THE DOWNSIDE TO GUARANTEED RATES

Shippers sometimes ask for guaranteed rates when evaluating transportation management partners or conducting an RFP. For a good reason: Guaranteed rates remove uncertainties from the budgeting process. But they also come with unintended consequences.

Rate guarantees usually force the provider to place your shipments with economy carriers. This is the only way to earn a margin on the business. (See the chart above.) Guaranteed rates ensure that your freight will be moved primarily by carriers with the longest transit times and lowest reliability scores.

If cost is your top priority, this trade-off may be acceptable. But if factors such as transit speed and reliability are also important, guaranteed rates will lead to delivery issues. You’d be better off with a program that gives you the flexibility to select different types of carriers. Economy carriers can still be used when service is less important, while other types of carriers can be used as service becomes more important.

Recent Blogs

Supply Chain Management

Beat Down Carriers or Lift Them Up?

Our full-service approach doesn’t start and end with the work we do for our clients. It lives in our corporate …

Read More
Supply Chain Technology

How to Avoid the Pitfalls of a Transportation Management System (TMS)

A transportation management system (TMS) automates shipping processes on a single digital platform. The efficiency gains can be enormous, and …

Read More
Audit

UTS Recovers a Record $4.5 Million for Clients in 2021

UTS set a record in 2021 with $4.5 million recovered for clients. Our audit services are so effective because we …

Read More