Freight 360
How to Bid RFPs in Freight | Episode 256
Can market volatility be your secret weapon in the freight industry? Join us on Freight 360 as we navigate the ever-changing landscape of extreme weather impacts, pricing strategies, and the latest in sports excitement. We kick off the episode by examining the recent hurricane in Florida and tornado in Buffalo, shedding light on the undeniable importance of disaster preparedness in freight operations. Not to be missed are our updates on Team USA’s Olympic achievements, women's soccer, and the much-anticipated NFL preseason, with a special focus on the Buffalo Bills.
Are you prepared to handle fluctuating lane rates and capacity changes like a pro? We share our personal stories and insights on managing these unpredictable shifts, revealing how regional disparities and broader economic factors influence freight costs. Our conversation provides a deep dive into effective pricing strategies, the intricacies of RFPs, and the nuances of the bid process. Understanding these elements is crucial for anyone looking to thrive amid market volatility, ensuring you secure the best deals while maintaining strong relationships with both carriers and shippers.
Ready to master the art of strategic quoting and transportation bidding? We'll guide you through the complexities of the bid packet, the value of negotiation, and the challenges of pricing multi-stop loads. By leveraging predictive rates and historical data, you can establish a solid foundation for your bids. Plus, we offer practical advice on handling large bids and prioritizing lanes. To wrap things up, we reflect on the power of belief in achieving success, with a spirited cheer for the Buffalo Bills. Don't miss this episode packed with essential knowledge and actionable insights for the freight industry!
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Can market volatility be your secret weapon in the freight industry? Join us on Freight 360 as we navigate the ever-changing landscape of extreme weather impacts, pricing strategies, and the latest in sports excitement. We kick off the episode by examining the recent hurricane in Florida and tornado in Buffalo, shedding light on the undeniable importance of disaster preparedness in freight operations. Not to be missed are our updates on Team USA’s Olympic achievements, women's soccer, and the much-anticipated NFL preseason, with a special focus on the Buffalo Bills.
Are you prepared to handle fluctuating lane rates and capacity changes like a pro? We share our personal stories and insights on managing these unpredictable shifts, revealing how regional disparities and broader economic factors influence freight costs. Our conversation provides a deep dive into effective pricing strategies, the intricacies of RFPs, and the nuances of the bid process. Understanding these elements is crucial for anyone looking to thrive amid market volatility, ensuring you secure the best deals while maintaining strong relationships with both carriers and shippers.
Ready to master the art of strategic quoting and transportation bidding? We'll guide you through the complexities of the bid packet, the value of negotiation, and the challenges of pricing multi-stop loads. By leveraging predictive rates and historical data, you can establish a solid foundation for your bids. Plus, we offer practical advice on handling large bids and prioritizing lanes. To wrap things up, we reflect on the power of belief in achieving success, with a spirited cheer for the Buffalo Bills. Don't miss this episode packed with essential knowledge and actionable insights for the freight industry!
Support Our Sponsors:
QuikSkope - Get a Free Trial: Click Here
Levity: Click Here
Bluebook Services: Click Here
DAT Freight & Analytics - Get 10% off your first year!
DAT Power - Brokers & Carriers: Click Here
DAT Express - Brokers: Click Here
Truckers Edge - Carriers: Click Here
Recommended Products: Click Here
Freight Broker Basics Course: Click Here
Join Our Facebook Group: Click Here
Check out all of our content online: Click Here
Welcome back for another episode of the Freight360 podcast. It's episode 256. I missed you guys last week but, ben, I appreciate you holding down the fort without me while I was on the road. If you're brand new, make sure to check out all of our other content. We've got a whole back catalog of episodes. We've got shorts, we've got shorter educational content, we've got blogs, downloadable content and the Freight Booker Basics course available on our website. If you want to look at a full-length training option and share us with your friends, this is a great way to get some one-on-one level knowledge and some more advanced knowledge if you are working for a smaller company that doesn't have a big training program or department, or if you're just kind of on your own or at a smaller company. So, ben, how are you doing man?
Speaker 2:I'm doing well, I'm curious to hear how your trip was.
Speaker 1:You said a hurricane come through Florida. I mean I know it wasn't your side of it, but did you get some of the after effects of the rain and stuff or what?
Speaker 2:Yeah, I mean like it definitely rained a lot but it wasn't like noteworthy on our side of things. But I'll tell you what like the thunder and the tornado warnings were like. I don't know that I've ever seen, or at least I don't remember, shelter in place warnings Like I this is the first time. I remember like I literally took Ava out of her bed Right and moved her into our room where we had like the hurricane shutters closed, because I'm like I mean you could see it coming up from Fort Lauderdale, you could see the storm on the radar like starting to spin and I was like, yeah, I mean so we had a heard from that.
Speaker 1:We had a tornado like about a month ago in Buffalo and we like shelter in the basement and we had another one on Monday this week. There's crazy videos of it. Actually made national news but like it started in Fort Erie, ontario came across like the I guess that'd be like the mouth of Fort Erie, ontario Came across the mouth of Lake Erie Niagara River into downtown Buffalo. It was an EF1 and just came through. I think it was a couple million dollars in damage, no fatalities or anything, luckily. But yeah, just tornado in Buffalo. Man, it's wild.
Speaker 2:And the thing is for sure, I there was one a couple years ago that that touched down very close, like 10 miles up the road up and, um, it wasn't like delray or you know, just kind of north of us, but it tore up like a whole community, like significant, significant damage. And like since then, now, when I see those warnings I mean because tornadoes are super unpredictable, they don't like move steadily across, they like jump, appear, disappear, like yeah, I'm definitely more concerned now than I've probably ever been where I'm like when I see it, I'm like, yeah, like let's go into the like, into the room, into the owner's closet, or get away from the windows because, like all it takes is a two by four, a tree, a, a branch, I mean that thing flies through that window like Wild.
