Why Can't I Just Compare Freight Quotes?

Bob called again.

He was becoming a regular, and by now I knew one thing about him: Bob liked numbers. Especially when it came to transportation costs.

“I have three quotes. One is $4,000, one is $4,300, and one is $4,600. Obviously, I should take the $4,000 one, right?”

I asked him: “Are you actually comparing the same thing?”

Bob looked at me. “What do you mean?”

A freight quote is a price for a specific transportation service. Before comparing the numbers, Bob needs to understand what each quote actually includes.

• Where does the transportation start?

• Where does it end?

• What services are included?

• What additional charges could apply?

Bob pulled up the three quotes.

“The first one is for ocean freight from the port in Taiwan to the US port,” he said. “The second includes pickup from the supplier. The third includes delivery to our warehouse.”

“So they aren't really three comparable quotes,” Bob concluded.

Exactly.

The Incoterm can help determine who is responsible for arranging and paying for different parts of the transportation. The mode of transportation determines how the freight moves. And the freight quote tells us the price for the particular transportation service being offered.

But those pieces need to fit together.

Bob looked at the quotes again.

“So if my company is responsible for the shipment from the supplier's door all the way to our warehouse, I need to know what each quote covers along that journey.”

“Exactly.”

Bob thought for a moment.

“Then I shouldn't simply ask which freight quote is cheapest. I should ask what it will actually cost us to move the shipment to where we need it.”

That is the important distinction.

The lowest quoted freight rate isn't necessarily the lowest transportation cost. If one quote leaves out services or charges that another quote includes, comparing the headline price can lead to the wrong decision.

Before comparing freight quotes, make sure you're comparing the same scope of transportation and service.

Bob smiled.

“So the $4,000 quote might not actually be the cheapest.”

Exactly.