September 25, 2014

1. Freight 101 – How To Ship With Zip! September 25, 2014

2. Agenda • Transportation Modes • Understanding Freight Costs • Freight Claims • Management Options • Q & A

3. Transportation Modes – Small Parcel

4. Transportation Modes – Small Parcel • Loose package shipments • Shipments under 150 lbs. • Length + 2x height + 2x width less than 165 in. • Hub and spoke distribution • Standard $100 per package insurance • Very few competitors • UPS, FedEx, DHL

5. Transportation Modes – Less than Truckload (LTL)

6. Transportation Modes – Less than Truckload (LTL) • Palletized or crated shipments (generally) • Shipments between 150 lbs. and 5000 lbs. • Typical shipments are from 1-6 pallets • Terminal/Breakbulk network, shipment will travel on multiple trucks • Insurance coverage is generally $5 -$25 per lb. • Lots of local, regional and national competitors • YRC, Conway, FedEx Freight, R&L, Central

7. Transportation Modes –Truckload & Partials

8. Transportation Modes –Truckload & Partials • Lots of equipment types – vans, flatbeds, intermodal, reefers • Full truckload implies that you are using the entire trailer - up to 45,000 lbs or approx. 24 pallets • Partial truckload encompasses shipments over 6 pallets up to a ½ truckload • Shipment stays on same trailer for entire journey • Insurance coverage is generally $100,000 per load • Thousands of local, regional & national competitors • Schneider, JB Hunt, Swift, Mercer, Werner

9. Transportation Modes – Expedite

10. Transportation Modes – Expedite • Expedite – make an action or process happen sooner or be accomplished more quickly • Terms – “guaranteed”, “hot shot”, “time definite” • Any size shipment from parcel to full truckload • Can be via truck or air • Guarantees only cover freight charges – not down time, crew costs, client penalties etc. • Fragmented competition – lots of carriers offer expedite options • FedEx Custom Critical, Panther, Conway Now

11. Transportation Modes – International

12. Transportation Modes – International • Shipments originating or destined to countries outside of North America • Full container and less-than-containerload options • Can be via ocean or air • Lots of insurance and pricing (incoterms) options • Most shippers use a broker or freight forwarder

13. Understanding Freight Costs

14. Basic Freight Cost Elements • Distance – zones, zip to zip, mileage • Size and weight (dimensions & freight class) • Transit time requirements • Equipment requirements • Additional services – liftgate, inside delivery, residential • Capacity – carrier specific and market driven • Fuel costs

15. LTL Costs – Freight Classes!!! • Freight classes are used by LTL carriers to categorize different types of freight for costing and pricing. • There are 17 classes: 50 -500. • Classes are published by NMFC (National Motor Freight Classifications). • Freight class is determined by multiple factors: • Density • Value • Ease of Handling • Fragility • Special considerations – hazardous, used or new, “dirty” items

17. Common Accessorial Charges • Liftgate – Free to $100 per occurrence • Inside Delivery - $25 to $150 depending on complexity • Notification – Free to $25 per occurrence • Non-Commercial or Residential - $50 to $100 • Service is defined by each carrier – not consistent • Schools and colleges • Farms • Military bases and government facilities • Churches

18. Cost Differences by Service Level

19. Strategies to Reduce Freight Costs • Conduct a formal review at least annually. • Identify metrics that measure freight costs. • Incent customers to order in larger quantities. • Consolidate purchasing of materials. • Eliminate vendor “best way” shipments. • Negotiate an FAK with LTL carriers. • Negotiate fuel and other accessorials. • Utilize a broker/3PL/consultant with expertise. • Utilize economy carriers (lower service expectations).

20. Freight Claims

21. Types of Freight Claims • Shortages – portion of the shipment is missing or the entire shipment is gone. • Visible Damage – shipment is obviously damaged and notated on the delivery paperwork. • Concealed Damage – damage is not obvious and discovered after the delivery has occurred. Carrier will pay a max of 33% of the claim when concealed. • Service Failure – applicable on certain “guaranteed” shipments. Only covers the cost of the freight, not any incidental costs.

22. Freight Claim Tips • Inspect shipments immediately, there is a limited window to notify the carrier that a damage has occurred. • Document as much as possible, take pictures. You will need copies of the bill of lading, delivery receipt, vendor invoices and details of your costs. • Expressly list both pieces and pallets on the bill of lading. • Use proper packaging, pallet sizes, corner protectors etc. • Don’t waste time on claims under $200. • Be Persistent! Do not accept the carrier’s first denial – you need a “bulldog” mentality to get resolution.

23. Freight Management Options

24. Customer and Vendor Routed • Hands off approach to freight – puts the responsibility on your vendors and customers to choose and pay the carrier. • Liability for charges and claims falls on vendors & clients. • Don’t have to negotiate freight rates, pay trucking invoices. • Zero control / leverage when problems do occur. • Dock congestion for larger shippers, too many different carriers / drivers. • There is really no such thing as “Free freight” .

25. Carrier Direct Model • Shipper responsible for managing carrier contracts, selecting carriers and paying carrier freight bills. • Allows for complete control over the process, carrier choices. • Best possible freight rates for shippers with high volume (over $1M) • Must have staff to perform traffic management and freight payment functions. • Hidden cost increases in carrier rates and tariffs.

26. Outsourcing – Forwarders, Brokers & 3PLs • Hiring a company to perform traffic and freight payment services on behalf of your company. • Access to better freight rates for smaller shippers. • Reduces time involved in dealing with freight administration and problems that occur with shipments. • “Must have” option for international shipping • Lose some control over carrier selection. • Start-up and implementation can be a difficult process. • May feel threatening to existing employees.

27. Questions and Answers Thank You!