Best Practices In Freight Bidding

Dec. 17, 2007
12 ways you can ensure you're receiving competitive rates from your carriers.

"Freight bidding can be a time-consuming endeavor that is disruptive to the supply chain," admits Chris Ferrell, principal with supply chain consulting firm Tompkins Associates, "but bidding is necessary to ensure that you are receiving competitive rates and quality service." Based on a recent survey conducted by the Supply Chain Consortium, Ferrell offers the following best practices for supply chain executives involved in freight bidding.

  • Get a commitment from executive management. Clear expectations and a consistent message will increase the likelihood of success.
  • Understand current freight costs up front. At minimum, separate fuel surcharges (FSC) and accessorials from the total spend.
  • To ensure competitive rates, mix in new transportation providers and allow existing carriers to bid on markets outside their historical base.
  • Standardize FSCs and accessorials to ensure an apples-to-apples comparison of rates.
  • Lane Bundles Work, But Few Are Trying Them

    Percentage of companies who determine lane bundles in freight bids:

    Source: Supply Chain Consortium

    Allowing a carrier to bundle a group of lanes that complements its current portfolio is more likely to yield a lower total bid than the sum of the individual lanes.

    Have a minimum of one year's worth of clean historical data for bid participation.
  • Look for opportunities to decrease costs through a change of transportation mode (e.g., from less-than-truckload to truckload, or from truckload to rail). Periodically review lane potential for a more economic form of transportation.
  • Use a multi-round bid process.
  • Encourage carriers to take a more holistic look at your freight. Potential solutions to solicit during a bid include: freight brokering, bid-packages (shipper defined groupings), lane bundles (carrier-defined groupings; see chart), dedicated fleets, and modal integration (e.g. TL intermodal, LTL to multi-stop TL, etc.).
  • Leverage volume through a relatively small group of core carriers to yield lower costs and more capacity.
  • Bid freight on a regular, predetermined basis (annually, bi-annually).
  • Put as much effort into implementation plans as the bid.
  • Track carrier performance against commitments made on at least a quarterly basis and utilize feedback loops.
  • See Also

    About the Author

    Dave Blanchard | Senior Director of Content

    Focus: Supply Chain

    Call: (941) 208-4370

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    During his career Dave Blanchard has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeekEHS Today, Material Handling & LogisticsLogistics Today, Supply Chain Technology News, and Business Finance. He also serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2010), which has been translated into several languages and is currently in its second edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.

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