Speaker 1:For sure it's a good and I know we've done other episodes on. You know how to handle disaster stuff, hurricanes, et cetera. But it's worth noting that we're at that time of year. So if you're going to get involved in FEMA freight, get yourself registered. And also if you've got customers, get involved in FEMA freight, get yourself registered. And also if you've got customers that are in the typically impacted areas of hurricanes, like Florida, Georgia, south Carolina, etc. We typically have a pretty good warning system for this stuff. We see it coming about a week out and as you get closer to the landfall the predictive models get really accurate. Plan ahead, talk with your customers and strike when the iron's hot. As far as opportunity, sweet. Let's talk a little sports here. Olympic update here we're coming to the close of the Olympics in Paris. We've got USA leading in. Literally every single medal count Total golds, silvers and bronzes. So we're recording. On Wednesday morning it's at 86 total right now. Have you gotten a chance to watch any Olympics? I've been watching it like every day.
Speaker 2:It's great A little bit, but not really. Every time I've tried to catch something, I miss the thing I wanted to watch. I wanted to watch some of the surfing. I wanted to watch some of the golf Dude. Yeah, Surfing is really cool.
Speaker 1:Didn't get to catch it. Yeah, it's wild man. Team USA for women's soccer is going to the gold, like the championship match against Brazil. So that'll be a go. I think that's this weekend. Is that this weekend? I don't know, I forget. I think Saturday. When does it end?
Speaker 2:When's the basketball game, the basketball gold?
Speaker 1:medal game? That's a great question. I don't know, there's just so much I can't track all of it. But let's see here. I think it's Saturday for the and I'm not going to waste any time looking for it, but I mean it's all coming up, so good stuff. Hey, we're back to NFL season, man, literally this weekend. So we had the Hall of Fame. Hall of Fame game was, I think, last Thursday, but you got preseason kicking, offseason kicking off this weekend, man, it's Bill's Bears on. What is it Saturday? Yeah, saturday, and then actually Bill's Steelers the next week. Man, a little preseason action.
Speaker 2:Oh really Nice.
Speaker 1:Yeah, and that'll be in Pittsburgh. So it's, you know, obviously preseason is, you know, take it for what it's worth. A lot of people aren't. Actually, you know, you don't get a lot of starters until maybe the final game. Um, they might play a quarter or half, something like that. But a good chance for a lot of the draft picks, the rookies, right, um, newly signed free agents, to get a chance to get some live reps with, uh, in a real game situation where there's literally nothing on the line. Um, I'm just excited. I saw a funny meme yesterday that was like um, it's officially no, is that between now and February there will be zero weekends without football? And I was like this is a good feeling.
Speaker 2:This is like my favorite time of year, man.
Speaker 1:The next like six months, just go to old football.
Speaker 2:I do really miss fall and I'm excited for summer to be over. To be honest, because summer is your winter, for me, yeah, Our summer is the worst time of year, weather-wise July and August. I mean, I've got to change my shirt three times in a day just walking out to get to the mail. So I am really looking forward to changing of the seasons.
Speaker 1:Nice, very good, very good In news. Unless you had anything else in sports, I don't. Oh dude, scotty Scheffler won the gold for the Olympics yeah.
Speaker 1:Really cool man. He had a very emotional podium when they you know they did the national anthem for the USA and it was pretty cool. I actually really enjoy watching the golf last week because you know, when you watch golf, normally it's flooded with advertisements, like all over their outfits, all around the course. You know commercials, and it's literally they just had like they're just wearing golf attire, it's like they're watching the rider cup, right, yeah, exactly, so it's pretty cool. Um, all right, news producer steven found this one for us earlier this week. This is, uh, mercury gate tms provider some of you may use it or have heard of it purchased by Corber, a company called Corber Supply Chain Software. I don't really know what that means or anything, but maybe they get some more funding. They're going to try and beef up their platform. There's a lot of newer TMS platforms out there that are offering some really cool web-based, cloud-based services, so maybe they're just trying to step their game up. And who knows, what else do we have here in the notes Just announced?
Speaker 1:Oh, this is from DAT Just announced our strategic partnership with Orderful, an advanced EDI vendor specializing in end-to-end document management for enterprise-level shippers. This collaboration will enable both parties to provide enhanced market insights and broader supply chain intelligence. Nice, you can read more on LinkedIn or probably their press release section. I'm curious, ben. I know this is not a news article, but what have you been seeing with the market? I'll tell you. I feel like we're starting to see the change, a little bit Like we just posted up a record month in July Highest, well, highest ever that I've seen. So curious what you're seeing as far as rates, capacity, all of the above.
Speaker 2:I'm seeing things shift more than they have recently, I mean over the past two years. Like lane rates changing quickly and drastically in very short periods of time, which, again, like I always say this too because it's like we always feel at first as brokers, cause we're most exposed to it right Like we're talking to more carriers. Carriers are more likely to ask us for more money immediately when the lane changes, or even in an afternoon. We see that fluctuation long before a shipper does, because shippers mostly have, you know, assured capacity, they're dedicated lanes. Like carriers aren't going back to a shipper directly and saying like hey, this lane moved, you know, $700 in the past two weeks. We need a price increase because it's a longer bid right and the trade off which we'll talk about in this episode.
Speaker 2:So like we see this way more and we're exposed to it at a different rate, and like I'm seeing it a lot, like I've seen some liens go in the past two, three weeks that were only two $3,000 lanes have moved six $700 in either direction.
Speaker 2:Wow, up and down, I mean, and days of the week, which is the other thing, like a few of the clients I work with have seen this a lot over the past few months is they'll have lanes, some of them in the Midwest areas, monday and Tuesday they're able to cover for 12% 15% margin. Thursdays they're losing 25% just to cover the same lane on a different day of the week because the carriers and the capacity just aren't there for whatever reason, that day of the week. So I mean I think we're seeing more volatility from like an anecdotal perspective just personally. So I mean I think that's good because you need that to happen. We need the disruption for the market to shift in the normal patterns it does, to create more spot opportunities and more areas for us to be able to help work with other customers, different carriers, like it's what creates the market.
Speaker 1:Yeah, no, you're absolutely right. I mean, today we're literally going to talk about pricing like RFPs, bids, all that in general. We'll break it down for you and I've done quite a bit of this lately with some of our different branches and agents in our company and seeing, like, actually like, looking at the rates, it blows my mind, both what we're currently seeing, the historical and the predictive future rates. From DAT's rate cast, I saw a lane. It was like last week or two weeks ago that was. It was into California and then out of California and it was like a dollar a mile into Cali and then like triple that coming out and the guy's like why is it? You know, why is it like this?
