Freight rates are in a state of constant flux, and while the market appears on the bridge of stabilization, the current peak season and uncertainty in global economies threaten to bring it to a halt. Also, the next set of general rate increases is around the corner, and shippers need to realize a few things. According to Inbound Logistics, most shippers, 78%, experienced more rate hikes—excluding fuel surcharge increases. Meanwhile, 62% experienced trouble finding available drivers in the market, and while capacity might be sitting in the form of empty trucks, they lack value without a driver. Steven Tapscott reiterated the risk, “Customers in general, and chemical customers specifically, are growing faster than driver growth can possibly keep up. The chemical industry is growing at a faster rate than the GDP (gross domestic product). But the driver population is not growing at that pace, which exacerbates the problem.” Shippers need to understand the problem and how freight bidding can boost capacity and strategic value simultaneously.
Challenges in Securing Capacity in Today’s Market
As noted by Chain Analytics, the top challenges in securing capacity in today’s market include:
- Evolving contracted rates that fall below market rates.
- Ongoing demand for more increases from carriers.
- Carriers remember when shippers do and do not bid to game the market.
- Limited drivers, especially given the uncertainty of the HOS regulations.
- Digital freight matching app proliferation means truckers have even more power to decline loads.
- The proliferation of private delivery drivers renders some traditional load matching options obsolescent.
The State of Freight Management
What Exactly Is Freight Bidding?
Freight bidding refers to the process of submitting new requests for proposals (RFPs) to both incumbent and prospective carriers. Now, bidding has a long history, and when shippers engage in freight negotiations, both parties can win. Unfortunately, shippers that decide solely to solicit bids to their benefit will face the uncertainty of backlash from carriers. Ultimately, bidding allows carriers to understand where they stand in the market and establish lasting carrier-shipper relationships.
Best Practices in Carrier Contract Bidding to Add Strategic Value
Bidding can add strategic value to shippers’ enterprises. Since it involves reentering negotiations and working with more carriers, it can help shippers realize the benefits of a more extensive carrier network. Instead of focusing solely on individual areas, carriers can expand their reach. Besides, healthy freight bidding practices help carriers avoid the pitfalls of bankruptcy, and given the history of trucking companies in 2019, such as the NEMF bankruptcy, all shippers should work to improve bidding. Of course, bidding represents another process and potential cost for shippers. Therefore, shippers should follow a few best practices in applying bidding to build strategic value. These include:
- Hold an annual event to attract new carriers.
- Always be on the lookout for new carriers to onboard.
- Consider re-allocating lanes to serve carriers better.
- Be transparent with new and incumbent carriers.
- Never try to sweeten the pot with “gifts,” focus on your company’s value as a partner of the carrier.
Leverage the Power of Bidding to Augment Your Carrier Database & Options
All industries bid for something, and in the shipping world, freight bidding allows carriers and shippers to work together more harmoniously and ensure healthy competition. Since carriers already operate on thin margins, less than 5% in some cases, shippers that do engage in healthy freight bid activities can safeguard the future for carriers. At the same time, carriers are more likely to realize the potential value of accepting a shipper’s specialized freight, including offering “Shipper Of Choice” discounts when applicable. Of course, the modern world demands something more when it comes to freight bidding, the technology to streamline the process. This is where a TMS can improve its value again, bolstering carrier compliance along the way. And, at Cerasis, our shipper customers enjoy our Carrier Relations team to go out and secure rates, down to the specific lanes, with multiple carriers in your most essential modes. We then embed those rates, available to that shipper and all locations and users, right in the TMS we call the Cerasis Rater. Request a TMS demo from Cerasis today or click the button below to watch a short video on the Cerasis Rater capabilities.