Published July 22, 2022

What is freight procurement software?

It’s an easier way to run your transportation RFP or mini-bid. Whether you need short-term or long-term pricing on your shipping lanes, freight procurement software helps you publish a request for pricing, compare rates, and award a provider to haul your freight.

Freight procurement softwares should centralize your process, help you manage providers, and facilitate easy rate discovery. If done right, you should eliminate 100% of email + spreadsheets, centralize your data in a secure dashboard, navigate a complex freight market without increasing your workload, manage company and compliance information for all of your carriers and brokers in one place, easily stay up to date on insurance and safety information with automatic updates, survey the market, track your spending overtime, and benchmark your current rates against historical and real-time market data.

How does a freight RFP work?

Shippers have always depended on being able to segment the year into peak seasons. Spot rates typically rise above contracted ones from May through August and November to December and fall below annual contract rates from January to April and September through October. This semblance of predictability allowed those involved in RFPs to agree on annual rates, accommodating for the fact that the fair market rate would split relatively equal time above and below their contract rates. That being said, it’s never been harder for shippers and carriers to predict our future streams of business. This “stabilization” has all but disappeared.

Today’s RFPs need to start with forecasting with good data. Before jumping into any bid, shippers need to have a benchmark of current rates (rather than just relying on the previous year’s prices) to get an accurate understanding of how competitive their rates are in the proper context. Here’s where leading benchmarking tools can help companies leverage recent market data and enable dynamic freight forecasting. Furthermore, most shippers should recognize that it’s not just the market rates that change; their transportation needs can change over time, too. So, make sure you’re paying proper attention to how your logistics needs have, and will, change over time.

They require shippers to be more informed bidders. Many shippers ignore including an RFI (Request for Information) as part of their bids. Bids are always more effective when you make an effort to establish expectations and other minimum requirements at an early stage. Companies can never be too thorough when bidding. And, as carriers are given the chance to quote rates and have all the possible information on lane origins/destinations, services, payment terms, etc., it’s still important to provide the opportunity for carriers to ask any questions it has. The better carriers understand your business, the better rates and service they will provide.

And to have total control over execution, Good carrier relationships need to work for both parties.You’ll get a lot further by making a conscious effort to maintain positive, mutually beneficial partnerships with your transportation providers.

Shippers should also develop a reasonable timeline for their RFPs to keep all parties involved accountable and avoid dragging out the process. Try creating an internal system that allows you to track where you and bidders are in your timeline to verify carrier compliance. Last but not least, integrate advanced technology that can help you better manage your bid execution and more easily distribute/update your RFPs.

Who uses freight procurement software?

There’s a point in most company’s growth when the process of finding partners and procuring logistics services needs more structure. Looking for carriers and assigning loads on an as-needed or spot basis can work for small companies with simple shipping operations, but only to a point. For businesses booking freight more consistently, a formal bid strategy including an RFP becomes a necessity.

And, even if it’s the first time a company puts out a bid, there are no excuses not to do it right. Poorly planned or overly simplistic bids won’t cut it in the current marketplace. Freight capacity is historically tight, and it’s the carriers who have the leverage right now, for sure.
With capacity constraints here to stay for the foreseeable future, shippers need to have an effective freight transportation procurement process in place. The best bidding strategies set your business up for long-term success, and it’s crucial to have the proper plan and processes in place before you get started with every RFP.

How does dynamic pricing work?

As your freight volumes fluctuate, market dynamics shift, and carrier networks change, it’s important for shippers to know who you can count on. This is where continuous routing guide management becomes a necessity. But first, many companies need to update their perception of what a routing guide is, and more importantly, can be.

Done right, routing guides are not the outdated and inflexible ‘suggested’ set of instructions for choosing carriers they were in the past. A dynamic routing guide serves as the real-time, cost and service optimization tool shippers can use to always make sure the right carrier choice is made for all of the freight they are paying for.

But first, what is a traditional routing guide? It’s a living document that provides shippers with a list of pre-vetted carriers and their individual characteristics. By breaking down relevant factors like active lanes, freight rates, specific services, volume/weight requirements, and any other necessary carrier information, these guides help shippers easily identify the ideal transportation partner for a particular load.

Routing guides are especially valuable for large or decentralized logistics operations.Given how static, unreliable, and time-consuming it is to manually manage the load matching process entirely in Excel spreadsheets, many routing guides often automatically pull data from today’s advanced transportation management systems.

This dynamic approach allows shippers to: A dynamic routing guide allows you to secure more reliable capacity. Having a carrier listed in your routing guide with a great rate is fine, but that information isn’t worth much if they don’t have available capacity when you actually need it. Since it’s common for market rates to go up and down faster than some routing guides are updated, the ability to find market-appropriate pricing in real time helps ensure you are getting the most accurate prices.

Lower freight costs. Shippers can also use routing guides to compare network-wide carrier rates with average lane rates to verify whether or not a rate is competitive for a specific lane and load, maximizing cost savings. It’s necessary to include additional fees like accessorials and fuel surcharges in your guide, too, because these costs can expose the carriers that aren’t as cheap as they seem.

And improve carrier service levels. When ranking carriers though, shippers should not only consider price, but also service capabilities. By using routing guides to track carrier metrics, such as acceptance rates and average response time, you can figure out which carriers are the most deserving of your repeat business. This can help shippers create and implement new policies to increase carrier compliance as well.

In order to successfully achieve these benefits, however, you’ll need a mechanism to ensure your routing guide is based on current and accurate information. Carrier rates and other variables are constantly shifting, so routing guides should be able to reflect this. Shippers should also focus on the shipments that stray outside of their expectations. While there could be valid reasons for these exceptions, larger providers managing hundreds or even thousands of shipments each month could lose a lot of money by not paying closer attention.

Failing to add a key attribute could significantly bring down the value of this resource too, so it’s equally critical for shippers to double-check that all relevant details are sufficiently covered within their routing guides.

How does a carrier win a bid?

With little access to excess time, shippers and carriers need products that provide them with efficient solutions to the problems they face. Freight procurement software allows carriers to accept or reject lanes individually or in batches, depending on their needs. When a carrier is awarded a contract, they will be able to view the contract lane by lane. Carriers can simply check the boxes for the lanes they want to accept. Or, for those carriers interested in accepting all lanes, there is a “accept all lanes and submit” button that will continue to allow you to quickly accept the entire contract.

This new process can give carriers one centralized location, to complete their work, hassle-free. Giving your carriers the freedom and flexibility to select lanes that best fit their objectives can help build better relationships, save everyone time, and reduce extra manual work.

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