L-Popick

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Questionable Compensation Approach

This letter is in response to the article “Freight Managers Can Help Control, Reduce Costs” (Nov. 16), written by Larry S. Field.

I read Mr. Field’s article with great interest, since we share the same profession as freight management consultants. I congratulate him on his article, raising awareness that a well-managed transportation program can have a major impact on a company.

However, I would like to point out that Mr. Field’s approach to compensation raises questions about objectivity and could be counterproductive in some situations. He states, “The firm (consulting) should derive its revenue either as a percentage of savings, or commissions from the transportation providers put in place.” How can an objective analysis or recommendation be made to the shipper when the consultant is receiving payment from the transportation provider?

One valuable service a freight consultant can perform is an independent cost/service benchmark study and subsequent bid. If the consultant is receiving its compensation from one or more of the bidding transportation providers, they have a financial stake in their client’s decision. Therefore, whose best interests will be truly served?

How can one be unbiased if compensation is completely based on savings? When the bid/selection process winds down to the decision-making stage, we have observed that the client places a higher priority on service components than cost, and rarely contracts with the low-price leader. Therefore, it is imperative that the decision be 100 percent owned by the customer and 0 percent by the consultant, especially when the consultant’s compensation is based on the savings achievement. A flat fee or fee-plus-savings-participation approach to compensation eliminates potential conflicts of interest.

CHARLES B. POPICK

Director, Transport Solutions LLC

Long Beach

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