Buying Blind: When Cheap Is Expensive
Imagine you’re shopping for something on Amazon -- let’s say it’s an electric razor. You type in your search terms and, sure enough, you get about a thousand results. The inexpensive ones are at the top, but they look kind of dodgy: You’ve never heard of the brands, and they don’t look very sturdy. So you refine the search by the brands you know, but it’s hard to tell the difference between the dozens of features. Finally, you pick an item and, surprise: it’s on backorder and can’t get to you before next month.
You’ve just experienced the difference between value and price.
More on that in a minute.
Last week, Inbound Logistics published an extremely well-researched and insightful article written by Sandra Beckwith. She writes about 10 Tips for Transportation Sourcing and it covers the many considerations a shipper must make when deciding how to get product from Point A to Point B. It featured a contribution by our CEO Fauad Shariff who made a critical point about value vs. price:
“Value will take into account cost, transit time, vendor quality, reliability, customer service, and other factors that price alone won't reveal,"
Fauad Shariff, CEO of New York freight forwarder technology company The CoLoadX Corporation, cites a situation where a large tobacco company's finance department required that carrier selection for exporting a large shipment of cigarettes be made on price alone.
‘The lower-cost carrier didn't know how to handle, build, or stage the product and left it on the ramp in the rain," he says. "The company spent $25,000 on replacement product, new packaging that was airlifted in, and labor—all to save $5,000 on the initial shipment.’”
The article also highlights other factors to consider, and they apply directly to Freight Forwarders when selecting an NVO partner:
- Calculate the Total Time and Cost: Remember that the quoted time for a given lane can vary significantly from the actual transit time due to factors such as weather and port delays. You cannot control the weather, but by using a trusted NVO (and a reliable platform to source that NVO), you can be confident that delays will be handled competently and transparently.
- Embrace “Sweet Spots”: Both Forwarders and NVO’s have “sweet spots” -- lanes and types of freight they specialize in. As a Forwarder, it’s important to know your own sweet spots, and that should also be a consideration when selecting and NVO. This reinforces the concept of “value not price.” The cheapest price in the world won’t matter if you select an NVO which is playing out of its league.
- Understand and Use Technology: As a Forwarder, limiting your NVO partners to just a handful of firms you know can severely limit your ability to find the value you need. Because it’s impractical to rate shop and negotiate with a sufficiently large number of NVO’s, you’ll need to migrate to a technology platform that does your heavy lifting for you. That will give you access to information about the many “value variables” you need to know -- not just price.
This is the value proposition that we’ve built CoLoadX around: giving you all the information and functionality you need so that you’re not just buying the “cheapest razor.” As this article shows, it’s gratifying to know that this way of thinking is being embraced by the logistics industry as a whole.
Other experts cited in this article include:
Jeremy Chaffee of Logistics Plus
Corey Nelson, CEO of 4C Global Logistics
Nerijus Poskus of Flexport
Toby Brzoznowski of LLamasoft
Steve Raetz, of C.H. Robinson
Vito Losurdo of UPS
Kaitlin Bates of Insight Sourcing Group
Chris Davy of Blue Bloodhound
By: Petere Pamela on Oct. 11, 2017, 11:50 a.m.