Many shippers hold annual transportation sourcing events during the first or last quarter of the year so they can evaluate their transportation costs and create the new budget for the coming fiscal year. Some shippers also believe this is the softest stretch for truckload rates. While Q4 to Q1 may historically be the quietest for the spot market, that’s not necessarily true for contract pricing. Additionally, carriers have become more aware that shippers expect them to lower rates during this time in order to secure contracts. Many are no longer adjusting pricing just to meet this expectation.
About three years ago, a strong hurricane season and the true impact of the ELD mandate started to effect bid cycles. Monthly and quarterly bid cycles became more popular and seem to have lasted through the events of 2020. Now, as we enter into 2021, it might be beneficial to consider switching up the bid cycle for your company. For example, try bidding quarterly instead of annually, or even monthly instead of quarterly. As a shipper, the more accommodating you can be, the better service and better pricing you’re likely to get.
Benefits of Contracted Pricing
Reduced Costs
Historically, contracted rates remain more stable than spot market rates when there’s volatility. By establishing contracts with carriers you trust that can address your specific needs, you reduce the chances of either not finding the best carriers or paying higher premiums for spot market coverage.
Network Optimization
When you regularly partner with the best carriers for your shipments, you begin to optimize your entire freight network. Finding and contracting freight partnerships that are mutually beneficial to the shipper and the carrier will help build better relationships in the long run.
Reliable Carrier Relationships
A successful freight contract is about more than just pricing. Finding the right capacity for the right freight and then maintaining those relationships will help you avoid having to go to the spot market even when there’s disruption and volatility.
Time to Consider Off-Cycle Bids or Shorter Bid Cycles?
Experimenting with off-cycle or shorter bid cycles could be better for business. For starters, most large corporations will have stuck to a traditional bid cycle, so you could end up getting additional attention you may not see during bid season. You could also reasonably expect quicker responses and an overall smoother process.
To avoid complications, you’ll want to make sure not to bid during times that are busiest for you, regardless of what the market may be doing. Allowing for organizational flexibility can also help ensure that new rates and carrier assignments aren’t going live during a time that could negatively impact your operations.
If you have the option to bid outside the normal cycle or in shorter cycles, you may find new opportunities for better savings and service. And while securing the best rates is certainly important, a shorter bid cycle does have the opportunity to turn into a long-term investment if you successfully manage the carrier relationship.
If your company is considering bidding (either on-, off- or shorter bid cycles), or simply looking for savings opportunities, consider working with a third-party logistics company. With a reputable 3PL, you’ll have access to an entire network of carriers, additional cost savings and overall network optimization.