A Bid For Sanity In Transportation
There's a better way than endless RFPs and mini-bids to thrive in unstable transportation markets.
15 September 2021 // In a world where shipping capacity and prices keep changing, customers are relying more and more on “mini bids.” We don’t have to tell readers how volatile supply chains have become due to continuing COVID-19 disruptions. Shortages have hit everything from components to shipping containers, ocean sailings and cargo flights. What’s a buyer to do?
According to a recent Journal of Commerce report, they’re turning to “mini-bids” to help them procure tough lanes—or even large portions of their networks. “Shippers are taking a snapshot of their business every couple of weeks or months,” Ben Cubitt, Transplace senior VP of supply chain and transportation, told the Journal. He added: “Both carriers and shippers thoroughly dislike the process. They aren’t thinking this is a great new tool or a best practice.”
At their worst, mini bids suck up shipper resources, and they can create what the Journal refers to as carrier “bid fatigue.” “What we’re seeing in this market is lower bid participation,” Cubitt observed. “Instead of getting 90 percent of the carriers you RFQ [request for quote] to respond, you may get 50 to 60 percent. Instead of 14 bids per lane, you may get six bids for lane. And even with mini-bids … we’re seeing carriers that are awarded lanes may give a number of those lanes back.” In some cases, those carriers also respond with higher prices than those originally in place.
There’s a better way for shippers than being at the mercy of carriers’ infrastructure: At Morgan, we’ve helped clients implement “custom tailored” networks. Instead of solving for individual transactions, we analyze a customer’s entire network, looking for segments where volume and frequency allow us to deploy personalized solutions. These could take the form of dedicated transportation, turnkey partner resources—and, yes, even some third-party carrier lanes.
This network approach doesn’t eliminate all need for ad hoc procurement. It does, however, provide a lot more operations flexibility and price protection. For instance, a custom-tailored network has greater cushion to absorb daily changes in the flow go goods, variations in volume and lane-level cost shifts. The network concept is strategic in nature and is built for long term stability.
Technology also plays a key role making responsive supply chains run efficiently. When you can see your goods and orchestrate actions across suppliers, it’s easier to create efficient hand-offs between strategic partners and take full advantage of the core competencies of each supplier.
We’re experts at designing network experiences for some of the world’s most successful and demanding manufacturing supply chains, including two of Gartner’s 2021 Supply Chain Top 25. If you’re ready to swear off mini-bid madness and tailor your operations as a network instead of just a collection of transactions, let’s talk.
Heard On The Dock
“Shippers are taking a snapshot of their business every couple of weeks or months,” and bidding it out. “Both carriers and shippers thoroughly dislike the process.”
-- Ben Cubitt, Senior VP, Supply Chain and Transportation, Transplace
While You Were Shipping…
More Recent Stories You May Have Missed That Caught Our Eye
Supply Chain’s Greatest Fear (Supply & Demand Chain Executive) Quick: What’s the most important vulnerability for supply chain leaders to worry about? Lack of inventory or transit resources? Supplier reliability? Other disruptions, such as pandemics, weather events or wars?
According to SDCE’s editors, it’s none of the above. They suggest that cyberattacks pose a much more serious risk. The story cites a recent Economist whitepaper survey of 400 supply chain executives in which more than a third of respondents indicated they had been hit hit with significant cyberattacks in the preceding three years. The average damage associated with an attack amounted to $3.9 million from lost business and downtime. Click through to the story for mitigation strategies and best practices.
On Cruise Control (DC Velocity) HP Inc. and Embark began autonomous trucking operations last week, moving loads of printers between Los Angeles and Phoenix. The trucks use Level 2 autonomy, which means a human driver is behind the wheel to monitor performance and intervene if necessary, although the trucks will be driving route on their own.
The Real Cost of Delays (Commercial Carrier Journal) Next time you’re tempted to accept delays as an unavoidable cost of transportation logistics, consider this new study that claims bottlenecks cost the equivalent of 75,000 years in transit in 2019. That’s about 660 million hours of lost productivity according to The American Road & Transportation Builders Association. The biggest chokepoints include New York, Chicago, Los Angeles, Austin, Houston, San Francisco, Nashville, Seattle, Philadelphia and Atlanta.
The group says congestion is up 25 percent in just two years. With the equivalent of 425,523 trucks sitting idle for a whole year, the environment is ripe for consolidation strategies that reduce the amount of empty or under-utilized truck miles being driven.
(Not) Eating Their Own Dog Food (Supply Chain Dive). Inventory management at online pet retailer Chewy has become a bit ruff. Stock-outs cost the company about $40 million in lost sales, CEO Sumit Singh estimated on an earnings call. It’s the latest example of the bullwhip effect in post-pandemic supply chains. Chewy had a large surplus of canned pet food just a year ago. Now, that has shifted to an extreme backlog.
Chewy’s experience mirrors the larger US economy, with the US Census Bureau reporting the lowest-ever inventory-to-sales ratio of 1.23 in March, compared to a record high of 1.63 almost a year earlier in April, 2020. That volatility underscores the need for supply chain resilience strategies including our own Inventory On Demand™ inventory finance solution and multi-party visibility tools such as our ChronosCloud platform. Jon Gold, the National Retail Federation’s VP of Supply Chain and Customs Policy, stressed to SCD’s editors the need for more investment in such tools, adding “I think lean is still the way to go.”
