Freight expenses often represent 2 to 10 percent of operating expenses. For shippers seeking to maintain stability in their freight spend, they should begin preparing their next freight bid or freight RFP project. An RFP allows shippers to negotiate multi-year agreements with a team of dependable business partners. These agreements can be solidified with annual increases subject to COLA (cost of living) adjustments, creating stability in operating margins. For manufacturers and distributors that have not conducted a freight bid in several years, now is the time to act.
In preparation for this exercise, shippers should be asking themselves these questions.
1. Based on how the business has been evolving over the past few years, is the company utilizing the optimum mix of modes and carriers to serve their customers in the most cost and service effective way?
2. Based on how the company’s carriers have been performing in recent months, are there elements of their transportation network that would benefit from a change?
3. Can the company create a detailed, granular, accurate data base of shipments for the past 6 to 12 months upon which the carriers can submit competitive rates?
4. Does the data base need to be refined so it captures expected changes in shipping patterns, customer locations, or shipping volumes?
5. How long will it take to capture this data and who will lead this exercise?
6. Does the company have a list of the key contacts at each of its current carriers, including email addresses and telephone
numbers?
7. To make the bid competitive, does the company have access to a list of potential new carriers and brokers that can be evaluated during the bid process?
8. Does the company have the data analysis tools to capture and effectively analyze the rates and other information supplied by the bidders?
9. Does the company have the time and expertise to launch and conduct a bid while ensuring that the day-to-day functions of the Transportation department are managed effectively?
Conducting a bid takes a combination of time, knowledge, experience, data analysis and negotiating skills. As capacity tightens in the market, this is an opportune time for shippers to prepare their data and establish their negotiating team; they can define their key objectives so they are prepared to conduct a successful bid in the months ahead.
To stay up to date on Best Practices in Freight Management, follow me on X (formerly Twitter) @DanGoodwill and join the Freight Management Best Practices group on LinkedIn. If you are looking for ways to improve the effectiveness of your freight management processes or to save money on freight, contact me at dan@dantranscon.com.
