2020 has been an unprecedented and challenging year for shippers due to COVID-19. In the first half of 2020, shippers contended with waves of panic buying that drove supply and demand imbalances throughout supply chains. During the second half of 2020, panic buying subsided, and consumers shifted their shopping habits online, adding $94B in e-commerce sales since March 2020. This surge in e-commerce added to a tightened truckload, LTL, and small parcel market, resulting in delivery delays and increased rates.
The transportation market is expected to remain volatile into 2021, making it difficult for shippers who rely on historical data to drive their transportation budgets to plan appropriately. As shippers head into the logistics RFP season, it’s essential to consider rapidly changing consumer behavior, tightened capacity, and the impact of an earlier and longer peak shipping season on transportation budgets.
Nine Tips For Controlling Transportation Costs As You Head Into Logistics RFP Season:
According to FreightWaves, shippers can see as much as a 10% increase in truckload rates next year due to high demand and tight capacity. Given the uncertainty of 2021 and the probability of rate increases, shippers need to take proactive measures to control their transportation costs as they head into logistics RFP season.
Below are nine tips for managing your 2021 transportation RFP for success.
Focus On Decreasing Length Of Haul
Generally speaking, shorter transits equal lower prices. Shippers can save time and money by strategically using distribution centers and condensing length of haul based on the location of customers. To help decrease the cost of transporting products to final destinations, utilize a nationwide network of warehouses to shorten line hauls. Additionally, shippers with long haul loads should focus on intermodal to help control transportation costs.
Consolidate Shipments To Increase Volume
Consolidating shipments can decrease overall transportation costs by increasing volume and improving operational efficiency. It also helps avoid loading dock congestion and can result in fewer accessorial charges.
Contract Consistent Freight Volume
If you have consistent volume on repetitive lanes, you can improve service levels and on-time performance by partnering with a 3PL. At GlobalTranz, we work to secure and negotiate contractual capacity for our shippers and leverage our virtually unlimited network of truckload carriers to cover backhauls for those loads.
Utilize Drop Trailers For High Shipment Volumes
GlobalTranz’s drop trailer program helps keep freight costs down, even in challenging freight markets. Through our drop trailer program, shippers can load trailers at their convenience, which reduces the cycle time for loading and unloading while also providing time for carriers to align power units and drivers’ hours of service.
Partner with Providers Who Provide End-to-End Visibility
When COVID-19 disrupted supply chains, visibility became the ultimate tool to overcome disruption and build supply chain resiliency. During your logistics RFP bid season, evaluate your providers’ track and trace capabilities, and look for a partner who can provide end-to-end visibility into your freight movements.
Leverage Real-Time Data
COVID-19 highlighted the importance of leveraging real-time data to make decisions. While many businesses have access to data, they typically lack the tools to make decisions from that data. It’s important for shippers to partner with tech-enabled 3PLs who can utilize data to identify optimization opportunities.
In a recent Logistics Viewpoint article, Steve Banker illustrated how GlobalTranz empowers shippers’ decision-making and robust contingency planning through real-time analytics. Through our Cost Prediction Model (CPM), clients received real-time data into changes in spot and contract rates across the top 20 COVID-19 hot spots in the United States. Our clients were able to use these data insights to inform their decision making and helped protect their transportation operations from disruption.
Extend 2020 Terms For High-Performing Incumbent Providers To Manage Churn
Consider fast-tracking high-performing providers through the logistics bid process by extending their 2020 terms into 2021, including better payment terms and additional benefits. Not only will this save you time during the logistics RFP process, but it will also result in a stronger relationship with your provider.
Recently, one of GlobalTranz’s long-stranding clients adopted this strategy. In 2019, this client put 90% of their truckload business out to bid, but only put about 60% out to bid in 2020. Our client found this strategy enabled them to collaborate with incumbent providers to agree on mutually beneficial pricing that can move with the market, driving consistency in service.
That being said, at times, shippers are compelled to seek out new providers to add to their network. If you find yourself in this position this logistics RFP bid season, consider the following factors when you evaluate potential new partners:
- Industry track record
- Experience serving clients in your industry vertical
- List of clients and customer references
- Technology capabilities that include a robust TMS, mobile app, end-to-end visibility, and real-time data analytics to drive your decision-making
- Proven processes
- Dedicated operations and account management teams to service your business
Become A Shipper Of Choice
In a volatile market, carriers can choose the loads they accept and typically prioritize shippers who provide better experiences. To be a shipper of choice, run efficient and friendly dock operations, reduce driver wait times, provide comfortable breakroom and restroom accommodations, and pay carriers quickly and accurately. When you are a shipper of choice, you will experience higher service levels, fewer claims, and better freight rates.
Communicate Objectives To Drive Collaboration
Overall, the market volatility of 2020 resulted in greater collaboration with shippers. The best way to smooth the cyclical curve is by prioritizing communication. Rather than using fines to drive service, focus on communicating key performance indicators (KPIs) and objectives to drive collaboration. Quality logistics service providers will hold themselves accountable and benchmark for continuous improvement to ensure they are helping impact your business. On-time pickup, on-time delivery, and tender acceptance or rejection percentages are a few examples of critical KPIs.
Shippers can set themselves up for success in 2021 and control their transportation costs by developing collaborative, strategic partnerships with their providers. As you start your logistics RFP bid season, look for logistics providers, like GlobalTranz, who have the people, processes, and technology to protect your transportation budget from market volatility.
When you partner with GlobalTranz, you gain a team of logistics experts who leverage our award-winning logistics solutions, virtually unlimited capacity, and best-in-class technology to protect you from market volatility in 2021 and beyond.