Speaker 1:And I'm like well, volumes out of Southern California are super high right now, so people will take cheap loads in there especially if they're coming from a a fairly like um dead area that doesn't have a lot of outbound freight, because they know when they get to california and unload they're going to get high paying freight out there because capacity is so tight if you, if you go to the market conditions map on dat like it, it's like just red every single day in california out. So meaning extremely tight.
Speaker 2:But to the other point, Stephen.
Speaker 2:Out of this here too and this is the thing that I think is always worth keeping in the back of your mind is that there are two things that affect the price in the market the supply of freight Right and the demand. Well, the demand in our world is the supply of freight, because if you have a shipment to move, you need a truck, so that's considered. The demand Supply are the number of carriers in any given market that can move that right and, economically speaking, like most of GDP and why the economy still seems to be doing well, is related to, like government spending and healthcare, which isn't usually translated into shipping. Manufacturing is either kind of flat or down. It's not really growing, and same with a lot of other consumer spending. So I think it's gonna be really interesting to see what happens in the next few months, because the Fed has indicated they might cut 50 basis points next month, which would be like one of the largest cuts, and if they do that, that could absolutely spur consumer spending. People start spending more money.
Speaker 2:I mean for the holidays Businesses spending more money yeah, businesses holding more inventory because of the cost to have that inventory is cheaper because there's less cost to borrow money.
Speaker 2:Like we could start to see that shift where more things are being purchased than needing to be shipped. At the same time, the carriers are kind of I don't want to say running out of cash, but like I do think Craig Fuller had a really good point talking about COVID money on the carrier side of the market Like hundreds of millions of dollars were spent to make sure businesses could stay in business, but also they've been able to survive, probably longer, and a good. That's not a bad bad thing, but it's changing the typical economic cycle of how it moves around the country and I think we're starting to get closer back to a normal economic cycle, which is, I think, good news for everybody carriers, shippers, shippers not the most. They're going to be the ones that are going to be the most upset because they've had two years of calm seas, if you will, after the chaos of the pandemic. But it's around the corner to where they're not going to have all the leverage like they do now, which makes prospecting a hell of a lot easier for us.
Speaker 1:Yeah. So I want to talk about bids and I want to like really peel back layers on this. So to break it down like Barney style for you, what is a bid to start off with? Right, like, you hear a call on RFP, rfq a bid. So RFP is usually a request for pricing or request for proposal, depending on the company. Rfq, request for quote or quotation bid is literally, it's all the same, right? Basically, the customer says here are my expected shipments for whatever time frame it could be the next year, the next six months, the next month and I want you to give your pricing and we can kind of get into the different layers of it. Have you seen more customers going towards bids lately Because they want contracted lanes, or have you seen more on the spot or just kind of not really a big change either way.
Speaker 2:I've seen a lot more bids, but it could just be what our sales team is prospecting Right. I mean, a lot of them are going after and our sales team are mostly people in the industry for 10 plus years, so they're going after companies that are larger, that they've known or worked with in the past, that they're trying to work with again. So in almost all of those companies that are you would call like, if there's three buckets of customer types small, medium and large the large ones almost all typically have a bid process to be able to get involved. And again, we're seeing less of it. But even like some of the smallersize shippers, I would say like I was working on one right before.
Speaker 2:This is a bit and I mean it's not huge like 50 lanes with a few different pickups. I mean not a giant company, but they still. They still want to see where our pricing's at. I think as an introductory Right Like hey, we're having conversations, they want to consider working with us. So they're like hey, send us over your rates on these lanes, let's compare it to what we have and if you guys are in range, we'll talk a little bit more. It's kind of the way it's also putting out.
Speaker 1:I mean. So the main reason that a customer would go to a bid, especially these larger companies, is there's a few reasons. Number one it gives them predictability, because they can predict what their freight spend is going to be, based on what people bid. Number two, it usually helps them save money because they're creating competition amongst their transportation providers. And number three, it's going to guarantee them consistency throughout the year and their freight spend. So, for the example of a 12-month bid, the customer is going to say you know, let's say it's August, right now, let's say the bid goes September through the end of next August. Right, they're going to say we want your pricing on this lane and it's going to stay consistent the entire year, with the exception of probably a fuel surcharge, which we can explain in a little bit here.
Speaker 1:But whereas the motor carrier that's running that or the freight broker that gets contracted that, whoever it is is going to find varying costs.
Speaker 1:So more so the broker, right, because as a broker, if we have to then find a carrier on a spot market basis, it's going to cost us different amounts of money throughout the year depending on the region it's in, external factors, et cetera.
Speaker 1:And carriers, right, their costs tend to be pretty, you know, pretty much the same. But they could be giving up the opportunity to make more money in a different lane in the spot market at certain times of the year, while on the flip side they might be making more money in a bid certain times of the year because the spot market would be paying less. So there's pros and cons and I always caution people if you're going to do a bid to think big term here, you don't want to underbid and overcommit yourself on the volume, because then if you end up getting awarded it and the market goes crazy, you either have to take a loss on a lot of business or you pretty much just have to tell your customer sorry, I can't do this, and you likely lose your opportunity to do any business with them moving forward. So there's still a reward when you get into this bid business.
Speaker 2:And again, just very simply think of it like this, If anybody's new to this the market is going to go up and down throughout the year. Now, the past two years were definitely different as a result of the pandemic, so you saw more stable rates across the country. That didn't fluctuate as much. However, typically our industry if you look back 40 years it cycles every 12 to 14 months long end, maybe 18. But it's like between loose and tight. It just keeps cycling over where, like when the business is good, lots of people enter it, and then there's more of those people to take the business. So then the prices come down and then it just does that over and over again and the whole economy does that. That is free market capitalism. That's how it functions right Now. What you're seeing, though, in a bid right, if you think about it in any given year, even if the average rates per mile are pretty consistent across the whole country, right, Like they still change per lane and per region. Right, and I'll just give like a really obvious example Like you pick California Most large produce companies, right, Operate in both like Southern California, where they grow a lot of it because they're closer to it.
