Why You Shouldn’t Base Your Freight Decisions Solely on PriceWritten by Neal Willis
As a shipper, it is important to factor in service levels in addition to price when evaluating a transportation partner. Carriers and 3PLs alike vary from each other in regards to size, service and price. Some carriers and 3PLs specialize in servicing niche markets and are more familiar with how certain industries work better than others. Price shouldn’t necessarily be the most important nor the only reason for choosing a carrier. Besides the freight rate, other areas of concern for shippers when selecting a carrier can include Transit Times, Handling & Damage Rates and Geographic Coverage.
Long transit times can cause lost sales and production time, both of which can cost a shipper dearly. Longer transit times also mean more handling, which means the shipments are being exposed to an increased likelihood of theft and/or damage. If a shipment doesn’t make it to the destination when needed or arrive in the condition that was intended, a great rate can be essentially useless.
Handling & Damage Rates
Filing claims can be a daunting task and keeping up with the paperwork can be a nightmare. Especially with high value products, one damage claim can end up negating any and all savings.
If you’re sending products across the border into Mexico or Canada, using a carrier with little to no experience with international requirements can result in items being held up at border crossings and inaccurate paperwork can end up being costly.
Transactional vs. Strategic Partner
By choosing a carrier based solely on cost, a shipper is essentially telling a carrier that they don’t plan to work with them on a long term basis. Carriers know when they’re being used solely because of price and easily recognize a transactional shipper when they see one. Carriers also realize that transactional shippers will quickly leave them for another lower cost option should the opportunity present itself, and LTL carriers will usually factor that in to their bid for the business and provide service levels according to the price they’re getting paid to handle the freight.
A shipper willing to pay a little more because of the value a carrier brings to the table will usually receive a higher level of service than the shipper looking at only a freight rate. When a carrier sees a shipper thinking strategically and approaching the relationship as a partner who wants more than just a freight rate, they are more likely to be flexible with the shipper on issues that aren’t always cut and dry, such as damage claims. The old saying that you get what you pay for still rings true.
On the other side of the spectrum, whenever there is a problem that might require a judgement call or goodwill gesture on behalf of the carrier, chances are more than likely that they will treat the transactional shipper just the same and forget about them in lieu of another shipper whose freight costs less to haul.
Carriers are just like shippers in the sense that they are constantly looking to lower costs and costs aren’t always lowered in the form of hard dollars. Rates will always be important; however, low rates shouldn’t necessarily be held in higher esteem than service. When service is sacrificed because of a lower rate, shippers can lose more than just the cost of the shipment. When shippers and carriers work together, however, everyone can achieve lowered costs and better service through operational efficiencies, which aren’t always measurable in terms of dollars.