Selecting the Low-Priced Carrier
Sometimes it's worse to pay too little for your transportation service.
How rates impact safety!
In today's economy, everyone is looking for a bargain. Many companies are putting their freight contracts out to bid, others are shopping just about every shipment. Focus is on cost. There are some pitfalls to selecting the lowest priced carrier and the problems they can bring are no bargain.
Many of the rates seen in the market today are "unsustainable". That is to say, they are below a carriers operating cost. When a carrier is faced with rates lower than cost, they have some difficult choices to make, just to survive. What are the first things they cut...
- 1. Insurance coverage. Make sure you know a carriers coverage, limits of liability and deductible on their policy. It may surprise you!
2. Maintenance. Because maintenance can be put off until a problem occurs, it usually is. Poor maintenance can result in frequent out of service and shut downs due to inspections on-highway. It can also lead to accidents and possible damage of your shipment.
3. Driver training. Because driver training isn't as urgent as the gas bill, it often get's put off. Poorly trained drivers generally get in accidents at a higher rate than better trained drivers. This could lead to damages to your shipments, or fines for improperly labeled HAZMAT, etc.
4. Safety...Pressure to "fudge" logbooks. Drivers are paid by the mile, not by the hour. When the rate per mile dries up, the drivers are pressured squeeze more miles into their driving day by improperly logging breaks, getting stuck in traffic, etc. This is illegal and leads to tired and unsafe drivers.
5. Adherence to laws...Pressure to speed. Again, because drivers are paid by the mile and not by the hour, when the rate is low there is a pressure to speed to get more miles in a work day. Not only is this illegal, but unsafe as well. If you hear "he's a runner!" Beware!
6. Payment of Claims. Carriers who lose money on shipments are very reluctant to pay claims. "I just lost $300 on the load and now they want me to pay a $2000 claim!" is what's going through their thoughts. You will find carrier's stonewalling your claims and refusing to pay.
By selecting a low priced carrier without doing due diligence as outlined on the previous page, you could be opening up your company to liability, claims, and damaged shipments.
What can you do to ensure the carrier you are selecting not only meets your price objectives, but also your safety concerns? Many of the answers you are looking for can be found at www.safersys.org
In the words of
John Ruskin, written sometime in the late 1800s:
"It's unwise to pay too much but it's worse to pay too little. When you pay too much, you lose a little money--that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot--it can't be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better."