricing has been a very low priority,” Dugent said.

Less than 1% of LTL shippers at Pitt Ohio, which ranks No. 64, have asked for density based pricing, Senior Vice President Geoff Muessig said, though the carrier supports wide use of that approach.

“Density-based pricing facilitates the seamless and accurate flow of pricing information. Density-based pricing makes it easier for a shipper to compare the relative costs of his small package and LTL shipments,” Muessig said. “The growth of the e-commerce revolution and accompanying need for more last-mile delivery services may impel more LTL carriers to embrace density based pricing.”

Kathy Fieweger, a spokeswoman for ABF Freight — a unit of ArcBest, which ranks No. 12 on the for-hire TT100 — said there has not been significant demand for density- based pricing.