Several major changes are coming next year to the way less-than-truckload freight is categorized. The National Motor Freight Traffic Association (NMFTA), a nonprofit trade group that publishes the freight classifications, is simplifying its nearly 90-year-old rating system to move the industry toward a more density-based approach that will better reflect the actual cost to ship goods.
Carriers, shippers and 3PLs rely on a standardized coding system known as The National Motor Freight Classification (NMFC) for identifying various commodities and other types of freight. The goal with the overhaul is to make the system more user-friendly and to reduce freight reclassifications, which often result in higher-than-expected costs to shippers. Updating and condensing the commodity codes will ensure a shipment’s actual characteristics are accounted for prior to pickup, producing more accurate freight rates upfront.
“It’s a response to a decadeslong complaint that the NMFC is too confusing and too complex,” Mark Davis, vice president of pricing and traffic at Averitt Express, told FreightWaves in an interview. “This won’t cure all of the issues, but certainly it will simplify a considerable part of it and that’s a big step.”
The system will still rely on four primary transportation characteristics – density, handling, stowability and liability – but the evaluation now targets density as the primary characteristic when there are no concerns with the other three.
There are several notable changes in phase one.
Density ratings have been expanded from 11 subprovisions to 13, with generic headings being consolidated. Subprovision 11 will be amended to include densities ranging from 30 to less than 35 pounds per cubic foot (assigned class 60). Sub 12 would range from 35 to less than 50 pounds per cubic foot (class 55), and Sub 13 would cover densities greater than 50 pounds per cubic foot (class 50).
“I think this is a win because the changes that are being made with an emphasis on density is hand in glove with everything that is being developed today,” Davis said, referencing the proliferation of the use of dimensioners throughout the industry.
Freight with special handling, stowability or liability concerns will have new symbols.
Currently, 40% of all NMFC items fall within the scope of review. That represents more than 5,000 potential changes. The final docket for phase one (docket 2025-1) will be released on Jan. 30 with a public feedback period to follow. The changes will take effect on July 19.
Davis said the classification changes will produce some positive and negative changes to customer pricing at first, but account profiles and margins will still be determined through negotiation.
“It comes down to what is the revenue and does it fit for this particular customer in these lanes, this market. … We’ll adjust our pricing mechanism to fit whatever this new class is,” Davis said.
Shippers Rushing to Get Ready
Third-party logistics providers will have to implement the updates into their platforms, and shippers will have to understand how to correctly classify and include shipment dimensions and weight if they weren’t already doing so.
“I think it’s a very exciting project. After the improvement, we will be able to more accurately rate the shipments and the freight charges. This will be more reasonable to both shippers and carriers,“ Ken Liang, corporate commodity manager for ground transportation at Siemens AG (SIE.DE), told FreightWaves.
Liang oversees U.S. and cross-border LTL activity for Siemens, which has a broad product offering for the electrical equipment, automation, rail transit infrastructure and health care industries, among others.
He expects the changes to eliminate roadblocks and streamline the process of putting together an LTL shipment.
Liang said Siemens has static dimensioners in only key locations currently and that some of its facilities are still measuring shipments manually when determining density. He said the company still has a big learning curve ahead but that the operations team is being educated on the upcoming changes.
“Creating that standardization along with more automation, so things move more smoothly, so we don’t have errors and rework, I’m highly encouraged,” Davis said. “The more the customer knows about their own freight, the better we’re all going to be.”
The organization is also overhauling ClassIT+, an online tool that helps shippers, carriers and 3PLs properly identify freight. Changes include more expansive APIs, an improved search function and faster responses. The final product will be renamed and offered to users through three subscription tiers.
“If they can get it to work properly, that’s very nice. Because everything is done manually right now,” Liang said.
This post was originally posted by Todd Maiden of Frieight Waves for Yahoo Finance