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Fuel for Thought

Repercussions Of Cutting Costs

By Greg Huggins
Posted Jul 29th 2019 10:48AM

As an owner operator, our biggest costs can be either equipment purchases or maintenance of said equipment. I have always figured when the cost of annual repairs to my truck surpasses the payments of a new truck, then it is time to upgrade. Then there is the reliability factor. How much does the downtime for repairing my old truck cost me in lost revenue? If you cannot deliver, then you have no value.

Considering expenses, I wonder how some shippers decide who to use for their transportation needs. If they choose to save money on transportation of their goods, it could open them up to a variety of issues. Late or undelivered loads, freight damage, or even total loss without recourse if the cheap carrier/driver was uninsured or underinsured. When does the cost justify the risk?

Not all, but many times, a cheap carrier will cut corners. Many will see insurance as a cost saving measure, using auto insurance policies for a commercial operation. Some will simply get a policy to get the proof of insurance, then fail to make the payments until the proof expires, thus not having any insurance beyond the initial payment. 

Another cost cutting measure from some ultra low cost carriers/drivers can be lack of maintenance, which results in loads not reaching their destinations due to breakdowns or getting put OOS (Out Of Service) enroute.

So why would a shipper choose the ultra low priced carrier/driver? With all the risk, it has to be cost. A chance to save the bottom line is more valuable than piece of mind. Until the inevitable happens.

Once the service failures reach a high enough level, then the shipper will make the decision to go with the more expensive, reputable carrier/driver to help ensure safe transportation. 

You can tell a lot about a shipper by who they choose for transportation. They will choose either low cost or high quality. Whether they realize the difference or not is to be determined. 

There is good, fast and cheap service. You can only pick two. Choose wisely.

Good and Fast will not be Cheap.

Fast and Cheap might not be any Good.

Cheap and Good may not be Fast.

Not being a shipper, I have often wondered about their thought process which brings them to the conclusion that the sketchy, ultra low cost carrier/driver is their best option. Perhaps it is trial and error, a learning process for them just as we have to learn about good and bad shippers.


See you down the road,

Greg

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