The April 2019 round of NMFC changes shook up LTL shipping practices for nutritional beverage manufacturers around the country.
Nutritional supplement drinks and whey protein were targeted for reclassification in the update. These items previously shipped at class 60 but the update created a secondary qualification for less dense products to ship at class 70.
That adjustment, even just a shift of one class up, brought on different freight rates for suppliers shipping those products, impacting their transportation operations and spend.
The difference in impact between organizations stems from preparation for these changes.
A Zipline customer, a large nutritional beverage supplier, was prepared for the reclassification updates, which allowed them to mitigate any substantial impacts that the new class would bring.
They were aware that as their class was going up, so too were the prices to ship their product. They began preparing to ship their products based on density calculations at class 70 instead of blanket shipping at class 60 as they had done before.
This prep allowed them to ultimately reduce the cost impacts that can come with class increases and avoid significant disruptions to their operation.
When NMFC reclassifications are set to affect your product, it is critical to proactively prepare for these changes.
But before we dive into why businesses need to be ready for NMFC changes and how that can be done, we must answer what is an NMFC number and how they determine LTL shipping prices.
What is NMFC?
If you have used LTL shipping as an order fulfillment solution, you have undoubtedly wondered at some point what is an NMFC number? The NMFC is a codified list that classifies products for less-than-truckload shipment.
It divides freight into 18 distinct classes, each assigned a number from 50 to 500. To establish a product type’s class, the National Motor Freight Traffic Association, Inc. (NMFTA), the organization that determines the NMFC, looks at attributes of a product like density, handling, stowability, and liability to establish a commodity’s “transportability.”
From here, the product is assigned an NMFC number based on its ease of transport.
The Commodity Classification Standards Board (CCSB) then performs routine updates to the NMFC. These take place three times per year and reclassify products for LTL shipping.
How Do NMFC Updates Affect LTL Shipping?
The changes, though routinely performed, can, but do not have to disrupt your organization’s transportation operation.
The thrice-yearly updates do not reclassify everything on the NMFC. Rather they challenge a subsection of the codified list and are done to ensure products are transported at their most appropriate class.
The changes are announced well in advance of implementation and can be found on the NMFTA website. However, it is important to note that these changes are not always the easiest to make sense of for the uninitiated.
An experienced LTL logistics expert can help you understand these documents and uncover whether the reclassifications will affect your transportation operation.
By working with a transportation professional, you can offset much of the potential disturbance to ensure a smooth classification transition.
It is important to identify what the changes will be and if product anywhere along your supply chain will be affected.
There are instances in which your finished product may not be part of the scheduled changes, but a key ingredient in a product could be included.
This can translate to higher transportation costs of that ingredient, which can substantially impact your spend and cause issues throughout your operation.
Why You Should Prepare for an NMFC Update
Not understanding or preparing for NMFC updates and freight classification changes can cause a myriad of problems for your organization.
Classifications Errors Add Up Costs
There are no ways around reclassifications. Since organizations shipping via LTL are responsible for providing class information on their Bill of Lading, it is possible to ship product at the wrong class if the shipper is unaware.
But what happens when the wrong class is on a bill of lading? Most often, the carrier will catch the error and charge an accessorial fee for the work required to change the paperwork. These fees can add up to costly penalties for your organization.
Even when incorrect classifications aren’t caught by the carrier, the mistake could still catch up to you. Carriers get audited and when these classification mistakes are noticed, you’ll get a hefty back charge for both the accessorial fee and class difference.
In short, putting the wrong class on your Bill of Lading will cost you. It’s essential to stay informed of NMFC class shifts.
Along with the additional fees from reclassifications or audits that incorrect codes can bring, choosing the wrong class for your shipment affects your freight liability. Different freight classes have different liability from carriers.
Having proper liability helps cover your cost should your product be damaged in-transit.
Hypothetically speaking, if your product is worth $4500 and class 70 has a ceiling of $3000 of coverage and your product is intended for class 80, you will not be reimbursed at the correct amount. Rather the reimbursement will be what the paperwork dictates.
Getting Density Right
Sometimes class changes come with calculation changes. The previously mentioned NMFC update for nutritional beverages is a great example.
With the April 2019 change, shippers of nutritional beverages were required to provide more information with their shipments because of the new density considerations for these products.
Following the change, the density of nutritional beverages ultimately dictates whether the product can ship at class 60 or class 70.
But to avoid pricing based solely on density, vendors can look to dimensional pricing options to ship their product.
Dimensional pricing is based on exactly what it sounds like – the dimensions of a pallet. Shippers must provide accurate length, width, height, and weight measurements. If incorrect, they could be subject to another rework charge from the carrier.
If unaware of the shift, shippers will face difficulty in securing accurate freight quotes and service. It is critical to monitor NMFC changes throughout the year to ensure that you’re building orders correctly.
Outsourcing LTL Shipping Can Save You Money
LTL shipping can be a difficult undertaking for an organization without the help of seasoned transportation professionals. And even though the barrier to entry in understanding LTL is high, it is a near necessity.
Zipline Logistics’ specialized operational teams can assist you in understanding your products’ class and best LTL shipping practices and keep you abreast of any classification changes.
We can also ensure you get the most competitive prices by sourcing our vast less-than-truckload carrier network, passing along our volume discounts.
Leveraging Zipline’s institutional retail expertise, you can source the right LTL logistics provider for the job and keep your customers happy. We can help ensure your success with LTL shipping.