Tendering your Less-Than-Truckload (LTL) freight is often a sensitive exercise for companies. First, it is time-consuming. But moreover, the results of the tender strongly depend on a solid baseline setup.
In addition to that, a good understanding of the current market, together with a solid preparation help you overcome most of the challenges in executing an LTL freight project.
LTL Tenders come in mainly 2 formats
in principle, there are two models used by carriers in Europe:
- Point-to-Point networks – in which the shipments are collected and delivered by the same truck. With this model, the transit time may have less variation and is more predictable.
- Hub-and-spoke networks – for small LTL shipments (Groupage often < 2000 kg) where shipments are locally collected, pass multiple hubs and are finally delivered by local trucks. In these networks, the transit times can vary a lot when shipments are stored in the hubs. Hub-and-spoke networks have extensive logistical requirements, are highly efficient and very often built around local players who work together in a partnership.
3 Useful Tips From Experts In LTL Tenders
1. Use Technology (Logistics dedicated)
Your historical shipping data contains a lot of high-value information. The volume and weight information are relevant for the pricing, while the pick-up and delivery date information determine the accepted service levels. When analyzing your own pick-up and delivery days, transit duration and volume data, you can identify which shipments cause most issues in transit time. During the evaluation phase you should be able to identify what your current road freight carrier is offering and the service you expect from others.
2. Pricing: Define weight brackets yourself
The ability to (flexible) define the weight brackets yourself is the most crucial factor of the LTL tender. And that is typically where you need a dedicated logistics sourcing tool. Reason? Generic E-Sourcing tools simply don’t cope with logistics costs structures. And this will result is a lengthy tender process, high communication workloads and it can possibly jeopardize cost savings. Let’s set an example:
The cost structure is built up in a fashion where there exist Basic fixed costs + Additional cost p/kg. This is a bracket-range that partly consists of a flat calculation and partly as a price per measure unit (eg. p/kg). But imagine that there also exists a minimum fee. How are you going to set that up with a generic E-sourcing tool? Will that take the right calculation method into consideration? Or the bracket application rules? Continue to point number 3.
3. Define conditions (Weight/Conversion factors)
Also the conditions, conversion factors (e.g. 1 m3 = 333 kg and 1 LDM = 1850 kg) are important. Important to implement beforehand. Once again, logistics is a unique business. And generic tools are not fit to handle highly complicated freight tenders. Our advice, use a tool that understands your logistics needs. Define weight definitions, round rules, consolidations, and cost conditions correctly.
Extra tip #1 – Calculation Rule/Bracket application rule
Use a minimum rule to always get the lowest pricing for a shipment. While many Excel rate cards are balanced to direct rules, it is advisable to change this today. This will define how to apply the bracket range for cost calculation. The Minimum Rule (Payant Pour) means that the calculated cost is compared to the lowest cost of the next bracket, the lowest cost applies. The Maximum Rule means that calculated cost is compared to the highest cost of the previous bracket, highest cost applies. The direct rule means that the cost calculation is solely based on the applicable bracket.
One core element is often not taken into account leading to difficulties during the tender: supplying carriers with limited or poor data. This seems to be an issue in the majority of tenders. Having good data via TMS, Freight Audit or ERP should be a strategic objective for shippers. Unfortunately many are not there yet. Leaving savings and valuable business intelligence on the table.
Extra tip #2 – Get the right number and classes!
For products in the US that will be shipped less-than-truckload (LTL), shippers need to know the correct National Motor Freight Classification (NMFC) numbers and freight classes!