Advanced Bid Design – Robust Lane and Carrier Classification

By Ben Cubitt, Senior Vice President of Consulting and Engineering and Cindy Bosecker, Director of Procurement, Transplace

There are three critical phases or elements of a truckload bid event – the upfront development of bid strategy, the execution of the bid, and the use of scenario management tools to drive final bid assignments. While all three phases are critical to a successful bid, many shippers can find significant opportunity by using advanced robust lane and carrier classification to optimize bid results.

Every shipper understands that “a lane is not always a lane” and that not all carriers are created equal. Given that, two types of lane classifications need to be considered. The first classification involves overall lane requirements and freight characteristics. These include lane requirements like live load or drop trailer, typical order lead time (e.g., less than 24 hours, 24 to 48 hours, greater than 48 hours, etc.), and equipment required.

The second classification assists in the bid analysis and segments lanes into sourcing groups that align with strategic goals or requirements. The exercise of classifying lanes up front leads the team to really think about what lane types are in their network and which have special requirements or profiles that will impact final carrier selection. Many shippers have not historically taken the time up front to do so, as they are weighed down by just the effort required to plan, execute and manage the rollout of a bid.

Tips to Improve Lane Segmentation and Classification:

• Evaluate how lanes are segmented for business purposes (e.g., inbound, outbound, by site, by product family, etc.) – How do you look at the network?
• Classify lanes based on service expectations that will allow tolerance testing for change. For example, understanding which of your customers are low risk or high risk from both a service perspective and a penalty perspective may change how you select carriers. Which customers have especially demanding on-time delivery KPI’s or large penalties for late or even early deliveries? Which lanes deliver to customers or plants that may impose heavy fees for “line down time” or “spoiled or damaged” production materials if a delivery is late?
• Shippers generally want to classify lanes as internal replenishment lanes, customer delivery with flexibility lanes, or critical tight time window lanes. These classifications help a shipper evaluate scenarios where more aggressively priced carriers or higher service profile carriers should or should not be favored.
• Include indicators on how the lane will be assigned (e.g., by lane, origin, particular grouping, etc.).
• Shippers may want to look at the bid lanes for a particular product family or for a geographic region holistically, and therefore the segmentation should be included up front.

In addition to lane segmentation, shippers should also carefully evaluate their carrier base prior to a bid event. Carriers, both new and incumbent, should be classified by capabilities, strategic alignment, or other criteria.

Keys to Carrier Classification and Alignment with Bid and Strategic Carrier Management Strategy:

• Define characteristics of each carrier that you plan to use to evaluate (e.g., asset versus broker, minority owned, customer approved, SmartWay certified, etc.).
• Identify carrier equipment capabilities and make sure it is called out in the information.
• Evaluate your existing carrier base and set tiers within the program for carriers that you want to target to grow, maintain, or reduce their existing business through the bid awards.
• Segment carriers based on performance and/or how strategically aligned they are with your company. You may be comfortable using some carriers anywhere, but others may be restricted to certain areas of the business. Defining that up front saves significant time on the back end.
• Classifying carriers into strategic groupings that combine both historical performance (e.g., tender acceptance rates, on-time pick-up and delivery, volume moved, etc.) and core carrier bid goals (e.g., grow volume, stay at or near same levels, limited usage, etc.). Three or four levels seem to work best and typical groupings are either tier levels (Tier I, II, III) or other easy-to-use names (Platinum, Gold, Bronze or Strategic, Core, Niche, Local).

Carriers are being inundated with bids and shippers have to strive to improve both how carriers evaluate their bids and how the shippers evaluate the carrier’s bid responses. Best-in-class procurement technology platforms enable shippers to reach new levels of bid performance. Organizations need to make sure they are prepared to fully leverage the capabilities of these tools and design RFPs to help facilitate an optimal bid outcome.

The bottom line? If you need to drive a higher level of performance from your truckload bid event, your success will increasingly be driven by your upfront bid design. The time spent segmenting your lanes and classifying your carriers makes the final bid scenario review more efficient and impactful. Intelligently focused bid design will drive a stronger post bid core carrier group, increase savings, and match service and cost performance with actual lane requirements.

 

Ben Cubitt is Senior Vice President, Consulting & Engineering, at Transplace. With more than 20 years of industry and consulting experience in freight optimization, Mr. Cubitt has a deep familiarity with the freight procurement field working for consulting firms and multiple Fortune 500 companies in the consumer products, paper and automotive industries. Mr. Cubitt joined Transplace in July 2010 after four years as Vice President, Supply Chain for RockTenn Corporation. At Transplace he leads the engineering and consulting teams.

Cindy Bosecker is Director of Engineering and Transportation Procurement, Engineering and Carrier Development for Transplace. Ms. Bosecker joined Transplace in 2002 as part of the engineering team and has since expanded her role within the organization to include not only the management of the engineering department, but also the carrier development team. Within these roles, Ms. Bosecker is charged with providing supply chain optimization and analytical support to both existing and potential customers, as well as managing the overarching carrier relationships with the contract logistics carrier base. Ms. Bosecker holds a Bachelor of Science in Industrial Engineering from the University of Arkansas.