Speaker 2:Right, yeah, Cheaper to ship when you're close. However, in the winter they typically move down to Arizona, where it's warmer, and most of that product comes up through Mexico because they're closer to it there, right? So what you see in the most obvious, I think, shift for anyone to think about is okay, like if you're a company and you literally move all of your operations from one state to another for a season and then move it back, right. Okay, when your trucks are coming from and going changes, obviously, right, but that affects all of the other trucks, right? So, for instance, when you see this switch from like Nogales, for example, to Southern California, trucks love to go into that area. Why? Because there's a lot of freight coming out of it.
Speaker 2:All the produce companies were there. They've got lots of freight to move into the country. You will see trucks going into the Arizona and sometimes Texas area very cheaply because there's a lot of money and a lot of loads that need to get out. However, as soon as all of these companies shift their operations and it's usually within a few weeks of each other, like, there's a pretty tight window. It's not like they all do this at random times, because once all that produce shifts to California and it starts growing locally. Now there's no freight coming out of that area and trucks don't want to go there at all. So it changes that rate throughout the year very seasonally. And that's why in California to your point when all the produce is really coming to harvest and coming out, it's very cheap to send a truck into California but gets very expensive to send it out. And then as soon as that season ends, it kind of levels out between maybe a little more like equilibrium, same rate kind of with what's coming out.
Speaker 2:Yeah, depending on where it's coming from, or going to Right.
Speaker 2:So if you think about it right, the market is shifting based on what is moving throughout the year and again, this happens in every industry, not just produce. It's just an example that I think helps you visualize, literally thinking of where these things come from. Because if you've got a bid again, if it's a one month bid, you're probably okay, unless it's the month of probably March, when these companies actually shift. However, beyond that, you can have pretty consistent pricing, usually for a week or two. When you get up to a month or longer, there is volatility, no matter what the lane is, because of these things happening all over the country.
Speaker 2:So if you are working on a bid that is a year or six months or even a quarter, it is a very different strategy than pricing something in the spot market this week or this month. Because, to your point, nate, like, what you need to consider is some of the lane. Like, let's just say you're shipping Los Angeles to Memphis, right? Well, some of that year that rate coming out of LA to go to Memphis might be $4 a mile in season and then as soon as that season's over, it drops to $2 a mile. So then we get the question like, well, how do I bid this, do I bid it at $2 or $4? Well, if you bid it at $4, you probably won't get awarded any of it, and if you bid it at $2, you'll get awarded a lot of it and you'll literally be spending your own money to cover your customer's freight, and that doesn't work either.
Speaker 2:So what larger companies do and just that very specific example is like you try to get as close as you can and look at a whole year, so like if you're fortunate enough to have lane history in your company for the past year, look at what you paid every month or at least a few months throughout the year, Look at the highs and lows and go okay. What we try to do with a strategy is if, let's just say, three quarters of that year the rate is $2.50 a mile and one quarter of a year it's $3.50 a mile, you want to price it so that you're profitable for three quarters and hopefully break even for the one quarter, like it's low enough that you can be awarded it when you need it, but not so low that you get destroyed and have to give the loads back because you can't cover them when it gets high.
Speaker 1:I'll give you an example of one strategy I've used. I don't want to get too ahead of ourselves, but one of the things I've done is whether you're using historical or predictive rates. I'll use predictive, for example. So DAT has rate cast, which um will give you an idea of where, where that median is going to fall up to about a year out. Um. So I was doing a six month bed um with somebody and we looked at that six month window and we averaged it out to figure out. You know, excluding fuel line haul alone. Here is the average rate predicted per mile for this six month window and we use that as our baseline and we added our margin from that point. But the reality is to your point, some months we're going to be running a that point. But the reality is to your point. Some months we're going to be running a, a slight loss, some months a really good gain and some months somewhere between that. Right, it's going to fluctuate depending on and not every lane has that volatility. Some lanes are pretty consistent around, you know, around the calendar year, but other lanes aren't. Um, it just depends. So let's go back to um.
Speaker 1:You know when, when you get invited to a bid. Let's talk about. You know what that this first, first couple of steps looks like. Usually you get either a web link or you get a bunch of stuff emailed to you with attachments. Let's talk about some of the things that you should be looking for that give you you know your instructions, your context and really the idea of how this bid is going to operate. And fill me in on whatever I'm missing here because I'm going off the top of my head. But typically your basic stuff is going to be all right.
Speaker 1:What is the period of time that this bid takes place? Is it for the next 12 months, the next six months, et cetera? That's obviously important because you want to make sure you know what time of year you're going to be providing pricing for. It should also have your basic load information for each lane origin, destination, equipment, type. If there's any high value or special it's oversized tabby haul, whatever that should be in there.
Speaker 1:But also and this is one that I think is really important is what is the frequency of this lane Meaning? How many instances do they project they're going to ship that lane during that upcoming bid, but 80% of the freight is in 20% of the lanes that are in there. And then you've got the other 20, you know, 20% of freight spread across 80% of the lane. So you get some of these lanes that have like one or two shipments in a year and you're like, well, I'm not, I'm not going to spend a lot of time, you know, sharpening my pencil to price out aggressively on a single shipment Right. A single shipment right. My whole tape was always you know the single, you know the one-offs, or maybe there's less than 10. I'm gonna bid them pretty damn high because if I get them sweet, if I don't, oh well, right, correct what else?
Speaker 2:and I?
Speaker 1:think I'm gonna say what else we have in a bid packet. But continue on with what your. Your thought there. I was gonna say like there's also usually a trade-off right.
Speaker 2:Because the way the shippers look at this is they have leverage. What does leverage mean? They have power in the negotiation. Where does that power come from? The number of loads they have to award. So the more loads they have on a lane, the more they can offer a carrier and what they hope to get in return by offering guaranteed volume, like, hey, we'll give you the business, make sure you get it at this number In return, give us a little bit of a discount on the rate. And why does that trade-off work for a carrier and a shipper? The shipper gets the discount, obviously, that's pretty obvious. But the carrier? Why would a carrier want to run it for a little less than maybe they could get today to run that load?
Speaker 1:Super predictable right, yes. It helps them plan it's it's guaranteed business for them over a certain amount of time.
