Why not charge for services rendered?

Why not charge for services rendered?

I rise in support of our industry, which is so vital to the world economy, and also to plead the case for a cooperative fee schedule. We all go to accountants and lawyers and other professionals and expect to pay their fees because they have made the case that their talent - including time - is very important. Yet our industry quotes freely to anyone and provides significantly important data on costs of shipping and other anticipated fees free. Why?

I recall years ago I met a shipper who relocated to New York and who kept calling our offices for quotes. Because I am a very frank man, I asked him point-blank: "When can we expect a booking?"

Astonishingly, he replied, "I am not moving this freight, just auditing freight bills and want to see if what we paid the carrier was in the ballpark of rates."

Needless to say, our "free quotes" ceased. As an ad hoc professor of logistics, I have suggested to students - some of whom are shippers - that a shipper should select and cultivate relations with at least two freight agents, and not churn agents.

Goldman Sachs Europe used to base its selection of freight agents solely on price until they found out that they were beating their costs to the floor and several agents simply quit the business, requiring the process of agent selection to be repeated, at considerable cost in time and expense. They finally developed a relationship with an agent that proved both satisfactory to Goldman Sachs and beneficial to the agent.

There is an "art of sales" that perhaps too many carriers and freight agents forget. I had a salesman once tell me, "Dave, I can get all the business in the world, all I have to do is quote the cheapest rate." I replied to him, "Paul, how would we do this?" He replied, "Dave, we have to cut costs." He quickly came to his senses when I replied that he was the cost.

A major U.S. food company proved to be very difficult to deal with on freight rates, always looking for the cheapest rate. However, it had no reservations to voucher its staff to attend trade seminars, such as the ones my company presents - and charges for - because we believe they deliver value. I asked the vice president of distribution about this, and he said the company felt value in attending a seminar but that "anyone can get a rate from anyone."

At the time, this iconic food company budgeted $5,000 per distribution department employee to attend a seminar or seminars of any kind to educate its staff. However, that same VP 'fessed up to me that he had seen a falloff of call activity by carriers on his firm. The reason, of course, is that carriers knew they were being shopped.

Freight agents provide a network of world business to the shipper at little cost, and while a major consulting firm could charge for a matrix of rates and routes, many agents give this information away free to a shipper, "hoping to get the business."

Why not charge a one-time fee for the rate menus?

As a former partner of Ernst & Young once counseled me, "Be careful, it is difficult to control what happens after an introduction." The handling fee that agents charge in no way compensates for the plethora of information provided and once given impossible to take back. Is there something wrong with making money?

Years ago I chaired an industry dinner that proved the most successful in that organization's history. At the after-action meeting a month later, it was suggested that the dinner was so successful that the next year a reduced fee could be offered. Who made this suggestion? A shipper, of course. I replied that we did so well we should raise the fee next year. They did.

What I am advocating is fair pricing for services that are becoming more and more crucial to the world's supply chains.