The Supply Chain Consortium recently conducted a survey of manufacturers, wholesalers and retailers on their freight bidding policies and processes. The results of the survey point to a number of best practices. Freight bidding can be a time consuming endeavor that is disruptive to the supply chain, but bidding is necessary to ensure that you are receiving competitive rates and quality service.
Keep on track by following the 12 best practices below.
1. Get a commitment from executive management. Clear expectations and a consistent message will increase the likelihood of success.
2. Understand current freight costs up front. Minimally, separate fuel surcharges (FSC) and accessorials from the total spend.
3. Mix in new providers and allow existing carriers to bid on markets outside their historical base. This ensures competitive rates, allows you to see what other carriers have to offer, and may give you renewed respect for existing carrier-partners.
4. Take this opportunity to standardize FSCs and accessorials. This ensures an apples-to-apples comparison of rates. Your accounts payable and claims departments will also appreciate the standardization.
5. Have a minimum of one year's worth of clean historical data for bid participation. Make sure your data is detailed enough that seasonal and day-of-week shipping imbalances can be clearly identified. Shipment profiles and a detailed forecast of new or radically changing lanes should also be provided.
6. Look for opportunities to decrease costs through a change of mode. Be sure to periodically review lane potential for a more economic form of transportation.
7. Use a multi-round process. Get a good idea of what the market is bearing for each particular lane, and follow up on potential oversights that may have become evident (confirm carrier capabilities against volume levels that might be awarded, etc.).
8. Enable participant creativity and give participants enough time to do it right. Instead of the usual specific questions that are asked during the bidding process, encourage carriers to take a more holistic look at your freight. Potential solutions to solicit during a bid include: freight brokering, bid-packages (shipper defined groupings) lane bundles (carrier defined groupings), dedicated fleets, and modal integration (e.g. TL intermodal, LTL to multi-stop TL, etc.)
9. Leverage volume through a relatively small group of core carriers to yield lower costs and more capacity. As a shipper's volume increases for a carrier, the shipper rises in importance to the carrier. Therefore, the shipper and carrier are able to dedicate more time to developing a deeper, less transactional relationship. This allows for more creative solutions, lower transactional costs, and the ability to move that desperately needed extra load during a peak-season push.
10. Bid freight on a regular, predetermined basis (annually, bi-annually). This will have a similar effect to dollar-cost averaging and will be conducive to developing meaningful, long-term partnerships with carriers.
11. Put as much effort into implementation plans as the bid. Communicate with affected origins and destinations on carrier capacity commitments, timing, and coordination of service provider turnover. Note: This most overlooked aspect is almost always more difficult and time-consuming than expected.
12. Track carrier performance against commitments made; utilize feedback loops. Tracking carrier performance against commitments and scheduling feedback sessions at pre-determined intervals (quarterly is a minimum best practice) would call attention to undesirable service providers, if not reduce the problem.
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