The original intent may have been for shippers to secure capacity at agreed-upon rates and for carriers to ensure they have enough volumes to keep their trucks loaded and moving. However, the reality is that contracted freight is actually a promise – not a binding agreement.
Carriers routinely implement General Rate Increases during the contract period. At the same time, a retailer whose product demand drops sharply has less need for transportation capacity and therefore tenders lower volumes to contracted carriers.
These actions are not driven by either party to avoid their commitments – they result from a past practice that no longer works in today’s fast-moving business environment. Quite simply, a lot can change in a year.
The frequency of RFP events is only one area that can be improved as shippers look for a better way to manage freight procurement processes.
Some items on a shipper’s “Wish List” for freight procurement are flexibility, visibility, and efficiency. Rather than implementing bid events annually “because that is how we always did it in the past,” savvy shippers are scheduling bid events that meet their cyclical and business needs. Some companies hold bid events quarterly, and others implement ad hoc bids to address issues within a specific geography.
Both shippers and carriers find that direct communication during the bid process can save time and money and lead to contact arrangements that are a good fit for both parties. For example, carriers can learn how they compare against others bidding for specific lanes and make informed decisions. If the lane does not fit their network profitably, they can choose not to bid for that lane while bidding for other freight from the same shipper. This transparency allows shippers to focus on bids most likely to meet their requirements for service and price.
A major distributor once commented, “In today’s environment, I would have to be crazy not to look at every aspect of the supply chain to gain efficiency.” In the past, a freight bid was conducted manually using email and spreadsheets and took months to complete. This labor-intensive process placed even greater strains on small logistics teams. And it tied up resources that could be better allocated to other aspects of the operation.
Fortunately, these and other aspects of freight procurement can be improved by technology currently available in the market. The Emerge Freight Procurement Platform has helped companies transform a process that once took months to one that takes one to two days at the most. Emerge also offers a marketplace that connects shippers and carriers directly – providing them more options for capacity and carriers access to companies they may not have served before. And with greater efficiency, logistics managers can focus on strategic issues to set the course for the future rather than spending time on legacy processes that are no longer effective.
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