Ep. 17: Density-Based Shipping: A Guide to the 2025 NMFC Changes with ODFL's Seth Bauer & the NMFTA's Keith Peterson

Speaker A: Welcome to Cargo Shorts, brought to you by Old Dominion Freightline. I'm your host, Samantha Jones, the owner of Samantha Jones Consulting, a recognized transportation industry voice and a tenured supply chain professional. Today we're here to talk about the upcoming changes to the National Motor Freight Classification, or nmfc, and how it will impact shippers and carriers. Specifically, we're going to take a deep dive into the shift from commodity based to density based pricing and aim to break down the complexities of this shift in simple terms. We'll talk about Docket 2025 one that is scheduled to go into effect on July 19, and what you can do to prepare. Joining me today to discuss all of this are two subject matter experts, Seth Bauer, Director of Traffic services at, uh, Old Dominion Freightline, and Keith Peterson, Director of Operations of the National Motor Freight Training Traffic Association. Thanks for being here.

Speaker B: Thanks for having me.

Speaker C: Thank you.

Speaker A: How are you guys both doing today? Would you mind maybe giving a brief introduction to.

Speaker C: Well, thank you. My name is Seth Bauer, of course. I've been with old dominion for 23 years. I started out as an inspector on the dock and have been dealing with the National Motor Freight Classification the entire time.

Speaker B: And I'm Keith Peterson, um, director, um, of operations at nmfta. I've been here for about a year and a half now and, and I've just been really enjoying getting to know everybody that's part of an N.M.F.T.A. and happy, uh, to be here.

Speaker A: Awesome. Well, thank you both for joining me for this conversation today. I'm looking forward to it. I'm sure I get to learn just as much as the other listeners, um, who will be hearing this podcast. So I want to do a little bit of kind of stage setting, if you will, for this conversation. And before we jump into all the, uh, details of what is actually happening, I wanted to ask you gentlemen why these changes to the NMFC are happening right now. So what has kind of led us up to this point and why the timing that we have this July 19th date? What got us here?

Speaker C: You know, Keith, I'm going to start off on this one because I have to compliment the NMWTA. The new folks that are there are open and willing to take a look at an old system and modernize where needed. And then by the same time, there's a lot more technology out there for the carrier, uh, dimensioners and a lot of computer programs, a lot of stuff that allows us to really identify what freight is being moved.

Speaker B: Well, number one, thanks, Seth. Right, so I appreciate that. As far as why we started doing this here and this has really been a year long effort. Uh, we really started the current effort in this past year. But I think it's important to recognize as well that we for a while now they have been moving items to full scale density as they could. But what we decided to do with 2025 one is really kind of turbocharged this process. So we kind of changed around how we built out a docket and made these changes and as a result we were able to really kind of kick it into gear. So the NMSC has been around for a long time. There's a lot of items in there that probably haven't been uh, actually put on a truck for a long time here. But when you really look at freight today and you know at least how I believe carriers, they want to charge for how much room is being taken up on the trailer realistically for the most part. And you look at freight today, a lot of it is on pallets. And so it just makes a lot of sense to look at it from a density base here. So you need the dimensions and the weight, uh, and it just keeps it nice and simple and uniform across the board so that even people new to the industry can pick it up much easier than trying to go out and find a specific item number with maybe just a couple of classes assigned to it that were put into place 20 years ago.

Speaker A: I remember when I started in the LTL industry, my first year was in 2018 and um, so it's not been too long ago that people were still like very um, apprehensive about adding in dimensions or into their process. And so there's been a lot of progress and a lot of advancement in uh, especially the last five years and especially we saw a lot of that was spurred through the pandemic. And in general I think businesses are focusing on operating more efficiently in a variety of ways. But technology is playing a big role in that and I think it's also helped to kind of stage set for, for this new um, advancement and kind of simplification of terms that like you said there Keith, people can kind of move a little quicker. The rules are a little simpler. They're things that we can um, help to streamline processes when we're quoting when we're shipping and when we're providing services as ltl, uh, carriers as well. So thank you both for kind of helping me set the stage there. I want to ask before we go any further if you guys would help us understand density based pricing because this seems that this is all Kind of hinging around the concept of density based pricing. And so can you guys help me understand what existed before density based pricing? How have we started to transition to it and just all of the ins and outs of density based pricing?

