How rate shopping can actually increase your costs
By Jordan Pottorff, CTB
Shippers shopping for the best rate on a per load basis or going out for bid every year to secure cheap capacity has been a long-standing practice in our industry. It’s a method that has benefited shippers across the country for years, but with our industry changing at such a rapid pace, is rate shopping really the best way for shippers to manage their freight?
When I talk with shipping managers and other decision-makers about their freight, a common response I get is, “I just go out for quotes, and the best price wins. Send me an email, and I’ll get you added to my list.” For years the transactional freight relationship of having hundreds of brokers and carriers on a quote list has got the job done and never forced shippers to look at their internal operations when it comes to available capacity until now.
The rate-shopping email blast practice of yesteryear won’t get any shipper-of-volume the return they want in today’s climate. The market has changed and is now putting a high amount of stress on shippers who don’t have strong relationships to fall back on. The ones who saw the market shift coming and planned accordingly likely have put new procedures in place that search for more than the cheapest price in a carrier or broker. For the ones who haven’t, now is a perfect time to start.
A few things a shipper should consider when sourcing available capacity is the amount of lead time you provide a carrier or broker, being flexible with pickup and delivery appointments, and considering all forms of transit if it’s not a time-critical shipment. The ability to intertwine these methods – – paired with implementing procedures to minimize the amount of time carriers spend waiting at your facility – – will open the doors to additional capacity with quality carriers.
Another step shippers need to consider is the volatility of the market. Going out for bid in today’s market does not make sense. You will secure rates that will compare to the spot market and not get you the desired results you’re searching for, which is affordable capacity with a quality provider. Shippers would be better off partnering with a smaller crop of carriers or brokers with strong carrier networks that will cover the necessary volume while working together to create a pricing model that benefits everyone involved.
When looking internally and taking the current market and everything talked about above into consideration, a shipper will want to partner with a carrier or broker with strong technological offerings that aid in visibility and reporting to improve on-time deliveries and overall performance. A brokerage or carrier with service offerings such as a customer portal, various forms of tracking, a freight spend and on-time reporting tool, and 24/7 availability could be the difference in meeting your goals or continuing to struggle in this market.
Lastly, implementing or partnering with a provider who offers a Transportation Management System (TMS) is the best way to streamline your operation, as studies show shippers who operate with a TMS see 12% savings on their freight. A TMS provides data and analytics that will provide hard data for shippers to review. This information could be looked at to gauge overall costs or determine areas that need improvement across the board as you look for internal improvement or prepare for your next procurement exercise.
All told, our industry is changing and the way shippers manage their freight is different than in times past. It’s important shippers know the pulse of our industry and plan accordingly for what will best fit their operation now and in the future.