Price VS Cost
Are price and cost different? The most common question we receive as freight forwarders is: “How much does it cost to ship from point A to point B”? This is an entirely reasonable inquiry when importing or exporting goods internationally. After all, as a business, your bottom line is the ultimate concern. But are there other factors to consider when inquiring about freight rates for your goods? Could there be underlying costs that are harder to measure that can significantly impact your company’s profitability? International shipping has a myriad of complexity many of which can cost your company more than just dollars and sense. Be sure to examine all cost drivers in detail prior to choosing the right service and freight forwarder for your logistic needs. Below we explore the difference between price and cost as it pertains to international freight and logistics.
The concept of price is simple. It is the money paid to carriers, handlers, truckers, and other parties involved that move freight. In general, the lower the price the better. This much is obvious. But what also must be considered is how the price is derived. Why are some shipments for the same destination more expensive? Why are some seemingly very cheap? When comparing freight rates it is important that your team is comparing not just numbers. All cost drivers must be considered to ensure you are getting an accurate quote. All things must be equal to ensure your quotes compared on a level playing field. Is the forwarder choosing a good carrier? Are they choosing a routing with minimum stops and transhipments? Does your quote include insurance? These factors can significantly impact quality of service, transit times, reliability, and other conditions of your import or export shipment.
In short: Be sure when comparing pricing all other service factors are similar to get a fair comparison.
The analysis of cost is more complex than price and often overlooked. It is important to not make the common mistake of developing “tunnel vision” on price alone. The phrase “you get what you paid for” certainly applies to freight forwarding. When we refer to cost in this context we are referring to those resources outside of the expenditure of money. These would include time, energy, risk, assurance, and other non-tangible qualities of your logistics process.
Time is probably the most commonly overlooked cost of doing business. In reality, your organization is spending money for the time of your employees. If your logistics team needs to spend excessive time managing and monitoring a shipment due to an unreliable carrier, this ultimately takes away their ability to focus on other aspects of your business. A quality freight forwarder ensures your team is constantly being updated and the shipment handled properly. This way they do not have to waste any time chasing down ETAs, tracking shipments, or monitoring statuses. At Maximum Worldwide Logistics, we look to provide an A to Z shipping solution so that your team spends the least amount of time on your logistic needs.
Energy is even harder to track than time. It is more qualitative than quantitative. However, it can be argued that it is the most pertinent aspect of business efficiency. A mismanaged shipment can require a tremendous amount of energy to correct. This can actually affect morale, motivation, and increase frustration in the workplace. This is particularly applicable to logistics. International freight requires working with other countries, laws, and import/export regulations that are very complex and difficult to navigate. If your freight forwarder is not hands-on and leaves your team to manage such complexities it can be incredibly taxing. Our goal at VWL is to ensure your team spends the least amount of energy possible on your shipping needs.
Peace of mind is priceless. We offer great insurance products that we can include in our quote. Insurance is commonly overlooked or not offered when pricing is given from other forwarders. When receiving pricing consider what assurances is the forwarder offering in case your cargo is damaged? Damaged or lost cargo can cause tremendous financial loss. Filing claims is also a very arduous task. At Maximum Worldwide Logistics, we offer proper insurance products in case the worst-case scenario should take place. We will assist in lost or damaged claims and are experienced in handling such matters. Assurance in service is one of our most important offerings in all the shipments we handle for our clients.
The takeaway: Cost is NOT defined in just dollars and cents. A mishandled shipment can cost your team well beyond just money. Be sure your quote is detailed, offers insurance, and quality of service is defined.
THE DIFFERENCE BETWEEN WHAT YOU PAY VS WHAT YOU GET:
We have seen all too often importers and exporters go with the lowest priced option with no consideration to any other parameters to their shipping options. However, in the pursuit of saving money, they end up paying in other ways. Ask questions to your forwarder about any and all factors about your shipment beyond just the price of freight. Getting locked into pricing alone can be a very dangerous exercise. Many times paying a slight premium over the cheapest service can offer a lot of benefits and assures your shipment will move in the most efficient way possible.
Final Notes: Ask a logistics expert at Maximum Worldwide Logistics for all your logistic and freight-related concerns and needs today! We will not just offer the best price, but also the best fitting product for your logistic objectives. At VWL we don’t believe one size fits all. We will custom tailor a shipping solution for your company with your budget in mind. Give us a call today!