Speaker B: I mean, yeah, density is our primary characteristic and for each of the items that we've ever really even done a research project on, uh, density has been one of the main things we looked at here. Our changes. Of course we're still keeping density as a primary characteristic, but instead of actually doing a full research and figuring out what range of densities this particular commodity could be, we're just saying, okay, you know, let's open it up to a 13 scale full density and you know, get the dimensions and the weight and, and figure out the density from there. And that really allows the commodity to change over time as well without us having to go back in and do another research project and adjust the density, uh, the classification tiers again here so that we're wanting to simplify it, set it up for go forward and to keep it nice and uniform for everybody.

Speaker C: You know Cathan, we're really happy here at Old Dominion to see the fact that you've gone to the 13 scale density, uh, uh, subs just because it provides the customer, you know, the greatest they could get in the past was class 60 and it provides them with class 50 and class 55 and is more geared uh, towards a shipper and allows them to get better rating when they have that heavy, dense freight. We always have backdoored our way into density based pricing essentially using classification and then using costing models on the back end and looking at average densities of accounts. We've backed into that in ways that the customer has not always seen. But now this is going to be more transparent, it's going to be more visible. It's going to be something that the customer is going to be able to see uh, from the front side they're going to be able to see more how their density when they ship, how it affects the pricing that they receive at the time. So density based pricing has always kind of been in there. Classification has always had density as the largest component to it when they have gone in to uh, determine a class for a product. So it's always been there but now it's just going to be more transparent, more visible for the shipper.

Speaker A: So this brings us to an important question for shippers. How will these updates positively impact their day to day operations or are there uh, potential for any negative impacts?

Speaker B: One of the main things besides moving to full density. That we really wanted to do was simplify this process. There's a lot of shippers out there that are not real familiar with the classification process. And when they go to look up an item number or ask for one, it can get really confusing. As it stands today, some of these generic headings can have 100 different item item numbers underneath it. And it could depend on what it's made out of. Right. Is it galvanized aluminum or is it steel? And it just gets really complicated and very, very tough to use on a, on a, you know, on a daily basis here. And what's resulted is, I always call it the sticky note on the side of the monitor. If you go to any shipping clerk's office, there's probably a sticky note on the side of the monitor that is 10 years old that's got an item number that's been updated several times since it was put there. So what we wanted to do was really. And I say it again and again, I know, but we wanted to simplify this process so we condensed down those generic headings into one item number where we could, as long as they didn't have handling storability and liability issues and, and made that one item number full scale density. So that way if they put in a search term for steel beam or something like that, making something up, it'll get them to an item number that may have a pretty large uh, viz listing meaning all those terms that could be describing it. But it's still down to one item number. And they should worry more about the dimensions of that shipping unit and the weight of that shipping unit and providing it to own Dominion Freight Line so that they can plan appropriately. And it's all about really kind of getting down to that process and making it as, as easy as possible for the entire logistics journey of that piece of freight.

Speaker C: From the classification standpoint, the simplification is going to be great and it's going to create a better experience for the customer. And for what we have dealt with over the years as a carrier shipper relationship, uh, you know, sometimes there have been some very contentious discussions with the customer and there have been contentious discussions with the fta. So, so the fact that we aren't going to have those same sorts of issues going forward to discuss with the customer and the shipper is going to be great because it's going to lead to less arguments and a better shipping experience, uh, for the shipper. And really the biggest change coming for the shipper is the fact that the need for accurate dimensions uh, that's going to be a big thing for them. Coming down the road, there's a bit of a change. Uh, we have plenty of dimension equipment to make sure that the measurements are captured, uh, once, uh, we receive it, to make sure the freight bill is rated correctly. And there's all kinds of outlets there for, uh, shippers to get relatively inexpensive dimension equipment out themselves. But, uh, that's going to be the biggest change I think, that they're going to experience with this whole change coming through.

