Manufacturing Client Saves 16%
on LTL Freight

The swift rise in fuel prices has impacted businesses in every industry around the world, prompting many companies to search for methods of controlling cost increases in order to remain profitable. One such company recently approached TradingPartners for assistance in managing its less-than-truckload (LTL) freight service spend. As a large, international manufacturer and service provider, the company needed to control its future costs for shipping its mechanical parts and machinery to customers across the country.

The client came to TradingPartners in contract with seven different carriers, each running on a different contract cycle. Because of the inefficiencies and confusion this situation caused, the company’s goals in running a fully- managed eAuction project with TradingPartners were not only to identify cost savings, but also to consolidate those seven carriers down to just two or three and achieve one contract cycle to be used among all of them.

Strategy

Because the only area of the spend that could be negotiated was the discount applied to the base rates of each shipment, this eAuction was setup so that every bid placed represented an adjustment to the discount amount the bidding supplier was willing to offer.

In order to help control other costs involved in the client’s LTL spend, restrictions and caps were placed on other fees and surcharges included in the project. All carriers that wished to participate in the bidding process had to agree to honor these pricing caps and requirements in order to be invited into the eAuction.

To ensure a fare auction process and equal basis of comparison, the base rates to be used for pricing were established up front and all suppliers were required to quote using the same base rates.  In addition, minimum charge requirements were established for each lot or geography.

This project is a fantastic example of the extreme flexibility TradingPartners offers our clients. Although there are several intangible variables, we found a way to eAuction freight services. This is great news for companies looking to somehow control the effects of rising fuel prices.

Priscilla Barczyk

Account Manager, TradingPartners

The Project

The eAuction format was broken down geographically, allowing carriers to bid only on the regions they each served. The carriers were also given the option to bid on a one- or two- year contract. This information allowed the client to form an implementation strategy based on the pricing differences between the two contract lengths.

After 33 carriers were identified nationwide, 11 were able to meet all of the detailed project specifi cations and participate in the eAuction. The project ran smoothly and without interruption due to the extensive communication and training that each carrier experienced prior to the eAuction. TradingPartners ensured that each carrier was prepared with its own bidding strategy, predetermined walk-away pricing and a thorough understanding of the eAuction process. The eAuction lasted just under an hour and a half and generated 27 bids.

Results

The eAuction achieved an overall savings in excess of $615,000; 7.66% below the client’s previous LTL costs. Perhaps more importantly, the eAuction provided security and predictability for the client through fixed costs that could be implemented through one- or two-year contracts. Because there was very little difference between the savings identifi ed for the one- and two-year contracts, the client decided to implement two-year
contracts, which they had never been able to do prior to the eAuction.

Additionally, the eAuction made it possible for the client to align all of its carriers on one contract cycle. This action made it easier to manage its carriers and dedicate less time to maintaining contracts and agreements.
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