Too many companies operate under the assumption that freight costs are fixed costs. They aren’t. And while there are several ways to lower transportation spend, one of the most lucrative involves pitting competing carriers against one another in order to win your business.
Here’s how to create a successful shipping auction to secure more competitive rates.
Use a TMS to stimulate more competitive bidding
One of the most compelling reasons to implement a transportation management system (TMS) is to lower freight costs. And one of the primary ways a TMS helps lower costs is by informing procurement negotiations.
Simply from gathering insights on optimal pricing, procedures, and freight rates before going into procurement negotiations, companies can secure significant savings. The more data a company comes to the table with, the easier it is for carriers to give their best quote, whether it’s for a one-off shipment or an ongoing partnership. And since all carriers are bidding electronically through the same system, competitive pricing is guaranteed.
Additionally, companies can rapidly scale up this process by bringing in managed TMS services. This can further increase savings during the strategic carrier bidding process.
Leverage steady lane volume
When a company can guarantee a carrier regular shipments of desirable freight, this creates an enviable position to negotiate lower freight costs across the board. A steady shipping contract is a boon to carriers, allowing them to invest in their operations and build out their network.
To leverage this advantage, companies can reach out to several key players highlighting the volume of freight they plan to ship and the steady ongoing arrangement they’re looking to establish with the carrier that wins the bid.
This strategy can be especially powerful if the shipper already has a strong working relationship with certain carriers. With demand for trucks outpacing supply, carriers are more likely to want to work regularly with companies that have a proven track record as a no-nonsense partner.
Streamline the freight bid process
Carriers are regularly inundated with bid requests for all types of freight. To increase the likelihood that they’ll bother bidding, companies can streamline the process by classifying their shipping requirements.
First, companies need to classify their overall lane requirements and freight characteristics. These can include distinctions like equipment required, live load, and expected lead times.
They can then break shipments into sourcing groups based on how they fit within the carrier’s actual business scope. For example, it’s important to let carriers know if certain delivery windows are flexible and when adherence to time-sensitive schedules is a must.
Classifying bids along these lines enables carriers to bid more aggressively for a company’s business. It also makes their lives easier, letting them know instantly whether it’s worth their time bidding. If a carrier can’t meet the requirements, they can opt out of the auction and save both parties’ time.
Price out shipping exceptions
If carriers won’t budge on their rates, another tactic that can lower freight costs involves allowing for exceptions.
If a company has deployed intelligent supply chain management software, they can leverage their network of real-time data for insights into possible acceptable delays or exceptions. These can drastically lower freight costs, while also making contracts more enticing to carriers.
Exceptions might include night-time freight pickups or shipping on off-peak days. Fridays and Mondays, for example, are typically “off-peak” days when many carriers are looking for more freight. When such exceptions are built into a larger contract, companies can create a lucrative bidding environment.
Rank carriers based on performance
The lowest bid in the world won’t help lower costs if the carrier can’t deliver. That’s why it’s vital to segment and evaluate carriers based on their historical performance. Luckily, tracking carrier performance is one of the places where an intelligent and fully integrated TMS is so useful.
Identifying when and where it’s okay to accept bids from the cheapest carrier and when it’s not a viable option can allow supply chain managers to optimize carrier rates at separate locations, instead of accepting blanket, less competitive rates. Valuable metrics to track include on-time pickup and delivery, tender acceptance rates, and demurrage fees.
Why pay more than the lowest possible rate?
Stop accepting overpriced fixed freight rates and noncompetitive bids. Generate competitive interest by leveraging data gathered through a TMS.
CTSI-Global’s industry-leading TMS helps companies mine all of their shipping data for the freight metrics and carrier pricing that will give them the upper hand in future negotiations. And since we’ve spent decades building strong relationships with our vast network of carriers, we can help shippers access rates that they won’t find anywhere else.
More competitive carrier rates are within reach. Uncover them today.