FAK (Freight All Kinds) agreements enable multiple items to be shipped and billed under a single freight class. For shippers dealing in various freight classes, these contracts can generate immense efficiencies. They allow for a streamlined process by reducing costs (admin and operational) for both parties involved (the shipper and the carrier). BUT, as time passes, the benefits of many FAK agreements evaporate. They then turn into unnecessary drains and inefficiencies, which inflate the freight bills of unaware shippers.
Here are four reasons you may need to review your current FAK agreement(s):
It might already be outdated
A lot of times FAK agreements will be forgotten and go unexamined and unchanged for extended periods of time, when ideally, they should be reviewed and evaluated periodically. Your average weighted class may have changed and not having a plan in place for routine assessments of the agreements leaves them at risk of becoming outdated and inaccurate.
Shippers may not tell you if you’re at a disadvantage
Every penny counts, and if your carriers are benefiting from outdated and incorrect terms, they’ll be in no particular rush to inform you. This leaves you open to unnecessary expenses and foregone savings. On the flip side, because they frequently limit their liability to your FAK class, carriers are also de-incentivized from pointing out a class that is too low.
You don’t have all the information
Most carriers have advanced systems for tracking and analyzing cost efficiency and class information. Meanwhile, shippers are at a disadvantage in this area and more vulnerable to FAK inaccuracies.
In today’s business climate, your FAK class is more and more likely to change
Today’s business environment is one of growth, growing obsolescence rates, and faster product development cycles. This climate is then paired with more robust (carrier-side) analytics and an increasingly strict and complex regulatory forces. The grand total decreases the average FAK agreement’s lifespan and places the burden of re-assessment on shippers.
What can be done?
The first step is to ensure that you are gathering the information you need to accurately measure average weighted class. Both in-house and third-party solutions are available for doing this. This information will be the bedrock on which your FAK strategy is built. You’ll pair it with what you know about your freight and available pricing structures. Finally, assess and evaluate both your FAK agreements and carriers regularly.