Speaker 2:Right. They don't have to find a load. They don't have to worry about paying a dispatcher to secure a load. The prices that they will get will sometimes be higher than they would have gotten, and sometimes they'll be lower and sometimes they might have to deadhead. So it makes their business easier to operate because it's easier to predict and the drivers like being able to pick up at the same places, knowing the facility, knowing how long it takes to get in and out. It makes a lot of things better, right? So give up a little bit of profit to get a lot of other things that you should be able to make money on.
Speaker 2:Once you get the return, your dispatchers work on other loads they can sell to other direct shippers to try to get you more customers. There's the return that you use that for, but you take that discount for it To your point. That's the trade-off. The other question I think that's really important, that isn't asked that often is if you get a bid let's say it's a large bid, call it 200 lanes or 500 lanes what is your approach? When you have to look at a bid that is like daunting, like literally hundreds of lanes, what is your first move?
Speaker 1:I could have a totally different approach than you do, but I'll give you specific examples of one that I did recently. I literally will sort them by number of like how frequent that lane is. I want to see up top, this first lane this is the one that does the most shipments per year right, and I filter them and descending order all the way down to the bottom, which might be one instance, and I always say okay. My tactic here would be focus. I don't necessarily think you need to bid every single lane in a bid If you're a big brokerage and you want to have at it, but if you're just one person or a very small company, I wouldn't bid 2,000 lanes for a huge company. I would focus on the lanes that meet a couple of criteria for it.
Speaker 1:Number one you have familiarity with that lane. You understand how vulnerable it might be when it comes to pricing and lanes that you have carriers that you already have a relationship with that you can talk to, because they're more likely to commit to you instead of having to go to the spot market every single time. You have to book one of these. But you could. You could talk with your carrier and say, hey, I was invited to this bed. I think this lane might be a great fit for us and for you guys to take a chunk out of this If we get awarded it and you can kind of work with them on that pricing to see what will work for them.
Speaker 1:How does that look for you? At your margin, Are you going to be competitive, et cetera. So that's the way I look at it and I'm always focusing on those high density lanes. First, because you can. It's much easier to cover, you know, a thousand loads in two lanes than it is if you win a thousand loads front across a hundred lanes. Right, correct, because it's the same. You know it's repetition.
Speaker 2:I end up at the same result, but there's also a little bit of a different rationale and I want to talk a little bit too. Right Is okay. So if you see a bid for a year, right, let's just use round numbers. 52 weeks in a year, okay. If any of those volumes are less than 52, it is not a weekly load, right.
Speaker 2:What else is true when it's not a weekly load is if you're a trucking company, it's very hard for you to plan for a load that is one off or once a month or twice a month. Because, again, like they're trying for predictability week in and week out, it's harder for a carrier right To pivot and find and cover a load that comes out of the blue that they didn't expect. So, any loads that are less than 50 a year on these bids, they're far more likely to go to a broker. Why are they likely to go to broker? For that reason because, like, they're usually unexpected and that shipper doesn't know how many sales they'll make to that customer that needs that lane. So, like they just use what their guess was last year and their predictions this year to guess. So, like, there's a real high probability that those loads end up with a broker, even if a carrier was cheaper, because even though the carrier was cheaper, when the shipper calls that carrier to pick up that load, they might not have a truck that week in that area.
Speaker 2:So then, when they do they go to the bid and pick the next cheaper? Well, that's probably also a carrier which is likely to be the same thing Once they get to the third or fourth down the line. Now you're usually going to see a broker, from the shipper's perspective, that's got a higher rate, obviously, just like your bid was higher, and that's why you always at least from my perspective as a broker I bid those a little higher because I don't want to be the cheapest. I know there's a pretty high likelihood they'll need a broker because the trucks can't make it work last minute and I need enough money to cover that with less time. So I ended up at the same place you were. I just want to add some context to how I think it looks from the shippers point of view as to where they go.
Speaker 1:The other thing.
Speaker 2:I want to finish one last thing on, like what you said, the carrier piece. Ideally, if you this is how I think it should look like conceptually and then how you could do this is if you could look at every lane, you actually have carriers running for you, right? Let's just say you literally could look at them in a spreadsheet or whatever. These are carriers that run these lanes for me every week or consistently. The lanes I want to bid for that large bid are the opposite of those lanes for those carriers. So, for instance, if I run Dallas to Memphis every week with a carrier that bid, I am going to email that carrier and be like, hey, I'm working on a bid for Memphis to Dallas. You're like, hey, I'm working on a bid for Memphis to Dallas. Do you guys want to participate, because I know I'm sending you to Memphis every week.
Speaker 2:Do you guys need backhauls? I know you're based in Texas. Most of your drivers need to get back. They are likely to give me a better price because they need that lane. They don't want to grab spot loads every week to go back to Texas home. They'd rather have the dedicated freight, just like we discussed. So they'll give me a better price because I know they need that and they trust me because we work together and I'm trying to help them get them the freight that fits their network, their routing guides, so I get a little bit of a better price.
Speaker 2:And then I go and say how much loads can you take? And again I'm always including the volume, for the same reason a shipper does. And I'm talking to this carrier and I'm going hey, like there are, like it looks like, about a hundred loads a month on this lane. How many do you think you guys can handle? And if they go, hey, I got three drivers who can take these every week. Okay, like I'm going to bid according to what that carrier can handle, no-transcript, going to pass that savings to my customer and I'm not going to work a higher margin just because the carrier is cheaper. I'm using the discount they provide for the volume and I pass that on to the shipper, meaning I can be more competitive in the bid from the shipper's perspective to be awarded that lane.
Speaker 2:And if you can do that again, say I got 500 lanes and I only got 25 lanes I'm running that match up. Like those are the ones I focus on. I'll probably bid another 25 or 50 lanes, just to put my name in a hat to see, because I think they might be a good fit where I can find carriers pretty easily and get a decent rate. But those are the ones that I'm going to focus on to be most competitive on. I put the most time in.
Speaker 2:I'm the most likely to win, because my objective to what you said earlier in a large bid, even a smaller bid is I'm not trying to win all of them. I will never win all of them, even if I'm the cheapest across the board. No shippers giving all their business to one provider. I'm not trying to be everything to everyone. I'm trying to be focused on where I can add value and then I pick another few that I think I've got a good advantage on because I also move out of that area. I've got other shippers there, carriers that I've worked with, maybe even like last year, that I'm just not running with this year. I'm reaching out to them going hey, if you guys are still in this area, I'd like to bid with you guys. That's where the effort's going to go in and then I'm going to compare the rates, again still against DAT, but like I'm going to get real truck and hand rates almost to negotiate those almost as if I'm been awarded them Like. That's the effort I'll put in for that.
