Thanks to increasing freight rate hikes, many shippers are pivoting their strategy. So, how will you adjust your freight bidding process and strategy? It’s crucial to account for changing industry trends for both the rate and shipper bidding strategy while remaining profitable.
We’re here to help. Read on to discover our helpful guide for developing a successful bidding process and strategy for your commercial trucking company.
What is Freight Bidding?
Freight bidding is commonly used by companies that transport large volumes of goods or have complex shipping requirements. It allows them to compare rates from different carriers and select the one that best meets their needs.
Freight bidding is the process of a company soliciting bids from different carriers to transport their goods from one location to another. The company typically provides the carriers with details about the shipment, such as the origin, destination, weight, dimensions, and expected delivery date. The carriers then submit bids to the company, specifying their rates and terms for transporting the goods. The company can then review the bids and choose the carrier that offers the most competitive price and the best terms for their shipment.
7 Tips For Developing a Successful Freight Bidding Process & Strategy
Developing a successful freight bidding process and strategy is essential for companies looking to manage their shipping costs and improve their supply chain operations. Here are some of our best tips to help you develop an effective freight bidding process and strategy:
1. Know the Market
You can't start bidding successfully if you don't know the current market rates. There’s no doubt that shippers have their thumb on the pulse of marketing pricing, so you better be in the loop, too.
Use facts and data to know the historical pricing of each lane and combine this with a bidding software solution. Combining these resources removes the manual labor factor from the process. Your software will alert you to annual drops and price increases for a particular lane – that way, you aren't under or overbidding.
For example, 2018 ended with rates at $2.14 per mile. By the end of January, they had dipped below two dollars. Your rates will be off if you aren't keeping up with the market.
The second advantage to keeping in touch with the market is that you see trends and can adapt and adjust to the changing market. Remember, successful companies do not operate in a vacuum.
2. Know Your Competitors
Before you start creating your competitive bidding strategy, you need to do your research and find out what your competitors are charging. This process of knowing where you stand is called mapping your competitive position. This strategy works because it doesn't just compare price – it compares the price with the benefit the customer receives from the product.
By making this dual comparison, you take into account that a higher-priced product may be providing more of a benefit, making the higher price worth it in the eyes of the customer. Keep in mind that this is not a one-time project. Just as you change your bid strategy, so do your competitors, so this research should be ongoing.
3. Optimize Your Bidding
Talk with your team about what opportunities are best for your fleet. What lanes do you underperform in? What lanes do you dominate in? Then, use this data to help shape your bid strategy.
To improve underperformance, determine why and focus your bidding in that area. Or you could decide to cut the underperforming lanes. Then you can dedicate more resources to the lanes that you dominate in.
4. Stay Consistent
Whatever strategy you are your team decides on, it’s important to stay consistent with it. This will be the only way to tell if it works for your company or not.
After you stick with the strategy for a while and have sufficient data, you can analyze its performance. If your plan has holes or lacks in areas, then you can address those. When you decide to make changes, only make one adjustment at a time. Otherwise, you won't know what changes work and which don’t.
5. Leverage a Solution To Maximize Profit
Now that you have your strategy in place, you need a bidding platform and management solution that will help you maximize your efforts. This will save you both effort and time.
Look for a service that can fully integrate into your other software and programs. That way, you have a seamless workflow from bidding to shipment management, invoicing, and accounting.
6. Get Familiar With Mini-Bids
Shippers are now using a strategy called mini-bidding, where shippers bid out only a small portion of their volume. This is different from years past, when shippers leverage their high volume to negotiate for lower rates.
With price hikes, using their entire shipping volume exposes them to a tremendous amount of financial risk. So by mini-bidding, shippers can limit the burden of annually bidding their entire network.
The advantage for carriers when they agree to these "surgical bids" is that they don't have to redraw the lanes map entirely every year. The extensive annual bidding process is time-consuming for both parties. Consider agreeing to longer than a year of generalized contracts. Then more frequent mini-bids throughout the life of the contract.
7. Don't Assume You Have the Upper Hand
The silliest mistake you can make is to let your guard down on an existing relationship. Just because you have a relationship with a shipper, that doesn't mean you no longer need to cultivate that shipper's business.
Many shippers will analyze current relationships and rates to cull the budget. So be sure to make compelling bids that make the shipper feel like you are a "value-added" service.
Develop Your Freight Bidding Strategy
With the beginning of each new year comes freight bidding season for the trucking industry. You must stay on top of industry trends to stay competitive and have a strong bidding strategy for your next freight contract.
Once you have your bidding strategy in place, you need to optimize your system. The best way to do this is to streamline your internal processes by integrating your bidding, tracking, and financial processes.
Learn how to integrate with ComFreight to make invoicing and load matching easier.