A Guide to Carrier Network Optimization for Parcel, LTL, and Truckload Freight

A Guide to Carrier Network Optimization for Parcel, LTL, and Truckload Freight

carrier_network_optimization

With the 2021 peak season, RFP and modern supply chain management remains essential today in the shipping and transportation market. The high priority focus on RFPs and carrier network optimization will continue to impact services and shipping protocols well into 2022 and beyond. On the heels of COVID-19, the fast-moving volatility of current market trends and customer demands make shipping, planning, and logistics more critical than ever. According to the Journal of Commerce: “In the early days of the pandemic, March through May, UPS and FedEx reported B2C volumes represented 70 percent of total ground volumes. As businesses reopened during the summer, B2C volumes remained high as a percentage of total ground volumes, declining only to 61 percent for UPS during the third quarter” of 2020. The global effects of the pandemic created a sudden shift in small parcel volumes and caused an accelerated shift in parcel types, shipping modes, product demands, and transportation service availability. Strong RFP supply chain management practices and carrier network optimization services will allow for continued growth and success in the modern supply chain and freight shipping network. It’s important to understand the full scope of optimization, including what it is and how your team can improve it.

What Is Carrier Contract Optimization?

The heart and soul of a successful transportation company is its ability to master carrier network optimization across the board. Carrier contract optimization essentially focuses on transportation carrier collaboration. With an optimized carrier pool, shippers can more easily find a suitable carrier for every load. From standard packaging to oversized loads to hazardous materials and more, having ample options to choose from makes it easier to match loads to carriers and get shipments on the road. As part of the consideration of network optimization and RFP logistics, carrier partnerships and collaboration go a long way in preserving effective shipment services daily. 

Carrier Network Optimization Begins With Data-Backed RFPs

As addressed by a Ryder report, published by SupplyChainBrain, “a company that relies on trucks to deliver its products over the road is only as strong and efficient as its transportation network. … By continuously evaluating your transportation network and analyzing opportunities for optimization, you can achieve [increased] success.” Basic data that can be gained from RFP tracking and monitoring include the following:

  • Key industries and markets of interest
  • Customer location or region
  • Dates of quotes, shipments, payments, etc. 
  • Contact information and customer specs
  • Contact role and method
  • Unique shipping trends by customers
  • RFP value estimates and finance
  • RFP status and current data
  • Won/lost reason and trends
  • Preferred carriers per customer
  • Preferred modes per customer

9 Things to Consider When Entering Annual RFP Processes

While RFP supply chain management is an ongoing concern for shippers, the annual process of submitting bids and establishing new carrier and shipper contracts must also be carefully considered. As pointed out by Forbes, “A truly optimized transportation network means it is flexible enough to adapt with your company’s strategy, changing needs, and a variety of constraints and variables. It takes advantage of all available mode options to deliver the lowest possible cost while providing visibility and reliability every step of the way.” The process can become very involved and complicated, and often, to get the flexibility required, many shippers should opt to not conduct an annual RFP and instead utilize data and analytics to procure capacity and rates. However, should an RFP arise, these nine points must be included during annual RFP processes:

