Shipping multiple products? F.A.K. rates can save you money

By Ray Bohman -- Logistics Management, 12/1/2005

Just about every shipper that is making shipments via less-than-truckload (LTL) general-commodity motor carriers is enjoying discounts off of the carriers’ class rates. A substantial number of these discounts are in the 50- to 60-percent range, or even higher.

A discount, however, isn’t the only way shippers are cutting their transportation costs these days. Many have also negotiated “Freight, All Kinds” ratings, commonly referred to as “F.A.K. rates.”

An F.A.K. is an exception to a classification rating published in the trucking industry’s National Motor Freight Classification (NMFC). It is generally a single rating (or class) that is applicable to two or more differently described articles listed in the NMFC. There are instances, however, when an F.A.K. applies to a single commodity that is subject to one NMFC class. In such cases, the F.A.K. rating will be lower than the rating (or class) found in the classification.

An LTL carrier might be willing to publish an F.A.K. rating for a shipper that, for example, ships four different, separately described products, each taking its own classification rating or class. Here’s how it works: Suppose the four separate products fell into classes 125, 100, 85, and 70. Rather than determine the rate per 100 pounds for each of the four classes, multiplying those four rates by the applicable weights, and then totaling all four extensions, the carrier might establish a single F.A.K. rating that would apply to all of those commodities. A Class 85 F.A.K., for example, would require multiplying only one rate per 100 pounds times the total weight—much simpler for both shipper and carrier.

What’s more, by having a single F.A.K. rating (or class), that shipper could more easily determine its freight charges well in advance of the date of shipment and develop a rate chart for its sales force to use when quoting transportation costs to customers before they place an order.

An F.A.K. for a single product might be in order if it is determined that the product’s density (weight per cubic foot) is significantly heavier than for other articles shipped under that same description. For example, let’s say your product’s simple average density is 17 pounds per cubic foot, yet your classification rating is Class 100. Class 100, under the National Classification Committee’s “Density Guidelines,” calls for an average density ranging from 9 to less than 10.5 pounds per cubic foot, with all other classification factors—liability (value per pound), stowability, and handling—being within normal ranges. Under those guidelines your product, with a density of 17 pounds per cubic foot, would call for a Class 70 rating. In requesting such an F.A.K. rate, you wouldn’t be asking for anything more than you deserved.

One final point: We have found many instances in which carriers have agreed to establish F.A.K. ratings that are below what the shipper is rightfully entitled to. Thus, favorable F.A.K.s that are coupled with discounts can result in even greater cost reductions than discounts alone.