Preparing a Domestic Less-Than-Truckload (LTL) bid in Today’s Market Sponsored
The first question is why should you be concerned about preparing a domestic USA LTL bid?
Warehouse space is loosening up as is truck capacity. Rates usually follow a downward path when that happens. The market is 30-40% lighter right now so it is a good time for bid requests to go out. There’s a lot of truck(er)s and less business for them to handle. Conditions are ripe for bidding out your business. The freight spot market rates have come down, which indicates that overall truck market(s) are softening. During softening conditions, you are in a good position to bid out your business for annual contracts (or longer).
So how do you go about bidding domestic trucking rates?
Here are the basic steps needed:
- Put together your process.
- Indicate how many rounds you are going to do in your bids.
- Determine which business you are going to bid out.
- Decide if you are going to look at bidding all your business or just some of it.
- Have a goal for reducing your freight costs. For example, “x % reduction in overall LTL costs”.
Now that you have made those decisions, here are the steps you go through during the actual bid:
- Identify which carriers you want to participate in the bid. Get their contact information.
- Notify the carriers you have identified that you are preparing to send them a bid.
- Collect data at least 6 months (minimum) for all the shipments in play.
- Include lane level detail, but don’t show actual costs or carrier SCAC’s for each move.
- Use zip code to zip code for the origin and destination data set.
- Rollup the data by origin and destination states showing average weights, density, and ship sizes.
- Provide a data sheet for each type of product that includes specifics such as:
- the value of the product.
- the National Motor Freight Classification (NMFC) for the product (if you don’t know ask carriers for this).
- the average product ship weight.
- type and size of pallets used to ship product.
- packaging type(s) such as Cases, Bales, Crates, etc.
- Percentages of prepaid and collect freight.
- Bill to addresses and contacts information.
- Include percentages for types of business handled such as:
- Business to Business
- Business to Customer
- Military or Government business
- School/College business
- Other types if you have them
- Show how much of the business requires additional charges. These are called “assessorial”.
- This includes charges for things such as: Liftgate use, Inside delivery, Residential delivery, Delivery Notification or Appointments. Ask for a list from one of your carriers.
- Show each assessorial as a percentage of the total shipments and provide a requested target cost for each, if you know it.
- Show which assessorials you want the carriers to “WAIVE” the cost on .
- Make sure you specify what Base Tariff Rates to use. Carriers traditionally discount off of a rate basis. You need to specify which one they are to use.
- Present a target pricing discount level in percentage terms. Discount requests are from a common base rate set. For example, you might ask for an 80% discount from Czarlite 2010. Ask your carriers if they use Czarlite (they should, as it is common used).
- Designate whether or not you want the rates to be applicable to Canadian Freight, or freight going into and out of Canada. If the carrier serves or has partnerships with carriers that serve Canada.
- Also specify your existing assessorial breakdown percentages so the carrier understands how important these assessorials are to your overall business mix.
- Fuel Surcharge (FSC)scales are extremely important to the overall cost structure. Fuel can represent 30% of your total cost. Typically, FSC scales are pegged to the DOT’s weekly national average diesel fuel prices. All LTL fuel surcharges drive off the base line haul rates as a percentage. See example below:
- A Sample Bill of Lading (BOL) is helpful so the carrier can see what type of BOL you use for you business. In many cases the shipper has a pre-printed BOL that shows the classes/types of products shipped and their NMFC’s.
- Pictures of the product being shipped is helpful for the bid as well. Most carriers will ask for pictures of the product to accompany the bids.
- Lastly, an LOA, Letter of Authorization, for the carrier to provide pricing is required. This (or a copy) should be written on the companies letterhead and be signed by an officer of the company or someone who is duly authorized to negotiate freight rates.
All of the above is not mandatory for a bid, but it is all extremely important to the quality of the bid results and the ability of the carriers to correctly price your freight. It may seem a little daunting for first timers, but after you have done a couple of bids using the above process, it gets a lot easier over time.
Riverside Logistics has been doing LTL bids for over 20 years and has a proven process to get the best results from RFP’s and RFQ’s for clients. If you would like us to do an LTL, Truckload or Parcel bid for your company we would be happy to do so. One thing we have is a lot of baseline information to compare results of the bids against. This allows us, in your stead, to provide very competitive rate information and produce the best results for your company.