Accurately calculating less than-truck-load (LTL) freight costs is challenging for online B2B sellers because of the variables involved, such as weight-based discounts and surcharges levied by carriers. Not knowing how to properly calculate LTL freight costs at the time of the sale can cause myriad problems.
Pricing LTL freight shipments too low, for example, can cause suppliers to eat the difference, cutting into margins. On the other hand, calculating LTL freight costs too high can cost sellers business, as buyers shop around the web for sellers charging lower freight costs. In addition, failing to accurately calculate LTL freight costs can lead to cart abandonment if the buyer feels the price is too high. Worse, the buyer will shop online for a supplier charging more accurate, and subsequently lower, LTL freight costs.
“LTL freight is growing in ecommerce, but calculating LTL freight costs is challenging for sellers to get their arms around because of the complexity in figuring them,” says Chris Cochran, CEO of Freightwise LLC, a provider of online logistics cost management whose growth has exploded in in first few years of operation. “For many ecommerce sellers, it has become a core problem.”
Omnichannel approach to freight pricing
“FreightWise’s ecommerce services have allowed Baileigh Industrial to implement a standard omnichannel approach to freight pricing,” says Steven J. Wronkowski, CEO of Baileigh Industrial, a designer and manufacturer of metalworking and woodworking machinery. “Our customers have the same experience for freight pricing when buying in any of our sales channels.” Baileigh sells through channels including its ecommerce site, sales team, print catalog and physical locations.
Accurate LTL pricing for ecommerce orders also enables suppliers to expand their online catalog by including hard-to-price items. “It’s allowed us to increase our product offering via the web channel in hard-to-price freight modes, as well as decrease the company’s risk for inaccurate pricing,” Wronkowski says.
Shippers use LTL freight to ship orders too large to be sent as parcel, but too small to fill an entire truck trailer. As an alternative to parcel shipping, LTL shipments start for orders weighing more than 150 pounds. Suppliers shipping LTL freight pay for the portion of the truck’s trailer their shipment occupies.
Freight carriers fill out the unoccupied space in the truck with LTL shipments from other suppliers. LTL freight has become a popular shipping option for suppliers shipping one or two pallets of goods or a large item that can’t be shipped as parcel, such as machinery, because the cost of renting the space the order will occupy in the trailer is less than that of renting the entire trailer.
Other advantages of LTL freight include the option for suppliers to add such services as liftgates. Liftgates are hydraulic platforms that enable freight to be lowered from the truck trailer to the ground when the buyer receiving the shipment does not have a shipping dock or a forklift to unload the freight.
Including a liftgate to an LTL shipment, however, incurs a surcharge, as it is an additional service. “If we see an additional cost like a charge for a liftgate, we include it in the LTL cost calculation,” Cochran says.
In many cases, suppliers tend to overlook additional costs when calculating LTL freight, Cochran adds.
Identifying the lowest-cost carrier
Freightwise calculates LTL freight costs for suppliers by looking at such factors as the weight class and dimensions of the order being shipped and how many ZIP codes it travels through to be delivered. The Freightwise web-based software app, which is built with responsive design and available on any desktop or mobile device, plugs into a supplier’s ecommerce and ERP systems. When a customer at a Freightwise client places an online order, Freightwise grabs the weight and volume of the order and the distance it must travel to its destination, then calculates the LTL freight costs, taking into account any additional costs or discounts. Next, it identifies the lowest cost carrier from the supplier’s list of designated carriers for LTL freight, as well as truckload and parcel shipping.
Freight carriers typically provide price breaks based on the weight class the order falls into. For example, orders meeting the minimum weight of a heavier weight class qualify for a discount. Suppliers can also negotiate discounts based on volume shipped.
“We can get the freight price down to the penny, which for a company shipping a low-margin order is important, because calculating too low a freight cost can destroy their margin,” says Cochran.
Freight invoicing and payment
Freightwise clients see savings of 10% to more than 40% annually on freight costs, the company says. The platform also manages such tasks as freight invoice auditing and payment, identification of the lowest- cost carrier, and management of damaged and lost shipments.
In addition to having accurate LTL pricing for ecommerce orders, Freightwise ensure suppliers can offer consistent freight pricing across all sales channels. Not being able to accurately calculate LTL freight pricing through its website, for example, can cause a supplier to quote one price on its website and another through its sales representatives. Such a discrepancy creates inconsistency that can lead to buyers moving away from the supplier’s ecommerce site.
Fulfilling the need for suppliers to accurately calculate shipping costs for ecommerce orders has fueled rapid growth of Freightwise. In its first three years of operation from 2015 to 2018, Freigthwise saw its annual revenue grow from a little more than $100,000 to $33.6 million, Cochran says.
While Cochran does not envision sustaining such explosive growth, he says the company expects growth to remain strong. “One reason we are growing is that we help ecommerce sellers get control over the most complicated freight mode and help them sell more online,” Cochran says.