Bids and RFPs for Freight Brokers | Final Mile 104

Speaker 1: 0:19

All right, welcome back. It's another edition of the Final Mile where we answer your questions. We've got some good ones and a little controversy today that we'll touch on.

Speaker 1: 0:30

But, if you're new, make sure to check out all the other content, including the Freight Broker Basics course, on our website and share us with your friends all that good stuff. Check out the sponsors down below in the description box to support the Freight360 channel. Ben, let's get right into it. First question I'm a new 3PL broker and I work for a big company. I have this Walmart bid that's due tomorrow by midnight. Sorry, we're just reading this on air after the fact, but we wanted to at least touch back on it.

Speaker 2: 0:58

I tried to answer this. By the way, I sent him a few responses.

Speaker 1: 1:02

I have a Walmart bid that's due tomorrow by midnight roughly 320 lanes to bid on. For example, walmart's rate per mile is $2.97. My rate per mile I'm bidding is 94.75% of that, so my bid would be $2.81. Do you think it's a good strategy? Oh, I have a lot of questions and I know your comments on YouTube were like we need a lot more information. What's your initial take on this? Because I'm not sure what he means by the 297.

Speaker 2: 1:32

Here's. That was the first thing I asked, but I'm going to assume that what he found somewhere or came up with was this is what we think the average rate per mile is what Walmart's paying is like.

Speaker 2: 1:46

It's kind of like where I think you have to start and I'm like okay pretty high regardless yeah, and it also kind of makes sense the rest of it, if you make that assumption in the sense that, like he then says, um, I'm gonna do like 97 percent of it's, like, oh, so if he expects them to pay, whatever that number is he figured, hey, I'll knock 3% below that.

Speaker 1: 2:09

He went like 5% below. He has 94.75% of it.

Speaker 2: 2:13

Okay, so he wanted to. You know, underbid, if that's what he thinks they're paying across the average, then he was going to try to. I guess that was the competitive edge. But the questions, I think my first thoughts are he said he worked at a large brokerage, I think, and I'm like okay, so somewhere in their internal data, I guess they feel like or he came up with, or whoever's teaching him how to do this said like this is where I think we start. But your first point was my first thought of like that is a lot of money across that many lanes for a company of that size. Like I don't, I would not expect Walmart to be paying an average of just below $3 a mile across 300 some lanes.

Speaker 1: 2:54

Yeah, here's. Here's what I would say Like for any bid in general if you're going to. First of all, if you're a new broker, he's a new broker at a big company, um, like this Walmart specifically. It's kind of a sucker's game. Literally it's a race to the bottom. They're a slow-paying, low-margin customer on average. But anyway, all that aside, when it comes to a bid, the actual mechanics of how you want to do it is you want to figure out what is the projected cost on average throughout the period of that bid. So if it's a 12-month bid, look at the 12-month forecast, maybe weigh in the previous 12-month, maybe weigh in your company's previous data for those lanes, Get an average, that's your expected cost, you add a margin to it and that's your bid. That's the one-on-one level mechanics of it. So let's say you figure out.

Speaker 2: 3:46

I want to repeat that for everybody, right, because that's really important you need the timeframe of when the bid is right. Is it a six-month bid or a 12-month bid? Why does that matter? Because if it's six months and let's say it's the second two quarters of the year, you know from basically half of summer through, you know December, right, q3 and Q4, those two seasons are going to have different rates up or down from the first two quarters, right, especially across that many. So you need that time period as your starting point.

Speaker 2: 4:20

And then I think what you said next is if you've got a lot of history in your brokerage meaning like you can see historically what you've paid all last year, compare it to that timeframe, because you don't want to compare Q1 and Q2 for a bid that is going to go live Q3 and Q4, right, because different seasons, different things happen on different lanes. So, like that is, I think, your starting point, look backwards at your own company data. If you don't have rate projecting data, like RFP tools and DAT, which is, I think, your best tool for this, then look at historically what that average was on that lane in DAT over the previous that time period, whatever that season is right If it's a month, if it's six months or a quarter.

