What goes up must come down. It’s not just gravity that works this way. Freight rates do as well. And right now, we’re on a rollercoaster. 

Load volumes and fuel prices are down while truck capacity is up, according to the most recent DAT Trendlines data. That can only mean one thing for freight rates. In the truckload sector, rates continued falling in December 2022 but surprisingly rose in January. It’s worth noting that Cass Information Systems attributes the increase to normal seasonal rate adjustments, signaling that a freight recession could still be ahead.

The State of the Current Freight Market

The freight market started 2023 with a limp due to faltering consumer demand based on two primary factors:

• • • Inflation. Due to financial uncertainty and high interest rates slowing construction of homes, consumers are purchasing fewer goods hauled by truck. The consumer-price index (CPI) rose at historic levels in 2022 and ended November up 7.1%, year over year.

    • Inventory drawdowns. Retailers saw inventories surge in 2022. With lower-than-expected consumer demand, retailers have curtailed transportation because they have surplus goods that are no longer in high demand.

Compared to the CPI, the transportation and logistics industry has seen higher increases in operating costs from:

• Fuel. The average retail price of diesel has been hovering at $5 per gallon since March 2022.

• Ongoing geopolitical tensions. Escalations could destabilize energy prices in 2023, making fuel and fuel surcharges even more of a wild card.

• Equipment costs. Prices for new and used trailers rose rapidly in 2021 and declined somewhat in 2022 but are expected to be higher than normal in 2023. 

• Labor. The unemployment rate entered 2023 at 4%, which economists consider a fully employed market. Labor shortages will continue driving wage growth for drivers, office staff, technicians, warehouse workers, and more.

So, what does all of this mean for submitting contract rates for the next quarterly bid cycle? Or for your next spot rate?

Modern Technology’s Impact on Bidding

No one enjoys the bidding process, but that doesn’t mean it needs to be arduous. 

Traditionally, freight bids or “RFPs” were done annually. Shippers had transportation providers submit rates for lanes based on certain volume commitments. However, the volumes were always more of an estimate than a binding agreement. Things inevitably change as shipper volumes fluctuate and carriers and freight brokers decide to implement seasonal or general rate increases during the “contract” period. 

The bidding process is evolving. Many shippers now conduct RFPs semi-annually or even quarterly. Technology has evolved as well to help carriers and freight brokers more easily manage bid responses throughout the year.

The top 3 advantages of using a modern, SaaS-based TMS for simplifying the freight bidding process are:

1. Real-time rating. Shippers are wanting to do more business with 3PLs and carriers that can provide real-time visibility of where their capacity is, the cost, and guarantee that shipments will be covered when they choose their “book it now” options for any lane and commodity type.

2. Access to better data. To bid accurately, carriers need to know the operating characteristics of freight such as daily volumes, hours available for pickups and deliveries, and wait times at facilities. Having visibility to historical activities by customer and by lane makes it easy to calculate realistic bids. Additionally, carriers and logistics providers can more easily see how new business will mesh with their freight networks.

By having fast access to operating data and intelligent analysis, carriers and freight brokers are able to submit rates that account for variability to better monitor costs with market pricing and network balance. In the end, users can quickly target the right opportunities from RFPs to balance their networks and spot lanes where they should not bid if the current bids are too low or simply do not fit their strategies.

3. Improved communication. Access to better data helps transportation providers find mutually beneficial solutions for shippers and, where possible, circumvent RFPs, and connect one-on-one to discuss the best options. A fleet can analyze historical data and then target specific lanes/loads that it can best handle at optimum costs for shippers. The carrier or broker doesn’t have to bid on the whole RFP and the shipper avoids awarding to the wrong provider, which inevitably will result in paying spot market premiums or re-bidding the lane.

Freight Transactions Simplified by Technology 

In today’s market, it is more important than ever for carriers to have a modern TMS to simplify the freight bidding process and improve their odds of winning the right loads from the right customers. Carriers who use outdated technology or manual processes are at a disadvantage when competing against those with market visibility and access to intelligent data that informs bids.

A cloud-based TMS, like Magnus TMS, provides all the features needed to efficiently analyze and respond to bid requests. Schedule a demo of Magnus TMS today to see how our solution can help you win more business today and tomorrow.

See the Magnus TMS in action by calling (877) 381-4632 or emailing sales@magnustech.com.

For more ways to simplify and thrive in 2023, download our latest guide.