Speaker 1:So I want to go back to. Steven put a couple of things in the notes here and I wanted to go back to the sort of the beginning here. One of the things he mentioned is asking them about you know what lanes are new compared to the previous bid or previous year? And then you know how much capacity to actually, um, say, you have. Because it'll say, you know, hey, we've got 100, 100, uh, shipments of this lane. How many can you cover? So we'll talk through some of that strategy in a minute. But what I think was great that he mentioned was to ask questions about what's new and in general. You know, just because a bid is sent out and it feels very informal or, I'm sorry, it feels very formal, like hey, this is all you know, packaged up very nicely, everybody has to go in and put your pricing in. No, you can still call your rep, your point of contact at the customer, and like talk to them like human to human, like all right, so I got this bid.
Speaker 1:I just want to clarify a couple of things here, because the bid packet doesn't always tell you everything, right? I want to know is there a list of accessorials? What is the fuel surcharge schedule, meaning you know we're going to bid line haul rates because we don't know what fuel is going to cost six months from now. So what is your fuel surcharge schedule? How many rounds does this bid have? Do I get live feedback on this? That's a huge thing too, because some are just like you get one chance, put your pricing in, you know the cheapest person wins right, and then others, and again they're all. They can all be different, but others might, like I'm on one right now. That's literally what you're going to do. It today. It's this third round, third round bidding, and they've pushed back the start date for the bid like three times now. But every single time we're given feedback on where our what percentile our pricing lines up or, you know, comes out at based off the previous submission. Are we in the top? You know 5%, or are we in six to 10%, et cetera, and that gives you good feedback on hey, you're really competitive here or hey, maybe you're not so competitive here. Here's an opportunity to sharpen the pencil, if you want to.
Speaker 1:Other things are how does their routing guide work? If there's a tender rejected by an asset-based carrier, whoever it's awarded to, does it then go to the second person on that list or the third person, and what you'll find out in some of these is that they might have, like they'll say you're first, second and third place for this lane. If first place says no, it goes to two. If two says no, it goes to three. If three says no, it goes to the spot board. Others might have a list of like eight, others might just have one or two. I mean, it's all different.
Speaker 1:And if you can hop on the phone and have a conversation with your rep at the shipper, they'll oftentimes give you a little bit more inside feedback than you otherwise would have gotten from the bid itself. When they say, hey, here's your percentile, they might be like hey, just want to let you know, so-and-so is ahead of you guys by about 10 cents a mile on this lane. Right, you can get that kind of feedback. And because the reality is if your customer likes you, they're going to want you to get awarded that bid. But it's also their job to make sure that they're doing a good service to their company. So it's in their best interest to give you feedback, to get you to help you get awarded that lane. Because they've had a good experience with you. They want to work with you. They don't want to work with some new person over at CH Robinson or TQL or whatever. But yeah, have the conversation, ask questions.
Speaker 2:And it's true for two reasons. Right, they know you, like you and trust you. But what does that really mean In value in a negotiation? It means they know what they get for, what they pay for, so they're willing to help because they know the service that is commensurate with the rate you provide. A lot of the other companies they don't know it's a crapshoot on whether or not that truck will pick up the load on time, pick up the load at all, or reject the load. So there's a risk to the shipper in doing this and sending it out to lots of these providers. That's why that happens.
Speaker 2:Right, and like, I have shippers that I've known for years that trust me a lot. Like they literally tell me exactly what everyone else is bidding for the exact same reason. Like, like would rather use you because your communications there, you pick up the phone when we need to. If we get jammed up, you rush to help us. Like the service is there. Would rather have you be competitive with them than just award to the cheapest carrier, because then our service isn't great. So, like that happened to me yesterday. And then the other thing too I think it's really important is that, like asking questions and how you frame the question when you reach out, because I've seen a lot of this, even recently, where shippers are going to say like, hey, don't reach out for questions, we're not going to provide feedback. We want to know your rates and what you would say without us telling you anything. And they do that because they just want to see what you're willing to do, mostly to test your integrity and to see what you're going to throw out there first. However, the way I found that is most effective to actually start that conversation and have it is to not frame it as something that's important to me and something I need, because if I call you and go, I need to know where you need the most help, where are the lanes you want me to cover that you struggle the most. Now, again, they might feel as if I'm trying to help them, but, like they know, there's self-interest in there.
Speaker 2:The way I always try to frame it is listen, like I want to bid these accurately and I really want to understand how this lane moves for you so that I can price it accurately. And sometimes they might email back like, oh, what do you mean? And I'll be like, okay, like, for instance, I saw one of these a few weeks ago with a client I was helping with, was there were extra stops next to the line hall and they just wanted a flat rate, so when they added extra pickups they could just price it easily. Well, that makes sense from the shipper's point of view, but from a broker or carrier point of view like how do you quote something if you don't know where the extra stop is? How many mileage is there? Is it first come, first serve? Is it by appointment, like if you are running a bid, like, for instance, to go to grocery stores this is really common in produce like they're all by appointment.
Speaker 2:Well, if that truck is delayed at the last stop and you got a one pick, five drop and they're at a Publix and they're stuck unloading at no fault of the driver and you schedule the appointments so that the driver's efficient and not waiting so they can run through these and get to their next load, that problem at that receiver can cause them not to make the next appointment, which then we either need to spend time to do, which sometimes happens fast, sometimes not fast at all, and the driver now may need to wait like a half of a day for the next available appointment because the driver at the last stop was stuck there. When he gets to the next one, he's 15 minutes late for his appointment. He's a work in. Now, six hours later, that carrier just incurred a huge cost a half a day's worth of work lost to no fault of his own because your customer couldn't get them unloaded on time.
