Freight Bid Tip # 5. Conduct Multiple Rounds of Bidding

The objective of a freight bid project is to secure a range of carriers and logistics service providers that are best able to supply a shipper with the service (e.g. transit times, customer service, shipment tracking information), capacity (e.g. drivers, tractors, trailers, straight trucks) and pricing to ensure the company has a competitive advantage in the market. It takes time to do this right.

If your company has conducted a professional bidding exercise, you should be able to rank your service providers on a set of variables at the end of the first round of bidding. If the bidding process has been conducted effectively, there will likely be some significant cost savings, particularly for companies that have not gone to the market for several years.

There is a temptation on the part of some shippers to “take the money and run.” This could be a big mistake.

The end of round 1 should be a time of thoughtful reflection and evaluation. Are you ready to entrust your freight transportation to some new carriers? Do you know them well enough to make the switch? If one or more incumbents have performed well over the years, but their rates were not as competitive as you would have expected, is it not time to give them a second chance? For companies that may have not made extensive use of intermodal service in the past, this is a good time to evaluate how much over the road business could be shifted to intermodal service.

Some other key issues should be considered. What is the size of your freight spend and will the low bidder or bidders be able to meet your needs. Conducting a multi round bid (e.g. 2, 3 or even 4 rounds) allows you to leverage your volumes over a shrinking carrier base, progressively improving your pricing and creating some true core carriers. For companies that spend tens of millions of dollars on freight, this is an entirely appropriate strategy.

Similarly, in this era of tight capacity, it makes sense to ensure your company has backup carriers, particularly for heavy truckload volumes. Conducting a multi-round bid allows a shipper to make thoughtful business decisions and establish a strong, robust supply chain.

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