To bid or not to bid…

That is a question that I have been asked several times over the past month. The calls I got asked about both reverse auctions and the more traditional RFP process for the truckload market.   The concern about the market tightening and the rates submitted in the bidding being higher than what the shipper was paying today.

Wrong reason to ask the question.

Put lanes out to bid if you think that there is chance to trade up in quality for the same price, or to be ready for a failure of a carrier that is shaky. But do not expect that you are going to be able to pick up better rates, the market capacity has tightened up.

If you have carriers in your stable that you think are not going to survive and they are not core to your core carrier list, have a candid conversation with them about the concern and let them know that you are shipping the lanes they are supporting because of the concern. Be prepared to have the carrier tell you that things are fine. Welcome the news if they tell you that your lanes are not making them any money.

If your carrier in a lane is giving you bad service in a lane, or group of lanes, it may be that you already have too low of a rate and the carrier has freight that is more profitable. The carrier may not want to kill your business, if the better paying freight drys up or they have left over capacity, they want to have your freight to fill the pipeline. In that case, you need to find a carrier that really can make a profit from your lanes. The best way is to ask carriers to come in and talk about your network, and find out what they think as a fit. Let them bid, and then compare. If it works well in their network, that will reflect in their pricing.

My answer is bid and don’t bid. Reverse auctions are not the way to go, but selective RFP to trade up in quality or confidence is a solid bet.

A few side notes:

A matter of trust:

I learned from a carrier this past month about a shipper who was so hung up about fuel surcharge that they wanted the billing to have the actual fuel receipt that driver collected so they could compare the amount of the receipt to the amount on the bill. Further, the shipper also wanted to tie the date on the receipt to the DOE announcement date. The shipper’s stance was that they would not pay the fuel surcharge without the actual receipts.

Stop and thin k about the request. The shipper wanted the ACTUAL receipt from the transaction; a fuel charge account summary was not acceptable. Think about the challenge of getting the drivers to turn in the fuel tickets, the effort needed to copy the fuel tickets, and the action that the shipper said that they would take if the receipt was not provided. If you were running a small one or two truck operation it may not be a big deal, but how about a 30 truck fleet, or even larger? That could be over 250 fill receipts per week. And what is the value of the paper? According to the carrier, it was to “assure that the fuel was a true pass-through”. This is a trust issue; the shipper was saying that they did not trust the carrier, and the carrier suspected that the shipper was looking for a way to avoid paying fuel surcharges because there was not “ticket”. In the end the carrier and the shipper did not agree to do business together, much to the relief of the carrier.

TARP and Tarps:

As I write this hearings are going on to push the $700 BILLION economic rescue plan through Congress. I am reminded of a old line that making laws is like making sausage, neither is a pretty sight to watch. Before this is all said and done there will be things added to the bill that will make it impassable. 

If the credit markets remain stuck, retailers who normally borrow to buy the holiday inventory will face higher rates and credit limitations, or worse, no credit at all.  If the retailers do not have the credit to buy the holiday merchandise, then there will be less freight to move.

There was a comment about my last post that said that the elections this year are not so exciting, and then made comments about the Republican ticket. Personally, this is a very exciting year, both in what it means for the country, and how things will play out on the political stage. Politics will upstage the economy, and we will all suffer a bit as the “show” plays out. The level of debt that the country has sunk into is not the just the fault of the current administration. Congress, business, and the American Public who wanted more for less, who sunk deep into debit to buy what they could not afford, all are to blame.

Are we all ready for the medicine? Are you ready for the government that you deserve?