In the ever-changing landscape of transportation procurement, major shippers are abandoning the traditional annual bid approach. Instead, they’re adopting more dynamic strategies to ride pricing waves, balancing flexibility with predictability in the volatile truckload marketplace.
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Evolution in strategy
Shippers are no longer relying solely on annual bids for high-volume lanes. With 80% of freight often concentrated on just 15% of lanes, traditional methods led to pricing instability, risking contract rejections. The new approach involves “riding the wave,” determining shipment rates at the time of tender based on negotiated rules between shippers and transportation providers.
Two approaches to dynamic pricing
Shippers are either fostering competition among a set of transportation providers or establishing contracts based on pricing indices. This shift requires analytics systems to monitor responses, providing a structured yet flexible approach to the spot market.
Ripple effects across the industry
The dynamic procurement approach has led to significant changes for motor carriers and freight brokers:
Brokers’ expanded role: Shippers’ structured approach to the spot market has increased the importance of brokers, who now play a larger role in strategic plans.
Network optimization: Shippers, through brokers, gain access to a broader network of carriers, offering flexibility and more opportunities for carriers.
Blurring of segments: Asset-based carriers now often have brokerage arms, and brokers act as quasi-asset carriers by cultivating “dedicated” carriers in their networks.
The path forward
As transportation organizations embrace sophisticated pricing strategies, the need for large teams of data scientists diminishes. Robust analytics, powered by artificial intelligence and machine learning, have lowered entry barriers, providing unprecedented insights into rates, capacity, and performance. This evolution enhances transparency across the truckload marketplace.
Keys to industry success
In a market where change is constant, speed and agility will determine winners and losers. Advanced analytics and streamlined operations empower transportation professionals to navigate market fluctuations successfully. As the industry looks to the future, these tools ensure readiness for whatever challenges lie ahead, creating a more resilient and adaptive transportation landscape.
