By Mike Hane | Senior Director, Transportation | Chainalytics
We hear it all the time: Companies are wary of putting out a truckload bid in a rising freight market like the one ahead in 2017. They don’t want to risk getting hit with a potential increase. While we’re still seeing savings in the bids we’re doing right now, that could change later this year. But bidding, even in a rising freight market, is actually a good move. You can lock in rates with more predictable budget impacts down the road. And while rates continue to rise–bid, or don’t bid–either way your costs are bound to go up.
If you decide to stick with the seemingly “low” previously contracted rates you negotiated with truckload carriers , you may face some unpleasant surprises in moving your freight later this year:
- When your contracted rates slip too far below the market rate, your incumbent truckload carriers are less likely to accept your load tenders.
- You might be forced to go deeper in the routing guide and tender freight to a higher cost carrier or use a higher cost back-up pricing matrix to actually move your loads.
- Your carriers may begin to ask for increases individually, and you will be negotiating in a vacuum with no competitive pricing to compare their rates against.
- If you don’t do a bid and leave your transportation strategy to your routing guide you could end up with a carrier deep in your guide picking up the freight at a potentially higher cost than a freshly negotiated rate. You’re putting yourself at even more risk for increased costs and potential service failures.
Consider this: If you think you already have great rates, look at your tender rejects. Your best rate (barring 100 percent tender acceptance) is not your cost on a lane. And without some external transportation market-wide insights, like the Chainalytics Freight Market Intelligence Consortium (FMIC) transportation benchmark, you don’t really know if your freight rate is “great.”
How can a transportation benchmark help your business in 2017? No one said you have to bid your entire transportation network; you can use FMIC to choose which lanes and carriers are in line with the market and pre-award those (extend contract terms), while bidding out lanes that are clearly no longer in line with the market. It just makes more strategic sense.
Chainalytics Transportation Senior Director Mike Hane has worked in the transportation software and consulting services field for over 20 years, 11 of those with Chainalytics. His main focus is helping companies take costs out of transportation networks while improving customer service. He has worked on over 100 projects across many industries in North America and Europe, primarily in sourcing, fleet/mode analysis, TMS improvements, and strategic network design.
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