Speaker B: Yep. By far as I've been out talking about this stuff, that's been the most commonly asked question is, will dimensions be required? And, uh, I've always strongly encouraged any shipper to start getting used to what I call their shipper profile. What's the dimension of your freight? What's going off of your dock? And I understand some docks only maybe send out one or two pallets a day. Right. But it is important, and I don't know any carrier that doesn't appreciate getting the dimensions so that they know what to plan for as far as picking up, and that's even before it gets to their dock. And they may have to reclassify it. Uh, it's just important for them to know what can they plan on for the day? What can that driver plan on picking up?

Speaker A: I couldn't help but think a lot about the EBOL while I was thinking about this discussion coming up, because in so many ways they seem to mirror each other to me in that from a carrier standpoint, understanding exactly what space and what equipment is needed before arriving to a dock is so helpful for route planning optimization, um, operations in general. I spent some time in LTL operations, and it's just very difficult when you show up expecting one thing and, and you get another, and you have more stops. And now you're going to have to get a second driver into the area and it, it becomes m more complex to service. So I think that the push towards the EBOL is kind of somewhat aligned to this. Keith. I, uh, thought that there was talks that dimensions would be a required part of the EBOL template. Did that make progress?

Speaker B: It is highly encouraged. In fact, you even see some TMSs, at least for shippers, start requiring them to put in dimensions, if not wait more and more these days so that they know what to expect when they get there.

Speaker A: So just to also, I'm not sure if we said this clearly, but density is determined by weight and cubic feet, which requires dimensions. Correct?

Speaker B: Correct. Correct. And I'm sure Old Dominion Freightlines Has a great density calculator on their website. I would bet they do there.

Speaker A: So among the expansion of the class table from I believe it's 11 to 13. Right. Uh, we also have a consolidation of commodity listings. Correct. And how, what are we talking about here? How many are we consolidating and what does that change look like?

Speaker B: So within 2025 to, there were 99 proposals on this docket where there's usually about 15 to 20. So it kind of gives you an idea of the breadth of these changes here. About 95 of those proposals were actually consolidating generic headings and making that item number full density. So you think about 95 or so these generic headings are out there that we took a look at. And a lot of work went into this. We had to create a spreadsheet in order to analyze it and then assign these, the different individual items to this, a new consolidated item number. So all in all it probably affects about 2000 different item numbers where we actually canceled that item number and put it into one item number, a generic heading. So it made full density. It was a lot of simplification and in all honesty, we didn't get it all right. When we went through the uh, process of the review and taking feedback on it and then had the FCDC meeting, there were some things that changed as a result, but we fully expected that. But what we were going for is to try to move as many items as possible at once rather than going through them one one by one.

Speaker A: Seth has the NMF TA classification book on his desk today. So he's going to have to get a new copy. And I bet it's going to be a lot thinner than the one he has sitting there today, which is good news. Seth, I want to ask you if anyone is concerned about the financial implication of this. What do you think are some potential actually cost savings that shippers might experience because of these changes?

