Some of the most fun I had in my trucking career happened when I moved from the C-suite to the front line at MSM Transportation.
At the time we were a growing but fledgling fleet that was having trouble connecting the dots in customer service. I figured a month answering phones and scheduling freight would give me a sense of where we could do better.
This one-month experiment turned into an 18-month education about customers and every little thing we were doing to keep them happy. So I learned a lot about accessorial fees and their impact on the bottom line.
An accessorial fee is a line item added to a customer’s bill for services performed above and beyond the standard pickup and delivery. These types of charges have been around forever yet I’m still surprised at the number of fleets that do not manage or have an extra-charge program.
Here are some lessons from my time at Accessorial Charge University, and what we did after I graduated and returned to my corner office.
When I started my customer service gig, I was convinced that simply capturing and applying standard accessorial fees would be a huge boost to our business. Boy, was I wrong!
Almost none of the fees we charged came remotely close to covering our costs. The one example that always stuck out to me was the $35 charge for a bonded shipment that actually cost us close to 10 times that amount to execute.
Something is really wrong when you’re following your documented procedures to a T and still losing your shirt.
In many cases these extra services aren’t necessities but are conveniences for the customer. My favorite was the consignee who would call us the day after a delivery asking for a POD because they didn’t feel like walking to their shipping department to get it themselves.
We trained our frontline staff to professionally educate customers on the reality of their ask before their freight left the dock. Scheduling a delivery time on an LTL shipment 2,000 miles away for 40 extra bucks was a recipe for disaster. Saying no with an explanation was way more effective than committing to something we had little or no control over.
Get their attention
I learned that customers will unknowingly or knowingly take advantage of carriers that don’t bill or charge enough for accessorials. So we took a different approach.
The first step was to raise our fees to cover our true costs with a healthy margin. In many cases this meant obnoxious increases (like $500 for a bonded shipment) to make sure we were properly compensated.
Our real endgame was not to use accessorial fees to generate revenue. It was to get customers to stop asking for freebies. We had many hard conversations and lost a few transactional price shoppers, but the plan worked like a charm.
One of the challenges with accessorial charges is that often they are not discovered until after the shipment is delivered and invoiced. Unfortunately, if an extra charge is not on the original invoice it’s almost impossible to collect. Surprise invoices are also irritating to customers.
With today’s telematics and digital-workflow technology, there’s no excuse for missing opportunities or holding up billing at the expense of cashflow.
Don’t fool yourself into thinking that all you need is to clean up your accessorial rate sheet and send it to customers. Implementation is the key. Employees need to be vigorously trained in every department to look for opportunities to bill or eliminate the freebies. And a little frontline experience in the C-suite doesn’t hurt.
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