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FedEx Freight launches LTL dimensional pricing pilot

Program to set rates based on shipment’s weight, dimensions, not on how it’s classified

FedEx Freight tests dimensional-based pricing (Photo: Jim Allen/FreightWaves)

Less-than-truckload carrier FedEx Freight said Tuesday it has launched a program to price freight tendered by select customers based exclusively on the shipment’s weight and dimensions, how much space it occupies aboard a trailer and when it needs to arrive.

The pilot program, called “space and pace,” will provide straightforward quotes based on a shipment’s weight, dimensions and origin and destination ZIP codes provided by the shipper, the LTL unit of FedEx Corp. (NYSE: FDX) said.  After receiving the shipment, FedEx Freight will use dimensioning technology — the company calls it “Dimension in Motion” — to verify the information.

The program bypasses the age-old product “classification” formula that has governed LTL pricing since the mid-1930s. The National Master Freight Classification formula sets class rates for shipments based on density, handling, stowability and liability. Each shipment is assigned one of 18 numeric classifications ranging from 50 for heavy, dense items like bulk materials to 500 for light, bulky items like pingpong balls. The formula is overseen by the National Motor Freight Traffic Association (NMFTA).

The different codes were designed to ensure that rates accurately reflect the costs of moving a wide variety of shipments tendered by multiple carriers. However, the formula is complex, often confusing to comprehend, and lends itself to differences of opinion between shippers, carriers and intermediaries over how a shipment should be classified. This often results in after-the-fact disputes, chargebacks and time and resources allocated to resolving disputes.

Over the years, technology has emerged that can accurately determine a shipment’s weight and dimensions, which allows carriers to proffer pricing based on the amount of space the freight occupied and the delivery commitments associated with it. FedEx Freight offers Priority and Economy services that set different prices depending on transit times.

FedEx Freight, like other LTL carriers, already uses dimensioning equipment to help determine pricing. The new initiative appears to be the first time that the carrier, the largest in the industry in terms of revenue and volume, will avoid the classification formula entirely in favor of dimensional-based pricing.

In a statement, Mike Lyons, vice president of LTL revenue quality for FedEx Freight, said the goal is to ensure customers “receive accurate pricing on the front end in order to reduce the frequency of price adjustments and disputes on the back end.”

The move was lauded by several LTL experts as a logical step in the progression to distance FedEx Freight from the classification formula. 

“Any method that engages with the customer in an easier way than the traditional class rates is a good thing for the industry,” said Todd Polen, vice president of pricing for LTL carrier Old Dominion Freight Line Inc. (NASDAQ: ODFL), considered by most experts to be the best-run LTL carrier.

In July, Old Dominion announced a trial program, called “One Rate, One Time,” that offers one all-in rate to LTL shippers before their freight is picked up. Shippers digitally submit information to Old Dominion, which verifies the data and furnishes a consolidated invoice that covers the base rate and all appropriate accessorial charges that cover a carrier’s services beyond the basic line haul.

Scooter Sayers, a long time LTL executive who runs his own consulting firm, said the moves by FedEx Freight and Old Dominion reflect the carriers’ ability to do a better job of building fair and accurate rates and to not rely on the classification formula to guide the process. 

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  1. Tom Bauroth

    Harkens back to the Dsys of New England Motor Freight Bureau whose Rate Basis was based on 5 Classes by Density pre-Deregulation of the Industry in the 80’s.

    Makes more sense than Discount’s and FAK, which was essentially a Railroad or Piggy Back way of Classifying and Consolidating Freight.

    Always hated FAK basis as it failed to recognize Value ,Handling, Damage and Service Parameters.About time LTL Iindustry adopted this.

    Curious on FED EX plan to also include PACE
    as a Factor as well. Transit Matrixes for Service would seem to start shuttling more Freight to hold at dock based on lane balance and Driver and Equipment Availability ;and Customer sensitivity to Due Dates and willingness to pay Premium for Standard Transit Times which have Improved to the Point of almost Expedite Performance, if not Time Definite Delivery ,but surely Date Definite Delivery and Performance.

    Excellent Transit times among Top Service Performers like ODFL and FED EX FREIGHT
    would seem to warrant applying a Cost and Benefit and Need Review by both Customer and Carrier.

    In an Era of escalating Fuel Costs and Supply Availability of Fuel, a more efficient application of Line Haul Resources that account for over 60% of the Variable Cost of Shipments is Timely.

    Technology today makes it easier and real time to crunch the numbers allowing Carriers to be Pro Active rather than Reactive to Market Pressures that saw them responding to Competitive Lead or Iniatives to drive volume.
    A one size fits all approach that led many Carriers to Try to be ‘All Things to All People’…much better to follow Shakespeare’s ‘To Thine Own self Be True’.

    Better product and profibility identity for Carriers to Distinguish themselves in the Market Place and Drive Better Margins!


  2. Dick Bischoff

    TForce Freight ( formerly UPS Freight) has had dimensional based pricing in place since 2016. This is nothing new as being presented by Freightwaves.

Comments are closed.

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.