  1. Balance Wants and Needs
    There are certain things shippers and carriers want that can align within the contractual agreements, and others need to be negotiated within the RFPs. Balancing wants and needs requires a lot of give-and-take during these negotiations. Securing capacity and maintaining shipping service diversity with affordable rates are always worth the more minor sacrifices that either party may require.
  2. Good Shipping Aggregation
    Aggregate shipment refers to a shipping model where numerous shipments from different shippers are consolidated to a single consignee. This combined shipment is treated as a single consignment as all parts of the order are heading to the exact location.  Consolidated shipping is ideal for smaller loads and makes it easier to preserve capacity and container space by combining orders and keeping good carrier networking and coordination.
  3. Parcel Shipping Opportunities
    RFPs are a uniquely rewarding and cost-saving measure that can make parcel shipments and supply chain network coordination faster and easier in addition to maintaining current costs, mitigating cost increases or potential cost savings in today’s carrier market.. Understanding how and when to implement an RFP and what points need negotiation can significantly extend parcel shipping opportunities and capacity. This will help build lasting parcel carrier relationships and strengthen future opportunities for fast and easy RFP negotiation and contractual agreements.
  1. Less Than Truckload Logistics
    The sudden rise and continued demand for last-mile delivery shows no sign of slowing or returning to pre-pandemic levels anytime soon. Delivery services and amenities with LTL strategies continue to be in high demand as shippers work to meet customer demands and deal with market volatility. With this in mind, strong relationships with less-than-truckload carriers are now a key component in building that network and maintaining a competitive advantage in today’s supply chain market. 
  1. Truckload Capacity Management
    For all freight management parties, from shippers and freight brokers to carriers and beyond, freight matching is critical to maintaining optimal productivity with truckload capacity management. Managing capacity procurement and truckload services is a critical part of the supply chain puzzle and must be included with all RFP bids and communications during contractual negotiations within the shipping industry.
  1. Dock Scheduling and Utilization
    Managing dock scheduling and operations can also improve profitability and make it easier for shippers and carriers to collaborate with loading and unloading processes. Real-time scheduling and updates and faster data analysis can improve the flow through docks and warehouses and prevent bottlenecks and shipping delays. Utilizing automated tracking and monitoring tools, scheduling platforms, and dashboards can improve movement throughout the supply chain.
  2. Well-Rounded RFP Submissions
    While the RFPs are a critical aspect of the supply chain management process and can help shippers and carriers to coordinate and come together, they also need to be well-rounded and well-focused. All proposals need to encompass key shipping areas, logistics, services, and collaboration to provide a mutually beneficial environment for improving truckload management and freight shipping services.
  3. Process and Result Evaluation
    RFP supply chain management processes must focus on results and real-time data for transportation carriers and shippers. Actual data about deliveries, timelines, claims, profits, expenses, and service performance all must be carefully evaluated on a regular basis to ensure the supply chain is operating at optimal efficiency. Basing claims and proposals on real-world results will help strengthen the carrier-shipper relationship across the board.
  4. Improved Network Organization
    When dealing with carrier and shipper negotiations and RFP annual reviews, it is important to remain focused on overall network organization and functionality. Small changes in one area can create huge ripples that affect other aspects of the supply chain down the line. Improving overall organization and collaboration can strengthen the entire supply chain and make things more profitable for shippers, carriers, freight managers, logistic directors, and other third parties involved in transportation services.

How to Track Carrier Performance and Set RFP Expectations

Tracking on-time shipping performance and keeping up with carrier performance and RFP expectations for all involved parties remains a vital part of carrier network optimization and optimizing the network for parcel, LTL, and Truckload freight transportation. This all requires the following points to be carefully monitored regularly:

During RFP Season

With new technologies becoming available, consumer demands constantly shifting, and new shipping and transportation services coming into the market, it is only a matter of time until new RFPs are needed in order to keep up.  Carriers and shippers alike will need to adapt to new processes and embrace new tools to continue meeting consumer needs. The following steps can make the process more manageable during RFP seasons: 

  • Benchmark all operations, set milestones and target goals, and work collaboratively to gather data from multiple systems throughout the supply chain. 
  • Be transparent about goals and set clear parameters regarding volume expectations, performance, success rates, and other critical metric milestones. 
  • Remember to consider accessories and accrual charges and to budget for expected fees and ordinary GRIs, fuel charges, and shipping rate fluctuations. 
  • Vet carriers early in the RFP process to form a reliable and successful pool of carriers to pull from for special and unique capacity needs or concerns. 
  • Know when to push back against contract changes with real-time access to data and trends that make it easier to fall back on the data to renegotiate terms.
  • Evaluate current shipping and transportation spend rates to identify where weak points and potential problem areas exist, then work with carriers to shore up and address those areas.
  • Leverage data and analytics to plan for future volume by carrier, service, and region instead of basing RFPs on current volume. Shippers need to intimately understand costs and general rate increases by zone, weight, and service, as shippers cannot simply switch volume around, as they need to know where volume discounts are in the data and apply those learnings accordingly.