Speaker 1: 5:04

Yep. And to wrap up on the bid thing, where you make your money on bids is carrier relationships and doing the work to source carriers, because at the end of the day, everyone's just trying to get the price at the right point to win a certain lane. You really make your money when you can find the carriers that will do it for below market average Back hauls, preferred lanes, round trips, lanes, things of that nature. So keep that in mind.

Speaker 2: 5:31

um, all right well, I have a little bit more on that before you pass that one because this came up on a larger bid I did recently is most people think, okay, let's take a multi-round bid situation. This is the situation I was in once. We're a big company and it was like it was probably the largest bid I've worked on in recent memory, like it was like 12 000 lanes, um, and it was for a whole year. And what made it even more complicated is some of their commodities were like high value, meaning like they were upwards of $300,000. Some were less, but they wouldn't tell you which lanes were going to be that much or not. So then you have this variable on the insurance piece of like what, when am I going to have to pay for additional insurance and when am I not? We don't know and they won't tell you.

Speaker 2: 6:16

But then, even with all those things, what I did is like I modeled this out with the RFP to one DAT, like every single lane, and then I modeled every single month and then I found the median rate, and the median is not the average, it's what most of the year you're most likely to pay. Think of, okay. And then I figured out those numbers and then I figured in the worst case. So when the market is the most expensive, there's another column. And when is it the cheapest throughout the year? That one's red, that one's green. So I have yellow for median and then I have in the worst case, what am I going to be at based on the number in my bid and what am I going to be at the best time of the year? Right, so then I can sort all my lanes and move those in Excel to go, okay, like my median rate. I want it to be around like nine, 10%. But some lanes change a lot throughout the year. So then I look and I sort by the biggest losses at the most expensive time per year. So then you sort by the high price and some of them I'm like, oh great, like I am not OK losing a thousand dollars even if we're making 250 most of the year for like a whole quarter. So like I got to adjust that one up and you can kind of play with those until you get pretty comfortable with what you think is going to happen, until you get pretty comfortable with what you think is going to happen.

Speaker 2: 7:34

And then this is what bit me in the ass and this is why I'm telling this story is that we were best in class on like 25 or 40 lanes somewhere around that right, like 40 or 50 lanes which we figured like, hey, like that's enough for them to bring us in Cause. We've never worked with this company, we aren't an incumbent, we're a new broker partner. So we're like, okay, if we're cheapest on 50 lanes, like they're going to want to work with us, right. So it was three or four rounds. In the final round, since we were still best in class and say 50 lanes, I didn't touch any of those.

Speaker 2: 8:04

But what I did do is I'm like, well, if I'm not the cheapest on the rest of these, I want to be a little more expensive.

Speaker 2: 8:11

Because if no one else can get a truck on that lane and it falls down to me in the spot board and that's usually what happens is like, hey, the cheapest guy, get that load first. But say the market moves and it gets really expensive. Unpredictably, everyone else's bid is too low to go cover that load anyway. So I'm like, okay, my strategy is I'm going to make all of the rest of these lanes another five or 10% higher so like I can actually get them capacity if and when they need it, and my service percentage is going to be great. And then here's where it killed me we didn't get onboarded. And they said the other thing they do and this is common with really big companies is they take all of your rates on all of the lanes and compare it to everyone else's rates. And they said well, you were cheapest on 50 lanes, but you were, I think, like 40% more expensive than everyone else on the rest.

Speaker 2: 9:02

So, looking at your consistency, Correct and I basically pushed myself out of it and I told and I talked to the person about it, I'm like this is why I'm doing this.

Speaker 1: 9:11

It's the same strategy as you before, like that's a common practice. Like my, my mentality is like on these other lanes might as well go high on them like worst case scenario you just don't get awarded them. Best case scenario if you get one here and there, you make some good money on it.

