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CHEAP CANNOT BE GOOD
14.12.2016

We have already learnt an important rule of business: decrease of a product prime cost ensures advantage over competitors. The time when imported goods were quickly purchased for any money has ended long ago. We, contemporary Ukrainian entrepreneurs, have learnt to save: we import large batches, get additional discounts from manufacturers, and look for other ways to optimize business.

However, while upon selection of a goods supplier we already seek the golden mean and understand that not just the price but also the quality must satisfy our customer, in the area of services everything is worse.

As an experienced forwarder and logistics analyst, I have always wondered why on many meetings with potential customers the cost of transportation is the main and sometimes only criterion to evaluate cooperation. Logic is “impressive”: “Well, what is so money-consuming in logistics? We load goods here and unload there. What service are we talking about? Goods are not living and cannot complain.”

At that, what does “cheap” transportation mean in practice?

I recall a case from my personal experience. We held negotiations with a potential customer. His major condition for the order was: “I need it to be as cheap as possible.” We satisfied his request and selected a reliable carrier at an optimal price, with whom we had worked on a number of shipments. We were prepared to sign the contract.

Suddenly we got a telephone call from our potential customer.
PC: I have been offered cheaper transportation.
LC: Please, clarify whether their price has been duly formed. We have offered you one of the lowest prices available in the market.
PC: I’ve already signed the contract with another company, so I cancel my order to you.”

We politely thanked the customer for the call.

Soon the “cheap” transportation price showed itself. It turned out the tent on the truck that carried goods was in poor condition. Rain and wind started on the way, and a sizeable part of goods became wet and useless. The customer incurred big losses and was discontented. However, he failed to come to agreement with the “cheap” carrier as to the loss reimbursement.

Logistics is a field where you perfectly understand the true meaning of the saying “cheap cannot be good”. Delivery seems to be such an insignificant component of business, but it can imperil the entire profit if you don’t pay due attention to it.

Therefore, when you choose a transportation contractor on your own, endeavor to get answers at least to the following technical questions:
– What is the year of manufacture of the truck? What is the truck model?
– What is the year of manufacture of the trailer / semitrailer (if any)?
– When was the truck tent changed / repaired for the last time?

At that, if you are uncertain about the carrier choice, you better address an experienced professional forwarder. This will indeed be better.

Logistic Center LLC Managing Partner Dmytro Kushch