Fool's gold or Holy Grail? It's been said that a fool is someone who knows the cost of everything, but the value of nothing. Yet many global shippers continue to fall for the fool's gold of cheap transportation costs, often at the expense of the Holy Grail of longer-term, more broad-based cost reductions that could benefit their bottom lines.

Given the inexorable pressure to cut costs in the short term, it is understandable why otherwise intelligent, capable people opt for the quick fix of the cheapest transportation rates they can find, rather than taking a hard look at their overall logistics process to identify even larger sources of savings. The latter requires a transfunctional collaboration between and among an organization's key departments, including production, sales and marketing, warehousing and distribution, procurement, customer service, finance, logistics and others.

This wide-screen approach helps assure a thorough review of all internal operations before an order is ever received. If this sounds like supply-chain management, so be it. Within this larger scheme, actual transportation costs become a secondary consideration.

Unlike reducing costs, supply-chain management is a value proposition that strives for systemic cost reduction by, for example, leveraging trade policy to save U.S. duties on imported materials; proactively managing the transportation component for rate renegotiation, and better sales cycle forecasting and budgeting; and reducing IT outlays by partnering with a tech-savvy logistics service provider.

This approach can reduce transportation costs by optimizing carriers and modes and minimizing maverick transportation spending by suppliers and employees. But it also can help reduce inventory-carrying costs and administrative overhead, provide end-to-end shipment visibility, reduce order cycle times, promote trade compliance, and ultimately improve profitability.

In the final analysis, it boils down to value versus cost. Holy Grail or fool's gold? Which will it be?

By: Richard Bolte, Jr.

President and Chief Executive

BDP International