Annual Freight Bid – You’re Doing it Wrong.

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Contributing Editor: Dustin Snipes – Enterprise Sourcing Manager

The annual freight bid goes out every year like clockwork.

The transportation manager for a business that ships, will usually send out a massive blast to third party logistics (3PL) providers and carriers. These providers are often given a spreadsheet that lists last years shipping lanes without the cost of the freight, cost of the order, or even the information on who provided the transportation. Essentially, they are receiving a blank spreadsheet.

The business was not built on a blank spreadsheet and neither should your transportation procurement method.

The best possible way to assess a transportation provider, is to meet face-to-face. The provider needs to see the operation and the current state of the program. The uniqueness of a business’ process and product cannot be captured in a column or row.

To better serve a shipper, the right questions need to be asked.

There are many questions that a provider should be asking a shipper? Let’s break them down into sections.

Provider Capability

  1. What ERP are you running? Is it integrated with your TMS?
  2. What is your current providers support structure for your account?
  3. What indirect cost avoidance measures did your current provider propose to you before onboarding your account? Did the cost avoidance measures happen?

Budget and Finance

  1. How are you allocating your freight costs today?
  2. What is your current provider’s fee structure?
  3. How much did you spend on chargebacks from Wal-Mart or other ‘Big Box Retailers’ last quarter?

Operations

  1. Are there any carriers you do not work with? Why?
  2. What is your current OTP%?
  3. What is your current claims % and who is handling the filing of these claims?

Evaluating a partner in a mutually beneficial business relationship

Do not prep the potential provider to ask you these types of questions. See if they come in only speaking about cost.

The always popular “We will save you 10% on your rates” is something that uneducated sellers like to tell uneducated buyers.

A well-managed transportation provider should truly help you optimize your supply chain and be an outsourced extension of your business. They should not only report on your issues, but alert you when an issue arises, and offer you solutions to fix it then, and moving forward.

 

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