Shipper Symposium Series Webinar Recap: Bid Activity Strategies and Trends
By: Ben Cubitt, Senior Vice President, Engineering & Strategic Carrier Management, Transplace & Ratna Prabhu, Engineering Lead, Transplace
Bid optimization and procurement are truly foundational for companies to achieve supply chain excellence and drive value. Procurement process and bid activities have a significant impact on shippers and carriers, making it critical for companies to establish good sourcing practices.
In our most recent Shippers Symposium Series webinar, Ben Cubitt and Ratna Prabhu analyzed last year’s bidding market and shared some best practices for successful bidding in 2017. Below are a few of the highlights.
2016 Recap of Procurement and Bid Activities:
2016 was a record year in terms of bid activities due to an industry-wide desire to lock in rates in the anticipation of an uncertain 2017. Overall, it was a great year for shippers to go to market. With plenty of available capacity, shippers had their choice of carriers within their networks to bid on different lanes, and they were able to save money. Even as shippers were able to achieve savings, incumbent carriers were able to retain many lanes – in part due to the fact that many shippers have been willing to leave money on the table to align with core carrier partners for future capacity.
2017 Brings Bid Competition
The later part of 2017 has the potential to be more challenging for shippers than 2016 due to expectations of tighter capacity and increased pressures on rates. In addition to this general market shift, each vertical within the transportation industry faces its own challenges and opportunities during a competitive bid response. It is important for shippers to keep these factors in mind throughout the entire bid process and seek out proactive solutions in light of capacity fluctuations.
A few key examples of these specific industry vertical challenges are:
- Consumer Packaged Goods: Challenges range from very large spends to high volume and low volume lanes. The end result of these bids must deliver freight on time, damage free and at a market-competitive cost to demanding customers that all have their own requirements.
- Retail: Inbound flow for retail has challenges that include many low-to-medium volume lanes.
- Manufacturing: Paper and packaging companies require different equipment types—this can span from traditional dry van to light-weight equipment. Balancing dedicated lanes and OTR lanes can be part of this challenge.
- Oil and Gas: With fracking recently taking a leap forward in the last few years, helping maneuver the sourcing of sand and water has seen barriers but has also had great rewards.
- Chemical: Shipping hazardous substance presents challenges in regards to regulation and safety risks.
Sourcing and Bid Strategies:
In order for shippers to proactively tackle these challenges, it is important to consider a few key sourcing strategies when engaging in bid activities:
- Shippers and their logistics and/or procurement partners should give at least a month of preparation time before going into a bid.
- Bidding the entire network is an effective strategy as it allows companies to leverage their entire freight spend and gives enhanced visibility to an entire network of carriers.
- Truckload and intermodal should be bid out together because many carriers have similar freight characteristics.
- The results of the bid needs to be implemented, at the most, 30 to 45 days after completion of the process. Sometimes a bid can get pushed back to the 60-day mark, but anything past this timeframe can reflect a change in capacity in the shipper and/or carrier’s network.
Additionally, while there are many practical bid strategies for shippers, there are also important factors that core carriers should address when facing the bidding process. Shippers negotiating with their top 5 or 6 carriers has become a more significant trend, thus removing some lanes from a specific bid process. It is also important to remember that, because of the changes within networks for both shippers and carriers, a single year contract is recommended, especially for truckload shipments (due to different environments, LTL could get pushed out to a 2-year contract).
With the entire bidding process comprised of an aggregate of steps, it is important to stay up-to-date on current industry trends and strategies. Proactive, good communication between all parties involved and following best practices will help make the process smooth and increase the success for a business’s bidding scenario.
To see all of what Ben Cubitt and Ratna Prabhu shared about bid activity strategies, trends and more take a look at the full video here. Want to learn even more about this topic? Keep an eye out for our Shipper Symposium breakout sessions, where it is featured in our 2017 event!