Can Freight Rates Be Good, Fast, and Cheap?
Logistics managers have many decisions to make regarding freight, and many of them aren’t easy. They have to weigh options, timelines, and costs and develop a workable plan that doesn’t sacrifice safety or budget. With moving targets and changing timelines, it sometimes seems that any workable solution is a miracle.
In reality, decisions are made by considering possibilities, determining what outcomes might result from those possibilities, and making choices that limit adverse effects while ensuring more positive results. The more information provided, the easier it becomes to sort out the most effective plan of attack.
It might seem like a mystery determining how to secure an accurate freight quote, and that’s partly because of how freight rates are determined. The decisions of the logistics manager regarding freight rates are subject to many factors that are constantly changing. To explain further, let’s look at a well-known saying that the business world uses.
Good, fast, cheap? Pick two.
“Good, fast, cheap? Pick Two.” is what we call a maxim, a short statement that expresses a rule or idea. They’re usually clever and easy to remember. “What’s good for the goose is good for the gander.” “Opposites attract.” That sort of thing.
“Good, fast cheap” is a quick way to explain the paths of a given project or endeavor, and “pick two” refers to the reality of the outcome. These three paths exist in relation to each other, and their relationship forms a triangle (this maxim is also called the “project management triangle.”
Good (Scope)
Good refers to the “scope” of the job. We all want to see a high-quality effort, especially when we’re directly involved in the project. In terms of freight shipments, Good is ensuring quality when securing a truck for your freight shipment, that the truck is mechanically sound and sturdy and the carrier is safe.
Good is also ensuring a quality driver with experience, timely pick up and delivery, and not having to worry about the safety or whereabouts of your freight. Of all of the factors, it’s easiest to understand how quality is factored into truckload shipping rates.
The scope of the delivery takes larger factors into account, such as the availability of carriers. If there are more trucks available, it may lower the price charged for delivery. If there are few trucks to be had or an abundance of freight to be moved, the opposite will be true.
The scope can also be affected by the size of the job. If the freight takes up multiple trucks or requires special handling or tarping, that can affect the delivery price. Other instances will be if the truck needs an escort or a special trailer. It’s easy to see how scope influences freight shipping rates.
Fast (Timing)
Fast is all about timing. In general terms, it covers how quickly the project can be completed. With freight, fast is about timing for pickup and delivery, whether the delivery requires specific pickup and delivery windows, and how quickly the cargo needs to be delivered.
There could be a need for expedited or rush delivery, and the goods in question might have a timeline for optimal availability. Other factors that play into time could be road closures or delays, traffic and driver’s schedules, or the schedule of the dock or terminal.
Fast is also a factor that often is taken for granted. Fast doesn’t mean ignoring speed limits or making reckless choices, and fast also doesn’t assume that corners are cut or standards ignored. In this context, fast means dealing with delivery as quickly and effectively as possible.
Cheap (Costs)
The third corner of our triangle is Cheap. In project management terms, cheap would be a project that comes in under budget, with no additional tasks needed. In the world of freight, Cheap equals costs.
Costs are part of the freight picture, and it has variables as well, such as the money it costs for a quality driver, which may depend on their location and the destination of the freight. It doesn’t take much thought to see how money/cost influences truckload shipping rates.
If the freight is heading for a larger center where the driver can pick up another job after delivery, they might be willing to take a lower rate for the job. On the other hand, a freight delivery to a small, out-of-the-way area might have a higher price tag, as the driver will be losing time and money heading towards the next job.
Each of our corners has a role to play in the overall project or delivery. It’s important to note that they also are dependent on one another to some extent. Let’s look at how these factors are related.
How the Triangle works
We’ve identified three critical factors in how freight rates are determined. As with a triangle itself, the three factors support each other to keep the shape steady. But the nature of the three factors is such that all of them can’t receive equal attention simultaneously. If we focus on any two sides, the other will be impossible to achieve. We simply can’t have all three choices.
Thus, “Good, Fast, Cheap? Pick Two.” You can have two of these choices, but because of the balance, the three factors maintain, choosing two means the third will no longer be possible. It creates a situation where the shipper must determine which are the most important because one of them will soon be unachievable.
Good and Fast, but not Cheap
Suppose we guarantee that the project’s scope will be carried out in a high-quality fashion or that special attention will be required in the form of tarping or specialty trailers, and we also know that we must expedite the delivery. In that case, the third side, money, will be the unsupported side. In this case, ensuring the quality and speed of the delivery will mean that the cost will rise; it simply can’t be done while saving money.
Good and Cheap, but not Fast
If we once again guarantee a high-quality or special instance delivery and need to be done at a low cost, the unsupported side becomes speed. The special nature of the delivery, combined with a lower budget, means there won’t be a speedy delivery, as priority items that require faster delivery will move ahead of the freight shipment. One example of this could be partial shipments which may not have a specific day or time the freight needs to arrive. In this instance, the goods will be handled in a quality fashion and move slowly toward delivery. It’s easy to see in this aspect how time influences freight shipping rates.
Fast and Cheap, but not Good
If the goal is to have the freight delivered as quickly as possible and the budget is low for the job, the unsupported side of the triangle is good. The scope of the project will be the area that may not have the support. While it may be possible to find a carrier fast at a lower cost, they may not be able to ensure that the project can be completed due to the scope of the project. When considering budgets, elements like escorts, height poles, or other aspects of the load may not be fully accounted for or understood.
Bringing it All Together
The scenarios above represent some of the issues a logistics manager has to deal with when determining the shipping price. When deciding how to get the best price for a truckload shipment, all of these factors, and many others, have to be taken into account.
It takes a particular skill set to consider all of the factors involved, especially in real-time, where conditions, availability, and human factors come into play. It’s easy to understand how difficult it is to arrive at a freight delivery rate and the impossibility of simply creating a single price.
Each side of the triangle is essential and plays a role in the success of freight delivery, and to some extent, every delivery will involve a focus on one or two of the factors we’ve discussed. Not every delivery will have a strong need for two sides of the triangle; some may simply require one of the three factors.
When securing a truck for your freight shipment, it might be worth spending a bit of time considering what’s most important and which factors aren’t a concern for you. There’s no overall correct answer for which factors should be the most important. Each delivery, company, or situation will require an individual solution.
In some instances, time will be the most critical aspect, and scope or cost will give way to ensure that happens. Money will be a significant factor in other cases, which will dictate how quickly the goods arrive and the project’s scope. It may also be the case that your shipment is fragile or one-of-a-kind, and time and cost will need to take a backseat to ensure the cargo is handled as safely as possible.
The one constant, regardless of which factors play the most significant role in freight delivery, is this: The dedicated professionals involved at every step of the way work hard to ensure your freight is delivered as safely, effectively, quickly, and cost-effectively as possible.