Speaker 2: 9:26

So that's, that's interesting and it's a good question to ask that's why I put out there is like these are, why, like, I try to ask lots of questions when you're going through a bid process, especially if it's one you really want to be awarded, because, like, I asked them this and they either misled me or didn't tell me. Because I'm like, okay, well, like, how are these weighted against everyone else? How do these percentages matter? They're like, oh, it really doesn't matter, it really doesn't matter. Just, I'm like, cause I want to make sure I can service it, but I'm competitive. And they're like yeah, well, if you think you need a little bit more to service it, we'd rather have you service it well than give you a load you can't cover. And I said in my head okay, well, then I'll up them a little bit. And I spent probably, like all told, like 30, 40 hours on that bid over like three months over every round.

Speaker 1: 10:14

Wild. All right, our next one. This is, uh, not really a question, but someone was just basically bitching about us on youtube, so you know, wanted to give them a little, uh little spotlight time here and address their controversial statement. They said freight brokers another legal scam profession. It's made the truck industry complicated.

Speaker 1: 10:30

Remember, folks, these bozos have never or have never or will ever haul a load or have never shipped a product, will never ship a product, but they are the experts. Remember, folks, this industry is the backbone and most important job in the country, because every single thing on god's green earth has goes on a truck. Even the oxygen you breathe and can't see is hauled every single day. This is what people that don't work for a living but say't work for a living, but say they work for a living. We don't need these clowns. All right, I want to. Whoever this guy is, or girl, I don't know there's pretty much an AI tool built into every computer now that'll check your grammar for you. So that's my first tip. But secondly, here's what's funny is you know, my brokerage has a trucking company associated with it. Right, you've done, you've worked for companies that are the same thing, so it's like, we're brokers, but we're also a carrier.

Speaker 1: 11:20

Like I think a lot, a lot of people don't understand that, like it's two different facets of the industry. There are some brokers that don't have a trucking side, but a lot of people that get into brokerage have driven a truck, have been a dispatcher, have worked on that side of the industry and I would encourage you to go check out any of our other content that addresses where brokers come into play. But the reality is I'm going to assume, based on the lack of business acumen and intelligence and grammar, that this person is probably an owner operator or a leased on driver or whatever. Okay, um, it's because of brokers that you have business. It's because of brokers that you have freight to put on your truck. Uh, every single time you want to drive. It's because of brokers that you can find rates paying as well as they do in certain lanes.

Speaker 1: 12:08

Um, because we are in a sales force for the small to medium sizedsized carrier, we are the business development for the 90% of fleets that have 20 or less trucks. So I've worked for a shipper, I've worked for a carrier and now on the brokerage side. So I've done all three and a lot of brokers have done both sides of the industry and continue to do so. What do you got? What's your hot take here, ben?

Speaker 2: 12:37

I'm not going to give this guy too much attention, but I'm going to answer it from the other way, in a sense to explain what you said. Here's why. Let's just say you're a trucking company of less than 10 trucks or less than five, or one or less than 20. And company of less than 10 trucks or less than five, or one or less than 20. If you've ever hauled a load let's say for a company like Walmart, for a company like Cargill or any of these large shippers right that most of these small carriers have pulled loads for right Without a broker, here's why you would have never been awarded that lane and never been able to access that shipment or to be able to move that load for that company.

Speaker 2: 13:15

Because those large shippers one do not have the procurement department to work with that many trucking companies, meaning like they are not going to pay and set up a hundred thousand or two hundred thousand truck companies. Yeah, the second thing is one it would be incredibly difficult for them to make sure they're paying all these companies correctly, on time and for the right things. The next thing that they don't have the ability to do and don't want to do is they don't have the sophistication to be able to reconcile, vet and confirm that the trucking companies that are picking up their loads either have updated insurance, are the company that they say they are, are not a fraudulent person impersonating a trucking company. They don't have any of those tools, that understanding or the setup to do any of those things. And then, finally, right, like all of the loads that are ever available, to just make a phone call and pick up to your point, only exist.

