Logistics Management

John A. Gentle

Bad Bid Process harms Company Reputation
October 4, 2007

From time to time I watch companies conduct bids that in the end do more damage to their reputation than good. Generally it's because the shipper has been inwardly focused only on the end result....lower costs!

First let me say that there is absolutely nothing wrong with searching for freight savings....that's what shippers are supposed to do!  The real question is - How are the savings to be obtained? Are they to come from productivity generated by the company in conjunction with the carrier? From the adjustment or redeployment of carriers' capacity? Or solely from rates? And when we talk about "rates" is it because we have not tested the marketplace in a few years or because we have chosen not to have a good face to face converstation with our business partners.

Well, let's assume that you have not tested the market place for a few years. A bid may be a good way to see where it is today and where it is likely to be for the next few months.  If you test early in the year the rates will be lower, and conversely later in the year you will get higher rates.  The real work to conducting a bid comes from: the pre-qualification process and the bid itself. Critical to the Pre-Qualification Process is the Fitness for Use(FFU) statement and Qualifying carriers to bid.

The Fitness for Use (FFU) clearly defines the expectations of your Transportation Team as well as the loading plant and your customer base.  It addresses; operating protocols; process of freight tendering and acceptance; EDI protocols; brokerage; capacity commitments; plant operating rules; safety; trailer pools; pick up times; service and other customers needs such as returns; claims; freight payments and terms; and lastly, performance metrics and a feedback process for the shipper and the carrier.

The Carrier Qualification Process is designed to ensure that the asset based carrier has:
      * Properly documented Carrier Operating Authority
      * DOT Safety Rating of Satisfactory
      * Reasonable SafeStat results and a solid positive trend data
      * Properly documented and complete insurance coverage for general and auto liablilty, workman's
         comp, cargo liability, excess liability, and does not have a long list of hidden exclusions
      * The insurance Carrier has a strong Moody's rating and can provide the support if needed.
      * Number of pieces of equipment the carrier is committed to place into operation for 
         you without having to resort to brokerage
      * Names of 2-3 customer w/similiar operating characteristics who will attest to their performance.
      * Knowledge of the industry and current indistry issues and plan to deal with them
      * Copy of your contract and agreeable to its provisions

The actual Bid Preparation process generally runs concurrently with the Pre-Qualification Process and includes a description and timing of each phase and what the carrier will be able to expect.  Bids should be constructed so the smallest carrier can easily participate.  Bids, which require companies to win just to qualify and then re-bid to be able to subsequently negotiate, should be clearly defined up front.  Some don't like to play that game....I wonder why?   And lastly, the whole process can't take months.  From the first bid to the reward and the actual transition, a simple bid should not take more than four weeks.  

One of the biggest problems occurs when a third party or a sofware provider begins to make the rules and turns the shippers into something that they are not and something that even their existing carriers cannot recognize.  The sure indication of a failed bid is when the winning carrier(s) have to be replaced by the old incumbents because they did not understand the business.

Bid if you need to but recognize how it will label you for a long time....a failed bid will be costlier to you than you can imagine!


    

Posted by John A. Gentle on October 4, 2007 | Comments (2)