While sitting around the table enjoying turkey and stuffing with loved ones last week, I was asked to reflect upon things for which I am thankful. First and foremost, I thought about how thankful I am for my family and friends. I am certainly thankful for my health and well being. As a graduate of the University of Kentucky and an avid college basketball fan, I am thankful that the Cats ended their 14-year championship drought in 2012.
At that point I started to think about how I had spent a large part of the previous two months managing a truckload transportation bid at LeanCor. I realized that I was very thankful for the fact that we had finished, but I was even more thankful for the fact that we had created a sustainable process for conducting future bids. In doing so, I learned some valuable tips that I’d like to share.
Develop a plan and stick to it.
At LeanCor we use a standard document called an LRC (Launch Readiness Checklist) to assign action items and due dates for each step of the bid process. We met as a team to discuss what our end result would look like, when our entire project was to be completed, and what steps we would have to take to reach our end goal. We then assigned actions. Below is a sample of what our LRC looked like. As you can see, we were able to keep track of each action item, the owner of each item, and the item’s status every step of the way. Having visibility to action items allows us to hold each other accountable for completing our project on time.
Standardize your inputs.
We had roughly 50 carriers participating in the bid. The bid involved about 240 unique lanes for dry vans and flatbed loads. Not all 50 companies ended up submitting rates for every lane but had they done so, we would’ve been managing about 12,000 unique rate submissions. With so much information it’s important to be prepared before the bid goes out. Create a standard bid template that you can use for all truckload bids moving forward. Do as much as you can to standardize the responses from the carriers. If you require all rates to be returned in a “per mile” format, make your expectations crystal clear to the carriers that you will not be able to accept flat rates. If you are savvy in Microsoft Excel you can even take steps to ensure that the bid file is formatted so that flat rates cannot be entered.
Allow your Carriers to check and adjust their rate submissions.
At LeanCor we utilize a PDCA cycle (Plan, Do, Check, Act) for problem solving. When used properly, the PDCA cycle can help solve a problem and prevent it from reoccurring. It’s starts with a plan to solve a problem or complete a task and ends with acting or adjusting the plan based on our results from the “check” phase. We offered the same opportunities to the carrier submitting rates for our bid.
We started off not providing target rates to the carriers, but instead asked them to provide us with a first round of their rates. We then collected all of the results and used them in combination with our 2012 rates to create a target for each lane. After establishing our target rates, we sent the rates back to the carriers in a format that showed them how their rates stacked up against our target (without telling them exactly what our target was). We used three categories. Each rate was either at or below the target rate, within 10% of the target rate, or more than 10% over our target rate. Essentially, we allowed our carriers to check and adjust against their initial plan in order to help LeanCor find the right carrier fit for each lane and provide the most competitive and realistic rates to our customer.
Utilize an XY matrix to make your carrier selections.
Unfortunately, anyone who has conducted a truckload bid can tell you that the carrier offering the cheapest rate on a lane is not always the best option to move the freight. Different factors such as carrier capacity, time of the year, service level, and rates all play a role in selecting the “champion” carrier on a lane. An XY Matrix can be used to pick your champion. The XY takes a significant amount of time and effort on the frontend. If done correctly however, it is a very effective tool in helping pick the best fit carrier and limiting the amount of adjusting needed on the backend once the bid is in effect. An XY Matrix allows you to weigh each input and, in our case, give each carrier a grade for every lane in the bid. Theoretically, the carrier with the highest grade would be your champion carrier. For more information on how to conduct a successful XY Matrix, refer to this previous entry in the Lean Logistics Blog: Lean Defined: The XY Project Selection Matrix.
Sticking with the PDCA theme, we will always check our bid results and adjust accordingly so that our process is always improving. Using the above strategies along with others catered to your own specific needs will help create the foundation for a sustainable truckload bid process. Creating a sustainable process for conducting bids will make subsequent bids easier and more effective. Conducting and executing effective bids will ultimately lead to happy customers. Having happy customers will provide new opportunities for your business. And, in today’s competitive logistics environment, opportunities are something we can all be thankful for.
Written by Steven Prince, Lean Logistics Team Leader at LeanCor
Posted by LeanCor Supply Chain Group
LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.Facebook LinkedIn Twitter Google+