FAK is an acronym used in the shipping industry that stands for Freight All Kinds. According to globalnegotiator.com, they are rates applicable to all types of goods and not restricted to any particular commodity. Let’s investigate exactly what an FAK is, how it is determined, and how it can help your shipping rates.
All commodities are assigned a classification by the National Motor Freight Traffic Association (NMFTA). The values range from 50-500 and take into account the difficulty involved in moving the goods. The higher the classification, the higher the cost per hundredweight due to an increased difficulty in moving the product.
Finding the correct classification for freight can already be a difficult task for shipper’s shipping multiple types of products but became even more confusing for those shipping different classed commodities on the same skid. The solution to this issue was to create an FAK. The FAK groups multiple classes of freight into a single class. In order to streamline the process and reduce the need for re-classifying items, attempts were made to choose a class that averaged all goods in a shipment. The goal was to reach a price point that was fair to the shipper and the carrier.
For example, one of our current customers has an FAK in place where any freight shipped with a classification between 55-110 runs at class 60.
FAKs are only one of a number of factors that determine the LTL freight rates. Here are some of the most critical factors involved in coming up with shipping rates for LTL freight movement:
Weight – The more a shipment weighs, the less you pay per hundred pounds.
Distance – Higher prices per hundred-weight are usually demanded for transportation over longer distances.
Base Rates – LTL carriers establish their own base rates per 100 pounds (CWT). These rates vary between carriers and are based on the classification of the freight to be transported.
Minimums – LTL carriers are protecting themselves by boosting the absolute minimum charge (AMC) for smaller shipments. This is due to carrier costs being higher for smaller shipments than for heavier ones.
FAKs – An FAK is negotiated between the client and the freight carrier. It is essentially simply an agreement that the carrier will transport multiple products with different classes as a single freight rate. This can lead to substantial savings by clients as they can significantly reduce the amount paid on higher class shipments by combining them in an FAK.
There are definitely benefits to be afforded to shippers when they can negotiate a FAK with their carrier. Moving certain types of freight can be more beneficial when a FAK pricing strategy is involved. Here are some examples of situations where shippers will benefit by utilizing a FAK to determine their shipping costs.
When shipping freight in a low freight class – Carriers will often be willing to negotiate on low freight class shipments since their operations ratios are better for lower classed freight.
Shipping mixed freight pallets – When shipping a pallet with freight of different classifications, the item with the highest classification is used to determine the class of the entire pallet. If you ship in this manner, negotiating a FAK can lead to considerable savings. *See example above.
Shipping density-based commodities – Density-based shippers such as industrial distributors that focus on narrow product categories can often achieve better shipping rates by negotiating an FAK with their carrier.
Conversely, there are some shipping scenarios that do not lend themselves to FAK based pricing strategies. Among them are:
Shipping high-value items – FAKs can cause issues when attempting to file claims for damaged goods. Carriers will often only be responsible for the freight class being paid, not the actual class of the individual components of the shipment. Your high price items will only achieve the protection of the averaged FAK classification.
When the majority of your shipment is lower classed freight – a FAK doesn’t really make sense from the carrier’s or the shipper’s perspective.
If you use a TSM system – A transportation management system (TMS) can eliminate the need for FAKs since you can dynamically rate shipments of multiple classes easily.
As you can see, FAKs definitely have their place in the world of LTL shipping. In some instances, they can provide substantial benefits for shippers and carriers. Care should be taken to ensure that your particular type of shipments can take advantage of what a FAK has to offer.
If you’re unsure of how to negotiate an FAK or are looking for further assistance in gaining the best possible rates for all of your shipments then contact us today!