Companies that concentrate on optimizing transportation discounts miss out on larger inventory savings. These companies often trade down on service levels. The most common strategies are to ship less often or to switch to slower, less-reliable modes. Each of these actions increases inventory holdings. The costs of this extra inventory more than offset any transportation savings. Thus, cutting transportation costs is a sub-optimization that produces false savings. Another reason why companies focus on reducing transportation costs is that changes are easily measured. In contrast, measuring amounts of inventory and calculating changes in inventory carrying costs are much more difficult tasks. Companies