Over the past decade, freight bids have become very popular with shippers across North America. Freight bids, reverse auctions, freight RFP’s and freight RFQ’s are being employed by shippers of all sizes and industry groups to source carriers and manage freight costs.
Carrier responses range from excitement at the possibility of securing new business to dread at the potential of losing a valued account to frustration at having to expend valuable time and resources on an exercise that is often a waste of time. Many carriers perceive freight bids as a stick that shippers employ to drive down the rates of the incumbents.
In our consulting practice, we work with shippers in designing and executing freight bids. On other occasions we work with carriers that need assistance in responding to these requests. This provides us with insights into Best Practices and the keys to success.
Despite what many carriers may think, responding to freight bids can be a productive exercise. It is important to remember that over 90 percent of the time, the freight is awarded to carriers, large and small. In other words, one or more carriers walk away with the business. An unwillingness to participate or a half-hearted response will not enable your company to achieve success in this area.
As a company that has been involved with these types of projects for more than seven years, we have observed a set of factors or Best Practices that enhance a carrier’s opportunities for success. Here they are.
1. Make an informed Business Decision as to whether to respond or not
Some computer-based bids are sent to over one hundred carriers and are largely price-driven. They provide the respondents with about as much opportunity for success (defined as adding valuable pieces of business at profitable rates) as a lottery ticket. On the other hand, well focused bids sent to a carefully selected group of carriers offer participants a reasonable chance of success. To make the best use of a carrier’s pricing personnel, the first requirement is to be very clear about what types of business are most attractive to the company and make sure everyone is aware of these parameters.
2. Raise your Profile
The starting point is for a carrier’s sales personnel to be very focused on the lanes, type of freight, equipment availability and other variables that are in line with the carrier’s core competence. The sales team should be targeting as many shippers as possible in each geographic location that meet the carrier’s profile of an ideal customer. Second, the carrier’s website should clearly communicate the company’s key services, lanes and value proposition. Third, the company’s website should be optimized (e.g. search engine optimization) so that its core lane pairs rank in the top five on Google searches. If is not, it is unlikely that the shipper or consultant will search though additional web pages to find that carrier.
3. Review the Bid Early and Carefully
Since many bids have defined timelines for questions and answers, read the bid almost as soon as it is received (rather than two days before submission date). Make sure there is a clear understanding of the shipper’s objectives, its freight handling characteristics (e.g. live load or drop trailer, density etc.) and the pricing methodology (e.g. fuel surcharge formula) so your company can submit a bid that meets the shipper’s requirements. Be inquisitive and ask questions if key data is missing. Try to find out the shipper’s “pain points” and “hot buttons.” To gain further insight, ask for a site visit, and/or a trial shipment to better understand the company and its freight.
4. Create a Bid Plan and Bid Team
Assemble a Freight SWAT team that comes together to evaluate and respond to freight bids. Develop a bid (e.g. target lanes) and pricing strategy. Create a boilerplate PowerPoint presentation that can be customized for each target account.
5. Prepare a Focused Bid Response
Don’t be greedy. Focus on what your company can do best, where you have back haul or head haul freight and where there is the best opportunity to make money. Prepare and review the rates. Make sure the pricing formulas all work. Be prepared for multiple rounds of bidding and for being selected as a backup carrier (with 10 or 20% of the volume). Know your drop dead break-even point and don’t deviate from it.
6. Prepare for a Face-to-Face interview with the Shipper (and advisors)
Send your “Power Play” team to the interview. By sending the most knowledgeable, experienced personnel with the ability to make decisions and commitments, this increases a company’s odds of success. Rehearse roles and responsibilities and agree on the “game plan” in advance of the meeting. Dress appropriately, bring a supply of business cards and arrive on time. Never sulk or argue with the shipper. When asked to speak and describe your company, be focused and communicate the company’s competitive advantages clearly (e.g. superior service, superior coverage, late model fleet, good SMARTWAY score etc.).
7. Be ready for a Terminal Tour
Make sure all terminal personnel are informed. Make sure your technology demo is flawless. Do a rehearsal and make sure the terminal personnel are knowledgeable and passionate about the shipper’s business. Watch out for potential “land mines” (e.g. food and chemicals in the same area). Display a focus on safety and an “attention to detail.”
8. Perform Trial Shipments Flawlessly
A transport company’s network is only as good as its weakest link. Poorly managed agent terminals, substandard service from interline partners or rude drivers can all sabotage a company’s chances of success.
9. Track Performance from Day 1
Carrier scorecards and dashboards are now quite pervasive as TMS systems gain in acceptance. Assign dedicated customer service personnel to the account, track the key metrics (e.g. on-time pick-ups, on-time service, OS&D’s, load refusal rates etc.) and take proactive steps to correct potential service failures before the customer becomes aware. Use the scorecard results to cement the business relationship with the shipper.
Summary
Some freight bids represent an excellent opportunity (that may not surface for 2 or more years) to secure very desirable pieces of business. Create a freight bid SWAT team and make sure they have clear parameters and objectives. Do your due diligence and make sure you double check the bid submission before it reaches the shipper. Use your “Power Play Unit” to sell them on the superiority of your solution. Perform the terminal tour and trial shipments without mishaps. Track your performance (before the shipper does) and fix the weak links in the chain. Good luck!