Speaker 2:These are the things that shippers intentionally don't put in there and they just want you to throw a rate to make their life easier. And if you ask them it that way, they sometimes get offended and go like what do you mean? Like everyone quotes it this way. What I always try to say is like yes, I just try to want to understand how this actually runs so I can give you the most competitive and fair pricing based on what happens in real life, not just it's got to go from here to here to here under these parameters. Like how easy is it to move an appointment? Is that shipper or receiver constantly accommodating? If a driver comes in 15 minutes late, not because the driver did anything wrong, but because your last pickup took too long, will they work him in? Is that a six-hour process? How's your detention work? Because all of those things don't seem to be important when you're doing the bid. You're just looking at math and numbers and rates.
Speaker 2:But in a practical sense, when you go to run that lane, you might book a carrier on it the first time and be able to make it work, and that carrier never wants to run that lane again because of these things that played out. And then when you go to cover the next load, every other carrier that's ever run that load for another broker or shipper goes like I'm not taking that load for that rate. I know I'm going to be stuck at a few of those pickups. I know it'll take me an extra half day. I need an extra $400 for it. Meanwhile you price this with a $200 margin and now you've got a load you committed to and you can't even get a carrier to run it all because you didn't ask these questions in the bid process to understand how this freight actually moves and what are the things that can go wrong and what you can do to actually help keep their freight moving you ever do a bid that, um, isn't even run by the customer, it's run by, like a third party?
Speaker 1:yes, a lot of them, and those are super frustrating, like I'm not even talking about, like they're using a system on like a, you know, an online I'm talking like they have a like a, basically like a 4pl that comes in is like hey, we're gonna.
Speaker 1:I had this. This is like probably 10 years ago now I did one and it was terrible. Like we're calling the customer, being like having you know got questions, and they're like why they're like I have no idea, that's so and so it's. And then we try and they don't answer and it's like what's going on here?
Speaker 2:ridiculous, no communication and you know, you know it's ironic is that we're complaining from our point of view, but even from their point of view, those processes and procedures that they think benefit them actually hurt them. Why? Because if you don't provide the right information for what you're trying to price, no matter who's bidding, it isn't informed, isn't pricing it based on all the information, which means they're far more likely to reject the loads at some point during the year. Anyway, they run them a few times, realize the reality and just go like our truck can't run that lane anymore, we're giving it back. Now, all of a sudden, the shipper is trying to recover a large portion of their freight because, oh, they just weren't clear and didn't feel like it was worth taking the time to explain the work they're actually getting bid. It'd be like trying to put a bid on a house and them going hey, I need new windows, a new roof. Can you give me a number? And they went yeah, can I see your house? You go, no, and they went. Well, how big is the roof? They go, I don't know. It's a little bigger than this house and a little smaller than this one. Many windows do you have? I don't know. 10 to 15. They're probably four feet, maybe they're 10 feet, I don't know somewhere in the middle.
Speaker 2:You would never be able to do that in any other scenario, but in shipping, for some reason, shippers have this impression that like, oh, it's mileage in a truck, you should be able to give a rate. We saw one this week that was to state to state, trying to bid a rate from, like, new York to the state of Tennessee. Well, okay. Well, if it's picking up in the Bronx or in Syracuse, it's a heck of a lot different than Buffalo to Memphis or to the middle of the state out of the rural areas of New York. Like, there's different rates based on what's happening. And shippers know that they're just trying to use all the power they have to bully us and, to be honest, most of the time it bites them in the ass. They've been lucky for two years, but during the pandemic, this is what happened. This is why they all ended up in those positions. They shortened the bid process, but now you're starting to see them get longer. My guess is they're going to shorten again soon.
Speaker 1:Yeah, more of a mini bid, less tender rejection, for sure. Um, I'm gonna pick your brain on this one. So steven said, when they ask you how much you can handle, don't just enter how many they predict, always go over, because their system might cut you off. Um, that's interesting. I've never, I've never considered that and I've, I've, I've, and this is a great. And I got another good question to ask your customers like hey, obviously this bid is kind of a catch all for brokers and asset based carriers.
Speaker 1:I'm a broker, I don't have a limit on the number of assets I have access to because I can access the entire market. Should I bid all of them or what? And they might tell you, yeah, you just bid the max, or no, don't bid the max because it looks unrealistic. Or they might say, bid you know over it, or whatever. And I think every system could be set up a little bit different. What is your which? Have you had any experience in that where, as a broker, you know how? Would you? Let's say, they've got you know, 500 shipments in a certain lane? Would you bid 500? Would you bid 400? Would you bid 700?
Speaker 2:I never bid over it, but it's a good point and I'll continue doing it now.
Speaker 1:I've never been over either.
Speaker 2:Because, just in the same way, they don't know if it will be 100 loads that year, they don't know if it'll be 90. They don't know if it'll be 110. And I would say that the thing that happened I've seen last week was the exact opposite, meaning like saw someone get awarded a lane and they were probably the best price, and the commitment level was two or three loads a week, three loads a week, right. And then the lane moved about $600 in, like five days, right. So then the shipper went, oh well, they're the cheapest, and they gave them six loads instead of the three they committed to.
Speaker 2:And then the broker was like well, I just kind of took them because like I felt like I needed to like but they couldn't cover any of them, even for break even of these scenarios when they go the other way too, meaning like, if you're the cheapest and you're taking one or two, and that's what you committed to, they're going to oftentimes double it if they can get you to take it and try to pull one over on you because they know they don't want to lose money on it. They know every other carrier they're talking to about that lane is going. I'm not taking that load into Florida this week. There's a hurricane. Give them to someone else. They'll give them to the newest broker or the newest carrier and go hey, we decided to award you twice the business. Congratulations, right.
Speaker 1:Yeah, interesting. Yeah, there's a lot of tactics and I'll kind of wrap up with pricing strategy, like this is-. I got one more question before you wrap up.
Speaker 2:Yeah, Go ahead. How do you guys, how do you price multi-stop? What do you guys use? So like do you add? 75, 125, 150?. What do you price the stop and the mileage for when you run into so?
Speaker 1:here's what I do for multi-stop, and this is a great, great time to explain. Well, I'll give a real example. Right, you mentioned New York to Tennessee. So let's say it's Buffalo, a stop in Pittsburgh and delivers in Memphis. Okay, so how would I price that?