Speaker 2: 14:18

The entire spot market exists because freight brokers exist. If you take out all of the freight brokers, the only thing that is happening is you're going to have small trucking companies working with a couple shippers and then you're going to drive back to where you started, empty, unless you could knock on enough doors or make phone calls to the companies that are there. When you arrive and somehow get them to trust you. Onboard, you verify your insurance, set you up as a vendor and the next day before you can pick up a load to go back to where you came from. And that's not feasible.

Speaker 1: 14:52

Yeah, the last thing I'll say on that note too if you don't like freight brokers, don't, don't use one you don't have to work with them.

Speaker 2: 14:57

Go get your own freight truck.

Speaker 1: 14:58

Nobody's requiring anybody to yeah, yeah, just just go go get business direct.

Speaker 2: 15:04

Yeah, there's no requirement to use a broker no-transcript day and somehow the flower company one 800 flowers or whatever I used gave me, like for free, a second you know order to send to somebody. So like I literally had flowers that I could send for nothing and I'm like, ooh, I don't have anyone to send them to. So, um, I had a customer who was a trucking company and a broker and there was a woman that worked there that like I worked with a lot, talked to every day and was friends with, and like she was like married or anything, so it was anything but professional. You know what I mean. But I'm like, oh, like this would just be nice, like, hey, appreciate the business, nice working with you. And you know, like, whatever kind of desk set up you send to an office, right delivered from a broker at a brokerage, and felt as if, like I was either bribing them or that she was giving me favorable treatment, and I got no business from that person ever again.

Speaker 1: 16:41

Okay, that's a first. Well, let's go to good gifts. I think it's the small gestures that say a lot. So literally, a gift can be like a handwritten note at the end of the year, like, hey, happy holidays, happy New Year, merry Christmas.

Speaker 1: 16:59

Like just really appreciate the thought that is the real value, common ones, like calendars, like stuff that like sits on someone's desk or in their office that they're going to see and associate with you. Like calendars, little truck, like wooden trucks, stuff like that, whatever they're going to see and associate with you. Like calendars, little truck, like wooden trucks, stuff like that. Um, whatever they're into, you know what I mean. Like I've had people send me gifts. Like literally one of the guys that we coached a few years ago sent me this giant buffalo bills like computer desk mat. It's like a mouse pad but it's the size of my desk and I have it to this day. Like I've moved houses and it moved with me because it's amazing and it's the bills. I love the bills. So I think it depends. What I wouldn't do is don't approach the bribery you know level where you're like you know pay to play because that'll get you in trouble.

Speaker 1: 17:48

The second part of the question is the posts on LinkedIn, et cetera. Spammy is bad. What I would say that what works on social media is consistency and adding value. Like to keep it as general as possible Writing articles, sharing your opinion, engaging, just becoming a relevant member of the social media community. I think it will add value, will it get you customers? I don't know. Marketing's that one thing that everyone says like 50% works, 50% doesn't. The hard part is knowing which part is which?

Speaker 2: 18:21

50% is which?

Speaker 1: 18:23

But I would say consistency and adding value is where I think people can do good on social media. You got any take on it?

Speaker 2: 18:31

Question number one, I think is a good, easy gift is find out whatever your customer likes to eat and like. On a Friday once a quarter, like you can just send Uber Eats, which is a really appreciated one. It's super easy. It's like 20 to 40 bucks depending on what you're sending. You send a pizza, sandwiches, chinese food, whatever. Like. That one, I think, is a one that goes a long way, everybody enjoys, never gets wasted and is super easy and it's real time. It's not like ordering it and getting it to your customer a month later. I think you kind of said everything that was relevant related to, like social media. It's engaging, it's being there, it's adding value over and over again and just being visible, and I think consistency is the thing that matters most. Add value, be consistent. That's going to go a long way. I like it.

Speaker 1: 19:14

Final thoughts Ben.

Speaker 2: 19:15

Whether you believe you can or believe you can't, you're right.

Speaker 1: 19:19

And until next time go Bills.