As outlined in previous blogs, most companies conduct a freight bid to achieve certain objectives. These may include saving money on shipping costs, upgrading the quality of their carriers, and/or improving service. Success can be measured in terms of a reduction in freight expenses, higher on-time service, greater customer satisfaction, or other metrics.
To achieve quantifiable improvements, the project team must have the skills and resources to effectively plan and execute a project of this nature. Companies conduct these projects either internally or externally depending on whether they are equipped to do so.
It has been our experience that some companies attain less than optimum results by not fully appreciating what is involved in conducting a successful freight bid. Here are some items to consider.
- Quality Data
To prepare competitive rates, carriers need to be supplied with complete, accurate data on their shippers’ lanes, volumes, and modes. Six months to a year of detailed shipping data is typically the minimum requirement. A failure to provide carriers with quality data during the bid process can result in unscheduled rate increases or a need to find alternate carriers.
- Extensive Database of Carriers
One of the mistakes we have seen some shippers make is to continually contact the same carriers every year. This limits opportunities to identify potentially superior partners and reduces the prospects of securing more competitive pricing. It is essential that each shipper cast a wide net to secure asset and non-asset-based companies that can meet their needs.
- Effective Data Analysis Tools
There is a considerable amount of data transmission during a bid. There is also a requirement to be able to create the data templates, and to upload, analyze and massage the data; there is a requirement to rank the carrier rates and other data elements in an expeditious manner, under varying geographically scenarios. Some shippers don’t have the analytical tools to perform these tasks in a timely manner.
- Adequate Freight Transportation Knowledge
Shippers need to understand the range of options available to move their freight. As the years go by, shipping patterns and volumes may evolve. Shippers may be able to consolidate volumes at origin or deconsolidate partial or full loads at destination. For some lanes, intermodal shipping may be a cost-effective option to over the road shipping.
Transportation Managers also need to have a solid grasp of the additional services that may be triggering accessorial charges. They need to be able to assess if there are some supply chain deficiencies that are causing detention charges or late deliveries, before putting their freight out for bid.
- Carrier Management and Negotiating Skills
In every bid, there is a requirement to do a “deep dive” into the operations of at least some new and existing carriers, to evaluate opportunities for improvement and to see if they are a fit with the company’s operations. There is a necessity to conduct thoughtful discussions with each carrier to look for situations where service improvements can be made and where leveraging volumes can lead to further cost savings. There is also a prerequisite to discuss and negotiate all aspects of freight pricing in a meaningful way.
- Post-Bid Compliance Skills
Many shippers operate under the belief that once the bidding process is complete, the project is over. It isn’t. The effective execution of a bid is essential to achieving the project’s objectives. For certain carriers, it may be beneficial to sign contractual agreements with measurable expectations, and progressive discipline clauses, to ensure compliance and performance. A set of KPIs, scorecards, a routing guide, and scheduled carrier meetings, are also essential to manage the carrier compliance process.
To conduct a successful bid, to effectively manage and control freight transportation expenses, each manufacturer and distributor needs to evaluate if they have the skills and resources internally or seek outside assistance. If not, there are a range of options available to them.
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, to save money on freight, or to conduct a freight bid, contact me at dan@dantranscon.com.
