Whether you’re shopping around for a third party logistics (3PL) provider to take care of your transportation needs or just interested in how cost is determined for your shipments, this month we want to bring awareness to one crucial aspect: lowest rate vs. lowest total cost.
In order to describe the difference between lowest rate and lowest total cost, let’s use the example of a request for a shipment from Portland to Boston. Often transportation companies will look for the lowest available rate and quote that in order to close a deal and guarantee the business. While this sounds enticing, prospective shippers should be careful. The only information the lowest rate can get you is the cost of the shipment to transport from one place to another.
On the other hand, estimating the total cost provides a clearer picture because it includes additional considerations such as: drop and pull at origin/destination, size of equipment, mode option (intermodal or truck), lowest cost per pound, etc. That being said, what you might actually find is that the total price you pay might actually be lower with a higher initial rate estimate because it has less additional costs.
Our company believes in getting you the lowest total cost, and we believe that when it comes to 3PL providers getting a total cost analysis tells you three things:
1 – The Company is Client-Focused
Anybody can get a quote for a rate. A great 3rd party logistics provider that offers to quote you via lowest total cost has to listen to you carefully to know your needs. This involves much more commitment from representatives of the company who interact with you. They are taking that extra step to put your needs first. Understanding your business is key!
2 – The Company is Resourceful
A company who gives you rates with lowest total cost shows that they are resourceful. They took the time to analyze your company’s needs and explored all cost options, charges, and modes of transportation available for your shipments. This additional information requires being connected to the right people and resources in the world of logistics.
3 – The Company Has a Wealth of Knowledge in the Industry
Companies that only offer the lowest rates can suggest a lack of research into the entire supply chain process. Often these ‘rates’ get a transportation company in the door yet does not allow their rate to actually pick up your freight. This means that the providers may have quoted far too low in order to grab the attention of its shipper. But going with the lowest rate can sometimes be underestimated and you can get slapped with various additional costs.
So make sure you ask the right questions when choosing a third party logistics provider and take into account the difference between the lowest rate and the lowest total cost! If you have any questions at all feel free to contact us, our highly experienced Client Success Specialists can tell you anything you need to know about getting you the lowest total cost!
