5 Ways to Enhance Opportunities for New Contract Freight Business
The year 2020 taught us a lot about the world and the transportation industry, including how quickly the conditions of the freight market can change.
The year started slow, culminating in a crash in the second quarter of 2020 that was followed by a rapid recovery in the second half of the year that lasted into the early days of 2021.
With this continued uncertainty in mind, fleets should seize this opportunity to identify new opportunities with shippers and third-party logistics (3PL) providers, including improving how they participate in RFP processes and rate analysis for contract freight.
So, where do you begin? Check out a checklist below of five areas to focus on to help maximize your fleet's utilization and your bottom line, both in 2021 and beyond:
1. Gain Visibility into Bid Details
Most RFPs give carriers point-to-point mileages for lanes, expected annual volume and product information, said Josh Schmidt, general manager of Liquid Trucking, but important details are often missing.
Plattsmouth, NE-based Liquid Trucking has a fleet of 190 tractors and 310 trailers, making it one of the top-30 largest bulk tank carriers in North America. Liquid Trucking operates nationwide, specializing in agricultural, food-grade and hazmat shipments.
Carriers need to know the operating characteristics of freight such as the volumes by day of week, and hours available for pickups, deliveries and wait times at facilities. These and other details should be more transparent with a large number of shippers using freight visibility platforms among other technologies, he added.
Another question for carriers to ask is related to the purpose of bids. Answering this question would help carriers determine how much time and effort they should invest in the RFP, said Joe Shefchik, vice president of business development and solutions for Paper Transport, a 850-truck fleet based in De Pere, WI, powering dry van trailers in regional, dedicated, local and intermodal lanes out of the Midwest and the Southern United States.
2. Understand the Changing Nature of Bids
One trend worth noting is that shippers and 3PLs are issuing fewer annual RFPs and increasingly turning to "mini" bids from carriers. The volume of RFPs — and mini bids in particular — has been steady with shippers trying to lock down capacity, noted Todd Smith, sales manager for Leonard’s Express.
Leonard’s Express is headquartered in Farmington, NY, and operates a nationwide refrigerated and dry van truckload fleet with 500 trucks and more than 800 trailers.
Mini bids provide carriers with a chance to focus on specific lanes to help optimize their freight network. These efforts are more likely to be rewarded with victories than spending an inordinate amount of time and resources on large, annual bid packages, Smith explained.
Conversely, mini bids can present more challenges to incumbent carriers. Losing a single lane can have ripple effects downstream on network capacity for connecting lanes, according to Michael Riccio, former chief marketing officer of Leonard’s Express.
3. Harness the Power of Data
For fleets, gaining access to accurate operating data and expert market analysis can help them more readily identify the right opportunities for their business and network.
Leonard’s Express has a full-time person who works on data analysis and bid responses. The company also has a process of continuous improvement to utilize good data and filter out bad data, Smith said.
Having confidence in data is helpful for Leonard’s Express to know how to respond when a customer receives a lower bid from someone else, explained Riccio. The carrier with the lowest rate could have underbid a lane as a result of not having the same quality of data. Additionally, this could be an opportunity to discuss opportunities with the customer to keep the business by driving out costs and improving productivity, he said.
4. Have a Conversation
While a formal RFP process can help a fleet gain new business, sometimes connecting directly with a customer can uncover new opportunities for mutual success.
Paper Transport’s Joe Shefchik said the company has a very robust process to analyze historical lane and network data such as where the fleet has been running, its empty miles, and rates. It uses this analysis to target specific lanes in RFPs, but its preferred strategy is to connect one-on-one with the shipper to discuss the freight it wants and come to a mutually beneficial agreement.
While more time-intensive than responding to an RFP electronically, it may actually save time in the long run. It also prevents the carrier from spending the time to respond to an RFP only to lose out on it in the end. For the shipper, this also eliminates the need to re-bid lanes after being assigned to the wrong carrier.
Shefchik believes that shippers are more likely to want to connect outside of an RFP with a large carrier like Paper Transport to lock down contracts.
5. Identify Spot Market Opportunities
While the freight market is currently booming, Riccio said that Leonard’s Express is sticking with the customers that stuck with it when freight was slow. However, the company is always looking for opportunities when it loses contract business.
The company's freight mix consisted of 95% contract and 5% spot market business before the COVID-19 pandemic. Management shifted more capacity to the spot market when the company lost some contract freight during the bust cycle. Today its freight mix is about 80% contract and 20% spot market.
Having more capacity in the spot market has created new opportunities to land contracts with repeat customers, Riccio said.
Finding Contract Freight Business That Fits
Many more RFPs will be crossing your desk in the first quarter bid season and throughout the year.
Do you have a data-driven process and strategic plan to balance your network and target the right customers, lanes and freight? If not, there is always room to improve, especially when so much information needs to be digested and analyzed in a short time period.
Interested in learning more? Check out a replay of our recent webinar to find out how to successfully navigate the bidding process to win new business and increase collaboration opportunities with shippers and brokers.