In the U.S., the primary mode of transport for the movement of goods is via truck. Far outpacing air freight, rail, water or pipeline, the combined shipping volumes from Full Truckload, Less-Than-Truckload, box trucks, and delivery vans represent a staggering 70% of the total transportation market. Within the trucking industry itself, there’s no question that the Full Truckload sector dominates in terms of revenue, weight, and value of merchandise shipped.
Given the strong position held by FTL shipping, one would think that the way in which shippers procure Full Truckload services is a highly evolved and fine-tuned process. Unfortunately, and while recognizing that shippers and truckers have made admirable gains in how they manage RFPs (Request for Proposal), much of the work that goes on during “Bid Season” remains fragmented, manual, and rife with constraints.
In this blog, we’ll highlight the top five FTL procurement challenges that shippers have historically faced. From there, we’ll describe how companies can deploy a combination of technology and Change Management techniques to overcome these challenges and transform a once-per-year bid event into a streamlined process of mini-bids throughout a twelve-month period.
The Top 5 Procurement Challenges Faced by Full Truckload Shippers
- Lack of centralized control of FTL freight procurement. Needless to say, the larger a company is, the more complex its FTL network will be. Bearing in mind that most logistics teams are understaffed, yearly bid events for companies of any size become unwieldy due to factors like limited access to accurate data, difficulty in compiling Key Performance Indicators, and “rogue” operating units with a company’s network that tender loads to unapproved carriers
From a financial perspective, another challenge that shipping folks face is timely visibility into actual vs. budgeted FTL costs. Although shipping managers execute RFPs, manage operations, and approve freight invoices, they don’t always have a window into how costs are trending against a budget. Closely linked to issues like tender rejections and paper rates, this can make managing the FTL procurement process even more difficult.
- Knowing whom to invite to a bid event. One of the biggest issues that shippers confront when procuring FTL services is related to the number of carriers they invite to a bid. Due to time constraints and limited access to a broad base of carriers, shippers invite a relatively small pool of existing and potential truckers to an RFP. In what is essentially an under-representation of capacity, it’s hard for shippers to get a true representation of market conditions when only a handful of bidders participate.
This constraint-based issue becomes even more troublesome when a shipper isn’t happy with current carriers and wants to make changes to its roster of providers. Even if a shipper can vet a couple of providers that meet their service needs, the capabilities of hundreds of potential partners will remain untapped due to the same time and access constraints mentioned above.
- The time it takes to execute FTL procurement events. One of the greatest impediments to an effective RFP process is the amount of time required to complete an FTL bid. Driven in part by the complexity of a shipper’s FTL model, it’s not unusual to see bids that take three months or more to complete. From a pure time and opportunity cost perspective, manual RFPs simply take too long and suck up human resources that could be dedicated to other facets of the operation.
Equally important is the fact that RFPs are designed for a one-year contract period. While that certainly aligns with a budgetary time frame, constant changes in market conditions are such that the rates quoted for a twelve-month agreement don’t remain accurate for very long. And everyone knows that when market changes inevitably occur, load rejections and paper rates surface to quickly render the results of an RFP obsolete.
- Difficulty in tracking RFIs, RFPs, counteroffers, and contracts. A big part of why FTL procurement processes lead to sub-optimized results is the difficulty of manually keeping track of what goes on during an RFP event. In what remains a spreadsheet and email-based exercise, even the most organized of bid pros soon find themselves mired in a sea of disparate information, version control problems, and the need to constantly “get everyone on the same page”.
Also, let’s not forget that if a shipper wants to bring new carriers into the mix, they have to conduct a Request for Information before they even get to the RFP process. It’s only after vetting potential carriers via an RFI that shippers can begin to manage the inevitable deluge of emails, questions and bidders “trying to be creative” by submitting their own pricing templates. For companies that do a second, short-list pricing round, this fragmented process is destined to drag on for months.
- Lack of RFP technology. When logistics people envision the application of technology to FTL bid management, it’s often within the context of automating the bid process itself. Certainly a major consideration that will be discussed in a moment, when shippers take a holistic approach to solving FTL procurement problems, they find that there are many upstream solutions that serve to improve the downstream bid process.
As mentioned previously, one constraint that shippers face with FTL procurement is the scarcity of data about lane pairs, volumes, and costs. Of course, Transportation Management Systems auto-generate this type of information, and when properly mined, a TMS can have a profound effect on the data-gathering phase of an RFP. Because a TMS is but one of many examples of technology that will enhance bid outcomes, shippers should focus on developing a multi-faceted tech stack that supports all areas of an FTL model.
How the Emerge Freight Procurement Platform Solves FTL Procurement Challenges
Long before the first line of code was written for the Emerge Freight Procurement Platform, every member of the development team was aware of the challenges that shippers face when contracting for FTL services. Founded upon this native understanding, the Emerge Freight Procurement Platform is a purpose-built solution that solves procurement problems that have plagued shippers for years on end. Here are but a few ways in which Emerge addresses those issues:
Execute and track multiple RFPs per year without missing a beat. One of the most attractive features of the Emerge Freight Procurement Platform is the ability of shippers to conduct multiple min-bids per year. While the shipper decides how many mini-bids to conduct, the Emerge solution makes it equally streamlined whether a company does two events per year, or ten.
Not only is speed of execution a differentiating element of the platform, shippers also have the option to carry out mini-bids for an entire FTL program, or they can host a mini-bid by region, lane(s), peak season or special project. Prior to the launch of the Emerge Platform, this level of flexibility was unheard of in FTL shipping and is one of the most popular aspects of the tool.
Invite the number of bidders that makes the most sense for your FTL model. In support of mini-bids, the Freight Procurement Platform also enables shippers to invite any number of pre-vetted carriers to an event. Whereas shippers were historically constrained by a lack of access to qualified carriers, Emerge opens the door to a universe of qualified carriers that collectively represent true capacity and pricing conditions.
Apart from inviting carriers that fit the service profile needed, shippers can also reach out to special designation carriers to participate in a bid through Scenario Builder. With this feature, a shipper invites truckers that are veterans, women and/or minority-owned businesses, all while assigning a predetermined percentage of loads to them. A great way to augment a company’s Environmental, Social & Governance (ES&G) efforts, highly qualified carriers that otherwise wouldn’t have an opportunity to quote, now do.
Control the entire FTL bid process on a single platform. One of the reasons why shippers conduct multiple bids per year on the platform is that it is entirely self-contained. Coupled with the ability to execute a Request for Information, the Freight Procurement Platform allows shippers to customize pricing templates, as well as articulate lane-specific service requirements. As bids are carried out and decisions are made, shippers can then remain on the platform to execute SLAs and contract details.
Explicitly stated at the beginning of this blog, shippers and carriers have done a lot of great work in the field of FTL procurement. With that said, much of what’s been accomplished are “workarounds” that compensate for flaws baked into an age-old RFP ritual. Driven mainly by manual processes fueled by spreadsheets and emails, there’s only so much that shippers can handle before they hit a wall.
Based on a deep knowledge of the end-to-end FTL procurement process, Emerge launched its Freight Procurement Platform to create an entirely new way to execute multiple bids per year. Empowered by the speed, flexibility, and control native to the system, shippers are now free to manage multiple RFPs that accurately reflect market conditions from a capacity, service, and rate perspective.