“It’s okay, I just won’t tell her.”
“I’m just gonna snooze for five more minutes.”
“Augh, I’ll go to the store tomorrow instead.”
These all sound like great ideas at first. That is, until she finds out. Or you’re late for work again. Or there’s no food in the fridge for the fourth day in a row.
When it comes to booking freight, always chasing the cheapest rate can sound like a great idea, too.
“The supply chain is a mess. Regardless of which carrier I pick, my shipments will probably be late and the customer service I get will be the same wherever I go. I might as well book the cheapest option and save money. Right?”
Ooof.
Savings Now ≠ Savings Later
We get it. Rates are through the roof, so maybe your transportation spend is higher than expected right now. Maybe you’ve been investing a ton into shipping, yet you’re still dealing with subpar service that’s costing you piles of late fees, ruined retail partnerships, or an embarrassingly low OTIF score. Maybe you’re just getting started and you’re not sure how to pick a carrier.
Whatever your situation is, picking the lowest rate can seem like a no-brainer. But when you add up the dropped orders, chargebacks, late delivery fines, and headaches that come with the the cheapest trucks, those upfront savings hardly turn out to be savings at all.
Additionally, when specifications aren’t precise or established upfront, you may end up booking with a provider who can’t actually service your freight at all. This mistake can lead to additional costs like retail compliance fines, service failure fees, and long-term relationship damage with critical customers.
Retail Compliance Fines
Compliance programs and scorecarding initiatives have become the norm at the biggest retailers like Walmart, Kroger, and Costco. Many only continue to increase the stringency of these programs in response to the challenges presented by COVID-19, supply chain disruptions, and increased competition for shelf space.
Although there are differences in the details, retailers’ goals are the same. Big box stores want their vendors to get products into their supply chain promptly to avoid out-of-stocks. If CPG shippers can’t meet deadlines, retailers can fine them to compensate for lost sales.
As these programs step-up challenges for retail shippers, choosing the right carrier has become increasingly important. Rate has become a secondary consideration for forward-thinking CPG brands trying to avoid the 3% cost of goods sold penalty for OTIF non-compliance at Walmart, for example. Instead, they evaluate a carrier’s ability to understand the stakes of retail logistics and execute on-time delivery.
Service Failure Fees
Some carriers just can’t handle retail deliveries. Worse luck, this is sometimes not made clear before booking a shipment and can leave brands in a bind. It takes recovery trucks, storage fees, redeliveries, and employees’ time to compensate for service failures resulting from low-budget carriers. Although not always avoidable, you can prevent many failures just by working with a carrier who is best equipped for your shipment and understands retail delivery requirements.
Long-Term Retail Relationship Damage
Retail destinations are continually upping their delivery specifications for CPG shippers to keep up with changing consumption trends. Their distribution centers require certain carrier expertise to avoid chargebacks and other accessorial fees that reduce profitability.
For instance, Walmart now expects that its vendors meet a 98% on-time delivery standard across all modes and product categories. This jump in compliance standards adds incentive for CPG Shippers to excel at delivery and stand out from the competition.
The expectations from retailers are clear, as are the ramifications for not meeting them. In a survey of retail buyers, Zipline Logistics found that a vendor’s ability to deliver product on-time greatly impacted buyers’ willingness to work with them. This feedback indicates stakes have never been higher for retail shippers fighting for shelf-space.
Working with budget carriers can lead to missed deliveries and jeopardize critical retail relationships, which in turn can stunt your brand’s growth and cost you more than any initial rate savings.
Why It Pays to Work with Retail Logistics Experts
Again, we get it — this is a lot to consider when choosing a carrier. We hate seeing brands make what they think is the best choice, only to get burned in the long run. Let us help you.
Zipline Logistics is the only third party logistics partner in North America exclusively servicing the consumer-packaged goods sector. Our uniquely qualified carrier network, world-class team of retail transportation experts, and state-of-the-art shipper intelligence tools ensure clients consistently meet delivery benchmarks on 95% of retail orders.
Like the title says, chasing cheap rates will only give you headaches. We’re here to take away the temptation to low-ball your transportation spend upfront and help you save long term.
Sound like a plan?
The post Chasing Cheap Rates Only Gives You Headaches appeared first on Zipline Logistics.