Thanks to skyrocketing freight rate hikes in 2018, many shippers are changing their strategy for 2019. Spot truck rates increased a whopping 20% from 2017 to an average of $2.14 per mile.
So how are you going to adjust your freight bidding strategy? You want to take into account the changing industry trends for both the rate and shipper bidding strategy and still remain profitable.
Keeping reading for a guide to developing a successful bidding strategy for your commercial trucking company.
1. Know the Market
You can't start successfully bidding if you don't know what the current market rates are. There is no doubt that shippers have their thumb on the pulse of marketing pricing. So you better know it too.
Use cold hard facts and data to know the historical pricing of each lane. Then combine this with a bidding software solution.
By combining these resources you take the manual labor factor out of the process. Your software will alert you to annual drops and raises in price for a particular lane.
That way you aren't under or overbidding. For example, we mentioned at the beginning of the article that we ended 2018 with rates at $2.14 per mile.
But by the end of January, they had dipped below two dollars. If you aren't keeping up with the market, then your rates will be off.
The second advantage to keeping in touch with the market is that you see trends and are able to adapt and adjust with 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. 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 price with the benefit the customer receives from the product.
By doing this dual comparison you take into account that a higher priced product may be providing more of a benefit. This would make 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
Have a conversation with your team about what opportunities are best for your fleet. What lanes do you underperform in? What lanes do you dominate in?
Use this data to help shape your bid strategy. If you want to improve underperformance, figure out why and focus your bidding in that area.
Or maybe you 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 decide on, 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 you have sufficient data, then you can analyze its performance. If you find that your strategy has holes or lacks in areas, then you can address those.
When you do decide to make changes, only make one adjustment at a time. Otherwise, you won't know what change works and what change isn'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 in both effort and time.
You will want to 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, to invoicing and accounting.
6. Get Familiar with Mini-Bids
Shippers are now using a strategy called mini-bidding. This is where shippers bid out only a small portion of their volume. This is different from years past where shippers leverage their high volume to negotiate for lower rates.
With the price hikes though, using their entire shipping volume exposes them to a great 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 completely redraw the lanes map every year. The extensive annual bidding process is time-consuming for both parties.
Consider agreeing to longer than a year generalized contracts. Then more frequent mini-bids throughout the life of the contract.
7. Don't Assume You Have the Upper Hand
They silliest mistake you can make is to let your guard down on an existing relationship. Just because you have a relationship with a shipper doesn't mean that you no longer need to cultivate that shipper's business.
Many shippers will analyze current relationships and rates as a way of culling the budget. So be sure to make compelling bids that make the shipper feel as though you are a "value-added" service.
Develop Your Freight Bidding Strategy
With the beginning of the year comes bidding season for the freight industry. To ensure that you stay competitive and have a strong bidding strategy you need to stay on top of industry trends.
This means understanding both lane rate trends and shipper's changing negotiating strategies. Carries can no longer approach freight bidding with ambivalence.
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 you can integrate with ComFreight to make invoicing and load matching easier.