Speaker 1:Some people think, well, I've got to price Buffalo to Pittsburgh and then I have to price Pittsburgh to Memphis, and that's not the case. What you really care about is where is the true origin and where is the true destination. So I'm going to price it as Buffalo to Memphis and I'm going to figure out the mileage. Reason is the market conditions in Pittsburgh don't matter to that carrier because they're not doing anything there besides either picking up or dropping something off, but they already have. Their next direction is go to Memphis. So what I would do is I take the rate per mile from origin to the final destination and then I will get the pc miler uh distance for the entire route, including stopping in pittsburgh, which might add 50 miles. It might only add 10 miles, but what it's going to definitely do is add time with the stop. So I typically factor in $50 to $100 per stop, and the more stops you have, you can typically go on the lighter side of that. So if you have like an eight stop load, you might add 50 bucks a stop because they're not going to be there for very long. But if it's only one extra stop and it's going to be half of the truck being unloaded or loaded, probably going to go more like 100, maybe a little bit higher even, depends on what you're hearing from carriers. But I'm usually in that $50 to $100 range for extra stops. So I'm going to go rate per mile from first pick to last drop. Multiply that times the total route distance, add in a $50 to $100 per stop amount times the number of stops and that gives me my expected freight spend to pay a carrier. Now I've got to add my margin in and the way that I add my margin in in general this doesn't matter if it's multi-stop or one pick, one drop is the higher the volume, the thinner the margin.
Speaker 1:I'll go on I might a 10 percent um margin on there. Um, if it's a lesser, you know, not as frequent dense lane, maybe it's only, like you said, less than one a week. I'm going pretty high on that. Like I'm probably like 15 to 20 percent um because if I get it great I've got some padding there and if I don't, oh well. So that's kind of my general rule of thumb and then that's like my starting point and then I'll look at every lane in that bid that I really want and then I'll start to do some really, really detailed research. Like what did we cover for last year? If we have the data right, what is DAT showing for predictive rates? Call some carriers right. Who do I know that this might be a good backhaul for, or even a headhaul, depending on if it's a preferred lane in general. Do some research and then you can really get granular on your pricing. But again, this whole process can eat up your entire day or week or month if you let it just absorb your time. So you have to balance out what's worth the time that I invest here. Is it going to be this bit of six lanes that is going to give me peanuts, or is it these three specific lanes for this huge shipper that I've got a good relationship with? That I think I can take my company to the next level on.
Speaker 1:But anyway, back to your multi-stop I do a fixed rate per stop. 50 to 100 bucks is what I typically go for, but that's depending on what kind of stop it is. Right, like Steven mentioned Walmart and what did he call it? Dollar General. It should be illegal to include Walmart or Dollar General on multi-stop loads Worst receivers, if you miss a point. Yeah, exactly. So it's not just them, right? There's other companies out there that you know how strict they are and I'm going to, I'm going to put in a little extra cost per stop because I know I'm going to have to pay a carrier like hey, you're going to go here and you know how congested is, how disorganized they are, but I'm going to pay you for it, right? So that's my take. How do you handle those? The?
Speaker 2:same way. The only thing that I always think a lot about is the coverage side, because I'm like if I got a one pick, five drop, yeah, I think if I had my own trucks I could price it at 50 to 100 per stop. But I know, actually trying to cover that load of a one pick, five drop like a carrier doesn't want that load if they can pick up a one one one pick, one drop, right. So like the premium usually to cover tends to go up when you get a lot of stops. That's why, like they call them like milk runs in the industry, like you know, many, many stops and one pickup like they're usually more of a fit for like local carriers because they know where they're going to cover.
Speaker 2:That as a broker in the open market with like a new carrier, like tends to be harder because, like the carrier also doesn't know if everything we talked about is true, right, when they're working with a broker and you're trying to get them to book on a one five like, you can tell them that you know each receiver is easy to deal with.
Speaker 2:We'll work them in is FCFS, but they know in practice they've been told that so many times where it's not been true that they try to get as much as they can or just go get a different load, because there's a lot of risk to the carrier If those receivers, to Steven's point, are like Walmart or Dollar General and anything goes wrong during that load, they know they can lose like a half to a whole day on one load. So they usually have to pay a bit of a premium to book them on a load unless you've got a carrier that you know and trust and you've worked this lane and you know those receivers. So that's where sometimes when they get a large number of drops, I probably put closer to like 125 per drop just because the coverage side, I'm giving almost all that money to the carrier to get them into it.
Speaker 1:So here's the other thing too, and this, this really does depend, because I've had I'll use your one pick five drop as an example I've seen lanes like that one pick five drop, but all five drops are in the same Metro area and they are literally super easy to take off. So if someone's going to get an extra $250 for two hours of their time, like that is well worth it, right? You're not going to have to pay $150 a drop, I think and Steven did even put in here tiered pricing depending on equipment type $100, $125, $150, and then $150 for every step after three. It all depends, right, and you can use your common sense. If you're taking someone into a very densely traffic, dense metro area and it's going to be congestion and it's going to take up a lot of time, you're going to have to pay them more per stop, either distribution centers in a similar area or they go to like like hunt, hunt's point and other different produce markets in a in a general similar region. You're not going to, you're not going to compensate for stops like that the same way that you would if you're. I just think about this how much time are you taking up? That's literally what it comes down to how much time of how much of the driver's time are you asking for them to give up and then compensate them commensurate to that? That's really what it comes down to. So I don't think there is a perfect way to do it, but rule of thumb, you definitely have to compensate for the additional stop and I would say it depends on how long it's going to take.
Speaker 1:But to Stephen's point too, the equipment type. Right. Some equipment type is more costly than others. Right, reefer, you're running that reefer unit and opening the doors. Yeah, so good stuff, man. What else we got?
Speaker 2:I think that kind of wrapped up most of what I think will help somebody understand and determine how to work through this where to spend their time, where not to spend the time. We've gotten that question a lot, obviously from like. We got it recently, I think, steve, and I actually answered it last week where somebody was asking like do I just quote all these from DAT or do I go and like try to cover all of these loads first to quote Like you definitely don't want to try to cover all of them because you're not likely to be awarded all of them and a lot of that time would be wasted, right?
Speaker 1:For sure, for sure, all right. Well, good stuff, good conversation Talking about bids, right, love it Could probably Could have went on for hours but we probably would have bored enough people.
Speaker 2:Final thoughts, Whether you believe you can or believe you can't you're right, and until next time, go Bills.