After Selection to Maintain Performance

Short-term and long-term RFP supply chain management, along with logistics RFP coordination services, will hinge upon each party’s ability to negotiate and embrace available tools. Keeping up with expectations and ensuring open communication and collaboration exist is key to maintaining mutually beneficial partnerships between carriers and shippers. The following steps can make the process easier for the daily monitoring of the carrier-shipper relationship: 

  • Aggregate data across all systems and utilize collaborative dashboards, tools, apps, and services to improve the relationship between shippers and carriers.
  • Normalize data to compare apples-to-apples and ensure accurate, up-to-date data is used with all metrics and goal markers.
  • Create target benchmarks and supply chain KPIs that can quickly provide a framework for all team members and 3PLs to work on together and stay on the same page regarding goals. 
  • Track performance by carriers using real-time data and up-to-date tracking and monitoring processes to monitor deliveries, relationships, profits, losses, and collaborative opportunities.
  • Drill into carrier performance by further granularities, including lane, SKU, inventory levels, and other key metrics that make data easier to apply to day-to-day supply chain operations. 
  • Leverage dashboards and innovative tools that are designed to simplify reporting and management of performance for carriers after RFPs are in place.
  • Be transparent in expected volume commitments, share data and insights, and be open to renegotiations to improve terms when new RFPs are presented. 

Bonus Tip for Carrier and Shipper Management

Maximizing carrier network optimization is another crucial aspect of the shipper-carrier relationship that needs careful monitoring. This is knowing when to send new RFPs and contact carriers for mini-bids or short-term changes in demand and rates.  General rate increases are expected, and a great deal of fluctuation occurs within the supply chain network and the transportation market. Basing RFPs and contractual terms on current rates and fees can provide a better rate for both parties and help shippers and carriers collaborate easily and maintain optimal capacity levels, regardless of market volatility. RFP supply chain management relies heavily on optimizing parcel, LTL, and Truckload freight transportation networks.

What to Look for in a New Carrier Contract

Shipper and carrier contracts can vary significantly depending on market, freight loads, and company specifics. However, all parcel, LTL, and truckload shipping options rely on supply chain data and current RFPs that generally include the following items:

Billing and Payment

All necessary details about billing and payment must be outlined, including payment due dates, late fees, surcharges, fuel costs, and other anticipated expenses and fees.

Significant Damages

The bid contracts must include terms that deal with what happens when damages and losses occur during the transportation process and who holds responsibility for damages.

Safety

The best RFP contracts need to include info that deals with transportation safety and defines who ultimately will be responsible for safety in warehouses, trucks, and delivery locations.

Liability Constraint

Likewise, there needs to be a clause that will specify the maximum amount of liability that both carriers and shippers will be responsible for if any injuries or losses are sustained.

Dispute Resolution

For high-level loads or specialty loads that are very valuable, delicate, hazardous or require specialized handling and transport, dispute resolutions may need to be addressed in the RFPs right off the bat.

Scope of Services

A strong RFP needs to include a description of services that will be offered to customers and their expected costs. This can be outlined in a detailed list of services within the proposals.

Termination

While no one wants to think about ending a relationship in volatile markets, freight contracts that never expire can cause problems. Therefore, all RFPs are designed to allow renewal intervals.

Working with skilled and experienced carriers by developing solid RFPs can make it much easier to negotiate the best freight transportation rates and services. Logistics and RFP management are critical processes that can improve freight shipping and positively impact shipper and carrier networks.

Why Logistics Consultants Are Critical to Improving Your Carrier Rates at the Bargaining Table

For transportation providers and shippers, RFPs create opportunities for winning new business, growing revenue, and building customer relations and standing. However, deep inside all these quotes and paperwork is RFP data that make it easier to predict trends, direct decisions, allocate resources, shape strategies, expand shipping services, and increase success in the network. 

Create Strategic Carrier Network Optimization With Intelligent Audit

Increased income, well-organized sales, and a higher customer loyalty rate are some benefits of improved RFP management. When done right, RFPs can bring about amazing changes, including better rates, easier access to capacity, and data-driven strategies, for the modern supply chain network. This is why constant monitoring and tracking are so vital for success within carrier network optimization and logistic RFP success for the short-term and long-term. With ongoing pressure for cost containment, greater transportation efficiency, on-time delivery performance, and high levels of customer service, strong collaboration between shippers and carriers is more important than ever. To maximize carrier network optimization and make the most out of transportation carrier-shipper collaborations, a new approach to freight transportation is needed. Contact Intelligent Audit today to learn more about advances in supply chain management and to improve RFPs for Parcel, LTL, and Truckload Freight shipping.

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