April 2021 | Sponsored | Knowledge Base

How Short-Term Bids Can Produce Long-Term Benefits

Tags: Trucking, Transportation, Big Data

Mini-bids act as a supplemental strategy, providing short-term revisions to rein in costs and shore up routing guides. You need accurate data to execute a successful mini-bid strategy.

Ken Adamo, Chief of Analytics, DAT Freight & Analytics, 800-547-5417

What's the best way to repair a broken routing guide? In these days of COVID-19, the question comes up often, with widespread market disruptions and network imbalances leaving many supply chain experts scrambling for solutions.

At a recent roundtable discussion, members of the Freight Market Intelligence Consortium—a group of leading shippers who rely on analytics from DAT iQ—discussed the rising adoption of mini-bids.

While not designed to eliminate the annual procurement process, mini-bids act as a supplemental strategy, providing short-term revisions to rein in costs and shore up failing routing guides. It's an approach that's been used for decades, but now with access to cutting-edge freight analytics, the strategy is becoming more and more common.

In general, there are four trigger events for a mini-bid.

1. Network Expansion

Whether you're introducing a new product that requires new inbound lanes or adding new regional markets that require new outbound lanes, expanding your network requires contract rates for new lanes that weren't in scope at the time of your annual procurement cycle.

2. Distressed, Failing Carriers

When markets become volatile, some carriers may fail to meet expected service levels. And when volatility continues for an extended period, some carriers may be forced to close operations.

In either scenario, you need new options for the lanes those carriers serviced, and targeted mini-bid events are an approach to getting back on track and/or testing new service providers.

3. Tight Capacity

When capacity is tight and spot rates exceed contract rates, carriers may turn down shipments or ask for higher rates. In some cases, a carrier could be seeking these rates for a short period as a way to reposition equipment to a different region.

In these scenarios, the carrier's actions may indirectly initiate a mini-bid process that ultimately helps you strengthen your long-term relationship.

Tight market conditions that lead to routing guide failures and spot-market premiums can cause you to spend budget at an unsustainable pace. Mini-bids can help contain costs in these conditions. You can even anticipate seasonal spikes and plan a mini-bid proactively.

4. Soft Markets

When capacity is plentiful, spot rates might drop well below your contract rates. A wide gap might initiate a mini-bid to lower your rates and align more closely to the market. However, you may want to honor these contract rates as a bargaining chip for future scenarios when the tables turn and the carrier is tempted to refuse contract rates.

Regardless of what triggers the event, you need the most accurate and reliable data to execute a successful mini-bid strategy. That includes up-to-date insights into daily changing truckload rates, plus the ability to benchmark your network's performance against the overall market.

With that 360˚-view, your operations will have the agility and insights to respond to markets in real time, empowering your transportation teams to make clear and confident decisions.






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