As we approach mid-February, I can say I’m significantly more optimistic about the current state and future outlook of the truckload market than I was this time last year.
With the spot rate premium to contract rates sliding since fall and now even falling below contract rates, we are seeing contract pricing beginning to come down as well. The peak is clearly behind us and the market feels stable, at least for now.
Within the transportation practice at Chainalytics, we assist many of our clients with their annual truckload procurement events. However, since much of our work is focused on the execution of the actual bid event, we do not always see how well the bid strategy holds up after we’ve completed the event. With that in mind, I wanted to offer some tips that shippers could utilize once the the bid is complete regarding how to manage the new terms and achieve the expected results.
Tip #1: Set yourself up for success
Now that your new rates and routing guides have been established and (hopefully) uploaded into your transportation management system and/or freight payment and audit system, you may think you are done. Wrong! You are just beginning. It is critical to get a process in place to perform weekly (or at least monthly) reporting on the loads that have been moved, the carriers used, and the spend by lane. This will allow you to develop and standardize a compliance measurement process and evaluate which contracts and assignments are holding up and which ones aren’t.
I’m a big believer in the philosophy “you can’t manage what you don’t measure,” so it’s important to create these weekly and/or monthly “health checks” that evaluate data points such as tender acceptance percentage and utilization of the right carriers on the right lanes. This will help you identify which contracts need adjustment and then make the adjustments in a timely manner instead of finding out at the next bid that your last routing guide did not age well.
Tip #2: Run mini-bids to fill the holes of your primary bid
No matter how well-structured your bid event, unforeseen circumstances will arise that will impact both your strategy and operations, ultimately requiring you to make adjustments that a mini-bid can help with. For starters, your organization must establish a process for how and when to conduct mini-bids. To do this, you’ll need to define “trigger activities” occurring within your network that alert you to the need to go out to market. As with the health checks mentioned above, doing this on a monthly or quarterly basis, depending on your operations, will create the cadence that best suits your organization’s needs.
Tip #3: Maintain reporting and dialogue with carriers
Once the primary bid is done, you must have people available to onboard your carriers so that the transition of new contracts or lane adjustments goes smoothly, allowing everyone to be on same page. Avoid a “flip the switch” mentality that assumes your carriers have a full understanding of your operations; while some incumbents may possess familiarity, it’s best to repeat this process with each cycle to avoid any gaps. Conduct monthly or quarterly business reviews with your carriers and exchange performance scorecards to determine if you all see eye to eye. They should be evaluating your organization as closely and often as you’re evaluating them, so this gives both parties an opportunity to constructively express opinions on how the relationship is progressing. Finally, it’s necessary to utilize transportation benchmarking to evaluate how your rates are performing in comparison to the market. This will provide transparency and allow you to make adjustments where necessary.
Remember, your bid is a “living, breathing” strategy and not a “set it and forget it” methodology. Like all things that provide value, it requires constant care and evaluation to meet the goals you established during the event. Ongoing dialogue and measurement is a key component of operational success. If you’re unsure if your transportation sourcing strategy is effective or need help conducting the next one, don’t hesitate to lean on outside resources with the experience and technical skills needed to achieve the desired results.