After the pandemic flipped the world upside down, the truckload marketplace cratered. Then, just as quickly, it rebounded, with pent-up demand and capacity shortages driving the longest period of rate inflation in history.
The ongoing volatility has driven up the price of truckload freight contracts, but also shortened the duration of those agreements. The average contract is currently down to 190 days and resets are coming in 18% higher, year-over-year.
Add it all up, and it’s no wonder why freight brokers and carriers are drowning in spot quotes and RFPs.
Eric Williams, Senior Program Manager at DAT, recently discussed with leaders in the transportation industry how they improve the rating process with freight intelligence. The webinar, “Long Live the RFP: How to Bid With Confidence in the New Normal,” featured Brad Loeb, Vice President of Pricing and Analytics for Armstrong Transport Group, and Andrew Smith, Vice President of Sales and Operations for Circle Logistics.
3 best practices for RFP bidding in the new normal
When bidding on RFPs or quoting spot rates, brokers and carriers must shift their mindsets to account for factors that have changed since the pandemic.
1. Quote fast and often
Pre-pandemic quoting was more aligned with an annual RFP process where brokers and carriers submitted rates and waited for weeks and months to get a response. Market volatility has made this approach all but impractical.
“We used to treat every RFP like it was the same,” said Circle Logistics’ Andrew Smith. “But we found that a lot of shippers analyze their rates differently.”
Circle Logistics sought a better understanding of how shippers analyze RFPs and tweaked its RFP strategy based on how customers actually use them. This led to a new mantra: “Quote fast and quote often,” Smith said.
Circle Logistics realized it was no longer prudent to bid on everything in the RFP but to focus on lanes that are most profitable for the company. This is one way bid strategies have evolved, and the result is better for all parties involved. Brokers and carriers are focusing on their best lanes to improve truck and driver efficiency while shippers are getting capacity from transportation providers who are the most proficient in those lanes.
2. Consider all outside influences
So many changes happen during the course of a year from lane to lane or region to region. When submitting bids for an RFP or spot freight, you need to consider all contingencies.
Armstrong Transport Group’s Brad Loeb commented on the difficulties of relying on experience in a volatile freight market. Pricing for cross-country lanes can sway by $2,000, $3,000 or even $4,000 over the course of a year. “You can’t just look at it and say, ‘Well, I paid this last year, so that’s what I am paying this year,’” he said.
The company has been using data analytics in more depth than before.
“In the past, we could say we had a carrier, that carrier runs it at this rate and that should be about market, so if we had to expand that lane outside of that carrier, we can probably lock somebody in at that rate,” Loeb continued. “Now, we have to look at a broader picture on every single RFP and every single customer. We have to go into a specific game plan for that customer on ‘how are we going to grow with them and where do we want to grow with them, and where do we fit with their network?’”
3. Be more analytical in your quoting
Prior to the pandemic, brokers and carriers quoted rates on a more emotional than analytical level. There is something to be said about the flexibility that comes from having relationships of trust with shippers during the RFP process, and quoting rates based on established carrier relationships and historical data.
Quoting must now be more analytical and driven by forecasting that can account for market fluctuations.
“The goal is to capitalize as much as we can on the speed of quoting for freight and being able to give that front-end user the information [they need] to know when it’s best to lock in that truck versus to keep working and try to get a better rate,” Loeb said.
Armstrong Transport Group’s new pricing tool will have two functions – one for spot rate quoting and one for RPFs. “This system will weigh all the averages and data that we want and then put out recommendations for numbers for rates with a confidence score attached to it,” Loeb said.
How to use data in RFP bidding / quoting
Having access to relevant, timely and accurate rate data is the first step. Understanding how to use the data when responding to an RFP comes next. To get the full picture, companies have to look at historical data, forecasted rates and their own internal data.
“We’ve gone so granular to look at what day of the week do we cover best at and what time of day do we cover best at,” Loeb said. “We’ve noticed historically the last two years that Thursday is our most expensive day by far. Anything other than those one-day transits, we pay extra, so we have to look at what day of the week is this typically moving and then we try to give recommendations even of what time of day do we recommend covering that.”
In addition to using multiple layers of internal and external freight data to determine rates, your data acumen will also help with building relationships with shippers. You can use your analytics to explain the reasoning of your pricing and identify areas where you can collaborate and be more flexible together.
Circle Logistics has found it effective to reach out to shippers and decision-makers during the RFP process to explain why it is bidding on certain lanes, and share data it has collected about lanes it has serviced in the past. “Showing them that data has been really key,” Smith noted.
How DAT iQ can help your company
The predictive rate data that Smith and Loeb are using in the RFP process comes directly from DAT iQ. As they both stated, accurate forecasting requires an enormous amount of data, and the forecasting feature in RateView Analytics from DAT iQ analyzes nearly half a trillion dollars in freight spend, providing confidence in the results.
That Ratecast in RateView Analytics allows users to view predicted rates for any time period and lanes they choose. The user can then determine how to quote and plan loads that fit into their freight networks. Both Smith and Loeb also use the Ratecast tool to plan daily and weekly volumes and for pricing every load to determine which ones will likely become more expensive today or tomorrow.
View the full webinar to learn more about the future of rates and RFPs and to get a more in-depth understanding of rate forecasts from DAT iQ.