Why Service Reliability Matters
in Price-First Logistics

This article was originally published in Supply & Demand Chain Executive.

As the final link in the supply chain, logistics failures impact both top-line growth and bottom-line costs more severely than any other business function. When products can’t reach customers, every other strategic priority – from marketing campaigns to product innovation – becomes irrelevant.

Consider this: Getting something like a 10-15% reduction in shipping rates can be overshadowed by lost sales, customer attrition, and emergency shipping fees, often within the first quarter after a transition. This is a pattern seen repeated across industries: what begins as a promising cost-reduction initiative often evolves into a case study in false economy.

The Deceptive Appeal of Cost-first Logistics

The math rarely works out for cost-first logistics decisions. Organizations that prioritize lower-cost carriers can find themselves spending more on expedited shipping, customer service escalations, and inventory carrying costs within twelve months than their projected annual savings.

Sometimes, it’s possible to miss out on the bigger picture due to a lack of data or a basis for comparison. Take for example a retailer convinced they were overpaying their UK warehouse provider by 20-30%. The contract had another 2.5 years to go, but they had an opportunity to break the contract. The client was nervous about even exploring other options, worried about upsetting the provider and potentially compromising performance.

Instead of just hammering on costs, the client and the provider sat down to lay out a plan of action. Running an RFP helped discover something surprising – the warehouse rates were actually right at the market. But more importantly, the whole process transformed what had been a purely transactional relationship into a strategic one. Now, they’re having real conversations about continuous improvement and supporting the client’s significant growth plans in the UK and Europe.

Building Service-Level Agreements that Work

Successful partnerships start with practical, well-crafted service agreements that set clear expectations for both sides, and this is a relationship business driven by data and analytics. Every day in logistics brings different challenges – from port strikes to pandemics to polar vortexes. Service agreements and strong partnerships need to reflect that reality.

What works in February rarely cuts it during peak season. A good service-level agreement (SLA) needs to flex with business cycles while maintaining clear accountability. Smart logistics teams map out specific response protocols and escalation paths upfront. The last thing anyone wants during a service crisis is time wasted debating contract interpretations.

Understanding Market Complexity

While strong service agreements form the foundation of logistics partnerships, executing them effectively requires understanding the unique dynamics of each market segment. The truckload sector serves as a good illustration of this complexity. With 580,000 different carriers in the US alone and average fleet sizes under ten trucks, it’s a highly fragmented landscape that needs careful navigation.

Reliable volume forecasts and consistent shipping patterns enable carriers to optimize their networks effectively. Carriers must align freight at both ends of the journey, getting drivers loaded and dispatched efficiently to their next pickup. Companies providing steady volume and accurate forecasts consistently outperform those operating on a shipment-by-shipment basis.

Prioritizing Long-term Results

Look at any high-performing logistics operation and you’ll find they treat carriers as part of their company, not just service providers you need to negotiate discounts from. Supply chains and logistics are giant ecosystems that can get out of balance if certain parts aren’t performing well. The key is viewing carrier partners as an extension of your company – providing good forecasts, ensuring timely loading and unloading, and maintaining consistent communication.

In logistics, the lowest price rarely delivers the lowest total cost. Smart logistics isn’t about squeezing carriers for lower rates. Organizations that focus on building resilient carrier relationships while maintaining predictive capabilities and steady operational patterns create lasting competitive advantages. By measuring success through service excellence rather than rate cards, companies position themselves to deliver exceptional customer experiences while building sustainable, profitable growth.

Learn more about how our collaboration with Cleveland Clinic is helping health systems improve margins and enhance care delivery.

Share this...

Facebook

Pinterest

Twitter

Linkedin