Four Ways to Secure Carrier Capacity Using Bid Optimization

Ask any trucking company how their business is going and the response you’ll likely hear is, “Great! Maybe the best it’s ever been, except we can’t find drivers.” The driver shortage, it turns out, is a backhanded sign of prosperity.

The American Trucking Associations recently estimated that the industry could fill 30,000 to 35,000 driving jobs immediately. The shortage has been intensified by a rebounding economy. Freight volumes have exceeded pre-recession levels with the ATA Tonnage Index setting record highs the past two months.

To secure capacity in this very tight market, companies seeking carriers are paying closer attention to bid optimization solutions as a means of aligning interests from both parties. Here are four ways brokers, third-party logistics providers (3PLs), and shippers can use the technology to procure fair and reasonable rates across all modes of transportation, especially from carriers that hold the upper hand.

1. Customized bidding. Rather than use a shotgun approach for bidding, companies seeking to secure capacity for their managed freight networks can use bid optimization solutions to analyze their carrier databases. Only the lanes that make sense to each carrier should be presented in a bid package to avoid wasting their time.

For truckload carriers in the freight network, a bid package could be set up to offer lanes the carriers have done in the past and those where they have equipment domiciles. Lanes that are less desirable can be offered up as continuous moves to position their trucks in desired markets.

The top 20 less-than-truckload carriers move about 95 percent of LTL freight in the market. Ideally, companies seeking carriers should blend a mix of LTL carriers with both large and small footprints in a bid package to attain the best cost and service experience.

The shipments offered up for bid should match the locations and type of freight that each carrier is looking for to improve the efficiency of their networks.

2. Consistent experience. The cover of a bid package is used to communicate the general requirements of the bid in terms of its duration, seasonality factors, accessorial charges, fuel surcharge agreements, etc. The bid package itself should be structured in a way that makes sense to each business. The online, spreadsheet-style interface that carriers use to enter rates should mirror the same structure they use internally for rating and pricing.

For all parties involved, the user experience should be the same each time. This standard procedure for communication allows the company conducting the bid to complete a package involving 100 carriers nearly as easily as one that involves 10 carriers.

3. Transportation centric. A number of software systems are used to procure bids from suppliers and contractors in various industries, but transportation is a world of its own. Only bid procurement tools that are specifically designed for transportation have the means to capture freight classification codes, tariff discounts and other idiosyncrasies of rates in an accurate and meaningful way.

4. Instant analysis. Unless a bid optimization solution is specifically enabled for transportation rating and analysis, it will take tremendous effort after the fact to determine which bid responses are better than others. The instant analysis tools in bid optimization solutions compare the rate responses from truckload, LTL, rail intermodal and other capacity providers to determine which carrier, or group of carriers, offers the best cost experience for each shipment and lane.

Bid projects can be a large and intimidating process without the right technology. The greatest benefit of bid optimization solutions is to funnel all of the communications, data, and analysis of a very complex process into a single, easy-to-use management system.

With this system at the helm, shippers and logistics providers can find ways to operate more profitably and differentiate themselves in the minds of carriers and with their own customers.

John Martin serves as the 3PL Practice Leader for MercuryGate International, Inc. Prior to joining MercuryGate, John worked for a 3PL that utilized the MercuryGate TMS to improve its efficiencies and grow its business for nearly a decade. Before finding a career home in the Logistics field, John held management positions in the Insurance and Software Development Industry.