The freight industry is a complex and competitive environment for carriers and asset-based 3PLs to maximize profits and optimize their networks. Balancing costs, managing risks, and ensuring network efficiency is crucial for success, and can be difficult without the right tools and strategies.
Approaching truckload bidding with analytics, as offered through Network View in Optimal Dynamics’ Plan product, carriers and 3PLs can better understand their network's performance, identify profitable lanes and customers, and make data-driven decisions. This article breaks down eight ways that thorough data analysis provides carriers and 3PLs with opportunities to make improvements.
Truckload Carrier Bidding Challenges & Key Considerations
Network optimization solutions should address the following four challenges during the bidding process.
Balancing Costs and Revenues
One of the most significant challenges faced by carriers and asset-based 3PLs is striking the right balance between costs and revenues. A study by the American Transportation Research Institute (ATRI) found that the average operating ratio for trucking companies in 2019 was 98.7%, indicating that carriers spent $0.987 on operating expenses for every $1.00 earned. This slim profit margin highlights the importance of carefully managing costs and maximizing revenues.
Managing the Risks of Certain Loads
Another challenge faced by carriers and 3PLs is the risk associated with accepting certain freight loads—how they impact their ability to deliver the loads profitably and on time. Carriers must consider numerous factors, like the cost of empty miles, potential delays, and the reliability of shippers when deciding whether to accept or reject a load.
Ensuring Network Efficiency
Carriers and 3PLs must also strive for network efficiency—maximizing the use of trucks, drivers, and trailers to minimize empty miles, reduce fuel consumption, and increase revenue. The ATRI report also showed that empty miles accounted for 16.3% of total miles driven in 2019. Increasing fleet utilization, reducing empty miles, and improving route optimization can significantly impact a company's bottom line.
Navigating Market Volatility
Market volatility causes challenges such as balancing cost and revenue, managing risk, and ensuring efficiency. During the COVID-19 pandemic, spot rates in September 2020 were 59% higher than the previous year, according to DAT Solutions. Carriers must adapt to these changing market conditions to remain competitive and maintain profitability.
The Role of Analysis Tools in Driving Profits
In order to optimize operations, it is crucial to identify profitable lanes and customers, minimize empty miles, enhance decision-making, and strengthen resource allocation. Analysis tools, such as Optimal Dynamics’ Network View, play a critical role addressing these challenges for carriers and 3PLs.
Carrier network simulation is a key step in making informed decisions regarding lane acceptance and volume per lane. With this, carriers can model their operations and analyze the impact of different scenarios on their business. They can then understand what percentage of a lane they can reasonably cover and which lanes to bid on. This helps optimize their network and allocate resources more effectively.
The Power of Network Simulation in Truckload Bidding
Tools like Network View in Optimal Dynamics’ Plan product help carriers understand their network's performance and forecast growth and profitability outcomes of different scenarios.
Here are eight ways network simulation works for carriers and asset-based 3PLs:
1. Improved decision-making: Analysis tools provide insight into load and lane profitability so users can decide which loads to accept or reject.
2. Efficient resource allocation: Analysis tools take driver availability, equipment, and routes into account, allowing for increased fleet utilization, reduced empty miles, and more cost-effective use of assets.
3. Enhanced pricing strategies: With access to historical data and market trends, carriers and 3PLs can develop more accurate pricing strategies to remain competitive.
4. Reduced operational costs: Analysis tools can identify inefficiencies in the network, such as detention time and routing, to reduce operating costs.
5. Proactive network adjustments: With analytics, companies are better equipped to take a proactive approach to risks and disruptions in the network, in order to maintain service levels and minimize the impact on the bottom line.
6. Better partner collaboration: Analysis tools help facilitate communication and collaboration between supply chain partners for greater operational efficiency.
7. Increased customer satisfaction: By leveraging data-driven insights to optimize service levels, companies can improve on-time delivery rates and overall customer satisfaction.
8. Increased driver satisfaction: Factoring in driver preferences, improving home time, and increasing paid mileage allows companies to build better relationships to improve driver retention.
Get Truckload Bidding Analysis for Data-Driven Decisions
Carriers and asset-based 3PLs should never have to guess which lanes, volumes, and combinations are most beneficial to their business. With Optimal Dynamics, carriers and asset-based 3PLs can follow these steps to bid analysis:
- Import customer bid files and evaluate the impacts on your network
- Rate lanes using historical market rates or upload your own rates
- Add bid loads to their network and identify beneficial lanes
- Test different rates and iterate based on customer feedback
- Evaluate bids from multiple customers simultaneously to understand network interactions
- Decide which new business to commit to
Through Plan by Optimal Dynamics, carriers and 3PLs get a data-informed approach to balancing costs and revenue, mitigating risk, ensuring efficiency, and navigating market volatility to optimize operations and drive profits. Learn more about Plan.