Speaker C: The effect of having greater classification, uh, two more additional classes to go to is going to be a benefit. Some of the partial scale density items before that would, you know, less than 6 is class 200. Those are now going to be full scale density. So, you know, you could get 125 on that. You could get 175. Surely be savings on there. But you know, right now is a great time to talk about pallet composition and making sure that the shipper is shipping a pallet that is not shipping air. We don't want to haul air. Uh, we want a pallet that is composed. Well, it has A lot of pockets with no freight on it. And it's never really been incumbent upon the shipper in the past to make sure that they are stacking their pallets so they're filling all the spaces. Uh, and now that's becoming more important than ever. So in talking about making sure that you're using all the pallet, one thing that is important to remember is that density is determined from most extreme dimensions. So we are measuring all the way around on the pallet. So you want to be sure that if you're using a large pallet, you're utilizing all the space. If you need to look at smaller pallets for the type of freight that you are shipping, there, uh, are many customization or different pallet sizes to look at. So you do want to be sure that you are utilizing all the space on the pallet because you'll be charged for the space of the pallet, not just the freight on it. There are, uh, reclassification fees out there. Old Dominion does not charge, uh, a fee to actually reclassify the freight. We just take it to the proper charges. But if you're accurate coming, coming onto the trailer, then you aren't going to see any of those charges coming your way and you'll know what your freight bill is up front.

Speaker A: Absolutely. Thank you. Well, the last thing I want to cover today to help people who are listening to us prepare for this transition is just to ask you guys for some advice and some things that you feel like, need to be, uh, proactively addressed for shippers prior to this July 19th, um, effective date for these changes.

Speaker B: So the NMFTA has put out a, uh, lot of resources@nmfcchanges.com and you know, we've broken out for shippers, three PLs, and even carriers. Checklists of things to do in order to help you prepare for these changes. One of the big things I think I've really tried to do in the past year was kind of open up the doors on how this works and talk about what we're doing as much as possible and tried to share as much information as I could as far as what was in scope or out of scope. Uh, in fact, over the past year we've put out lists, uh, over time, you know, what's in scope for this in order to help people prepare for the breadth of these changes and get ready for them.

Speaker C: I will say from the carrier perspective, the best resource we have is the Old Dominion solutions specialist. And reach out to them at any time for anything that you as a shipper may need to help understand about this. They can find the proper resources within the company to help you if they can't, uh, answer the question themselves. ODFL, uh.com, we've been putting out some great resources. Our marketing team's been doing some, some wonderful things. We've, we've got a great resource page on there. Be sure to go and check out but then also talk about those changes internally. Management may very well know about them, but there may be a lot of folks, uh, within your organization that don't fully understand the implication of what they're putting on that bill of lading and what comes as far as how that winds up costing down the road beyond cost of that. And then take a look at those classifications. I really like the classification tool that Keith is putting out there making sure that you got those classifications correct. So then you're making sure that you're getting the pricing correct in the end and then updating systems, automatic pre, uh, printed bills of lading and making sure that those are correct with new item numbers and that you're getting the correct ones out there. We've uh, got a lot of stuff we're working on here at Old Dominion to help make this change easier and to not see an impact on the customer and looking forward to continue to work with the NMFDA to make these changes happen.

Speaker A: And then another thing is after you make sure you go through and update all of the systems internally. Also consider if you guys are using any free audit and payment partnerships or anything of the like that your external partners have also been made aware of all of the changes that you are making or that could result in some frustration down the line when these changes take effect.

Speaker C: That's a great point all.

Speaker A: Ah, right. Thank you both so much for talking to me today. It was a pleasure to have you both on the show.

Speaker C: Well, thank you so much Samantha.

Speaker B: Yeah, thanks for having me. Really appreciate it.

Speaker A: Absolutely. And thank you for listening. If you want to learn more about density based pricing, be sure to visit odfl.com odoutlook and for more information on the NMFC changes coming July 19, OD has created their own own resource page to help break down the key changes for shippers and carriers. Additionally, you can visit nmfta.org nmfc for more information. If you enjoyed this episode, be sure to check out our full cargo Shorts podcast series. You can find us on Spotify, Apple podcasts, Amazon Music, SoundCloud and YouTube Music. You can also leave us a comment on Spotify. Please rate and review. Share with your colleagues or drop us an email at, uh, marketing at odfl. Com. Thanks for listening.