Lower cost carriers are notorious for hidden fees, added costs for delays, subpar handling of goods, and lower insurance coverage. These hidden costs add up and end up being higher than choosing a slightly more expensive but more reliable carrier with well-established service.

Higher-priced, quality freight providers, many times offer more tailored services based on your specific needs. This includes time-specific and quality-controlled delivery schedules. Less expensive options usually don’t do this. You usually end up getting what you pay for.

If your supply chain is unreliable, your relationship with your customers suffers. Delays, damaged goods, or miscommunication leads to unhappy customers, and a poor reputation. More reliable and professional services may cost more upfront but help ensure customer satisfaction and help foster longer-term relationships. If you want your business to be a relational business rather than transactional business this is important.

The cheaper the freight the more the likelihood that service quality will go down. If you think of it like an inverted fulcrum, the higher the price the higher the service level. The lower the price the more corners are cut. Providers who offer lower rates typically have less reliable delivery schedules. This can lead to delays and subsequent further delays in your supply chain. A more reliable carrier, even when expensive, ensures timely delivery and avoids disruptions that can cost more in the long run.

Each type of freight has certain damage, theft and or loss risks associated with it. Lower freight rates tend to provide lower measures in place to prevent Loss & Damage provisions from occurring. Investing in (slightly) more expensive options should mean better risk coverage in case things go wrong, including insurance or stronger handling safeguards.

I understand that cheaper freight costs may offer short-term savings, and it may allow you to look good in the short term, but it could end up costing you more over time due to damages, inefficiencies, and poor customer service relationships. How costly is freight not arriving on time for you? Think stopping a manufacturing line, no booth for a tradeshow that did not arrive until after the tradeshow, product for a heavily promoted sale not arriving until after the sale.

You can’t make money if your customers walk away due to poor service levels or too much damage or all the above. More reliable options might be a higher upfront cost, but they tend to be more cost-effective over the long run, especially if they help avoid issues down the line.

Don’t be confused by the above points. Price is always important. You don’t want to pay more for the same or worse levels of service. By the same token you don’t want to pay lower rates now only to find out later that your reputation as a supplier has been damaged by the hidden costs of poor service, damage, and reliability.

In summary, while price is a critical factor, it’s important to also consider reliability, service handling quality, and the long-term impact on your business.

Let’s turn now to an alternative that may provide a better balance to this issue.

Hire a Third Party Logistics Provider (3PL) who knows the carrier community and can balance cost and service to your benefit as a client. 3PL’s deal day in and day out with a broad base of carriers from all modes; Full Truckload, Less-than-Truckload, Volume LTL Parcel, Local, Shuttle, Dedicated, Intermodal, Van, and Flatbed, among others. You get the picture. Their expertise is in logistics, and they live and die by selecting and managing carriers to meet each client’s specific needs. A 3PL is someone who buys a lot of transportation. They utilize their buying power to get competitive prices which they then turn around and share with their clients. At the same time 3PL’s also manage their carriers so they use the carriers that can best meet the needs of the client. Service levels are extremely important to 3PL’s. They have the key performance indicators (KPI’s) and tools in place to measure and manage service levels. This ensures that the Cost-Benefits equation fits the client’s needs. Most shippers do not track or assign costs to poor service levels. On the other hand, 3Pl’s typically do. A lower rate with poor service has a cost attached to it. This is measured and managed by the 3PL to properly reflect the true cost of doing business. A good 3PL (like Riverside Logistics) can show clients the full spectrum of carriers and their true costs so that good decisions are made day-in and day out.

 In summary, it’s very easy to select your carriers based only on price. It’s also potentially (much) more costly to do this. The better option is to contract with a 3PL who knows how to manage carriers using time-tested algorithms for cost and service in a TOTAL COST OF FREIGHT management program. This program when run correctly will provide the necessary cost service balance to enhance the clients competitive position and reputation with their customers. Value rather than price is the proper yardstick for selecting your transportation providers.