What Does FAK Mean? Hint: Wouldn’t it be nice to ship different types of commodities that are similar in many ways, but without the multiple classification headaches?
FAK (Freight All Kinds)
Freight All Kinds, or FAK, is a logistics industry term used to assign a single tariff classification by an LTL carrier for freight that would usually ship under several NMFC codes.
These NMFC codes are the result of how commodities are assigned a classification by the National Motor Freight Traffic Association (NMFTA).
NMFTA created the National Motor Freight Classification (NMFC) tariff to help classify all commodities into 18 different freight classes.
The assigned values range from 50-500, and take into account the difficulty involved in moving the goods.
In short, the higher the classification, the higher the cost per hundred-weight due to the increased difficulty in shipping the product.
Because it’s often difficult to manage multiple classifications for shippers, utilizing FAK a great opportunity for both the shipper and the LTL provider to move the freight more efficiently.
The FAK Averaging Solution
Let’s say you’re a shipper trying to ship different classed commodities on the same skid.
The FAK shipping solution groups multiple classes of freight into a single class. This streamlines the shipping process by reducing the need for re-classifying items. By averaging the specifics of a number of commodities, a more fair shipping rate is achieved for both the shipper and carrier.
How is FAK Determined?
The FAK classification is only one of a number of factors that determine the LTL freight rates. Some of the other factors used to determine shipping rates for LTL freight include:
- Weight – The more a shipment weighs, the less you pay per hundred pounds.
- Density – Density is determined by taking its total weight and dividing it by the total cubic feet of the item. Density is also used to calculate the class of the shipment.
- Distance – For transportation over longer distances, higher prices per hundred-weight are usually used.
- Base Rates – LTL carriers use their own base rates per 100 pounds (CWT) which may vary between carriers and are based on the classification of the freight.
- Minimums – Absolute minimum charge (AMC) help LTL carriers protect themselves against highr carrying costs for smaller shipments.
- FAKs – A FAK rate is negotiated between the client and the freight carrier. It’s essentially an agreement that the carrier will transport multiple products with different classes at a single freight rate. As mentioned, this is designed to significantly reduce the amount paid on higher class shipments.
What Does FAK Rate Mean?
Why a Shipper Should Negotiate a FAK Tariff
- FAK simplifies the shipping and invoicing process
- FAK can reduce tariff freight rates being paid.
How to Validate FAK Options
Depending on what you’re shipping, FAK’s are a great means of reducing LTL rates and simplifying the entire LTL process from start to finish.
To assign a FAK class, some freight characteristics need to be in alignment:
- Freight weight and density must be similar across the commodities shipped.
- Shipping of multiple NMFC freight commodities.
- Product stow-ability is similar.
- Cargo liability coverage is appropriate for the freight in total under the FAK.
- LTL minimum freight charges are appropriate for all commodities in the classification.
With these points in mind, the LTL carrier will determine which of the 18 FAK commodity codes make the most sense for the shipper’s freight.
How Can an FAK Help Your Rates?
There are definite benefits for shippers when you negotiate a FAK with your 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 can use a FAK pricing strategy and determine shipping costs.
- When shipping freight in a low freight class – Carriers can negotiate on low freight class shipments since their operations ratios are better for lower classed freight.
- Shipping density-based commodities – Density-based shippers such as industrial distributors can often achieve better shipping rates through negotiation.
- Shipping mixed freight pallets – When shipping with different classifications, the item with the highest classification is used to determine the class of the entire pallet. Negotiating a FAK in this situation can lead to considerable savings.
When Not to Consider Using FAK
On the other hand, there are shipping scenarios that do not lend themselves to utilizing FAK based pricing strategies. A few of them are:
- If the majority of your shipment are lower classed freight – a FAK doesn’t make much sense from the carrier’s or the shipper’s point of view.
- Shipping items of high-value – when attempting to file claims for damaged goods, carriers will often only be responsible for the freight class being paid. This means your high priced items will only achieve the protection of the averaged FAK classification.
- If you use a TSM system – A Transportation Management System essentially eliminates the need for FAKs because dynamically rating shipments of multiple classes can be done easily.
Other Areas Where FAK’s are Used
While most of our discussion has been around a shipper’s freight FAK assignment, FAX is also used in the process of freight consolidation.
Multiple entities such as freight forwarders, consolidators, Container Freight Stations (CFS’s), 3PL logistics service providers, and larger shippers can create their own consolidated loads to operate under FAK tariffs.
In these situations, the use of a TMS (transportation management system) can quickly and easily build out the consolidations.
Final Thoughts on FAK and What It Means
FAKs can certainly provide substantial benefits to both shippers and carriers. But you should take care to ensure your particular type of shipments can take advantage of what a FAK has to offer.
If you need further clarification on how to negotiate an equitable FAK for shipping, or are looking for further assistance in gaining the best possible rates for all of your shipments needs, contact Brimich today!