Shippers throughout North America are trying to cope with the tight freight capacity that has been driven by Covid-19, truck and driver shortages, freight embargoes and the surge in eCommerce activity. While many manufacturers and distributors conduct annual and bi-annual freight bids, this methodology is proving to be too static and rigid for shippers experiencing truck capacity shortages on certain corridors. Companies that rely on the spot market for carriers are likely experiencing rate spikes and inconsistent truck availability on an ongoing basis.
There are several solutions to address this problem. First, it is important for shippers to lock in capacity, market pricing and service commitments as part of their annual bidding process. As I have mentioned in prior blogs, these are opportunities to have “heart to heart” discussions with one’s core carriers. Certain carriers may be willing to sign multi-year agreements that provide their customers with “peace of mind” on key traffic lanes.
Second, despite these assurances, some carriers will not provide the expected capacity. They may not be able to retain or hire enough drivers to meet their commitments. In other cases, carriers will identify higher paying freight and divert their capacity to other customers. In other cases, they may wish to allocate some capacity to high-paying spot market loads. In these cases, shippers should have a mini bid methodology which they can quickly deploy to find replacement carriers.
In order to expeditiously go to market, companies should:
a) subscribe to early warning systems or data bases that highlight existing or projected trucking shortages,
b) identify a stable of carriers in every geographical area. The names, email addresses and phone numbers of key contact people at these carriers should be kept up to date,
c) feed selected loads to these carriers to keep them interested in the business and to test their operational capabilities,
d) keep the “boiler plate” components of the bid up to date. This includes the basic information on the company, shipping hours, freight density, packaging, trailer loading / unloading procedures and other key data,
e) ensure it easy to extract shipping data from the most recent 3 / 6-month period so carriers can quickly grasp the scope of the bid. If the company’s customer (or supplier) dynamics are changing, it is most important that these changes are reflected in the data,
f) be prepared to rapidly implement the results of the mini bids,
g) ensure they have the internal or external resources required to conduct these bids. They should also have the data analysis tools they need to quickly capture and process the data. A delay in finding capacity can result in lost sales and profits
and
h) make sure the supply chain team is ready, willing, and able to conduct these mini bids. They will likely be needed for the foreseeable future until the market corrects for these imbalances.
To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill and join the Freight Management Best Practices group on LinkedIn. If you need help in conducting freight bids, contact us at dan @dantranscon.com.