Area of Improvement #2: Quoting a Shipment
There’s no doubt. It’s been a challenging couple of years. The Bloomberg | Truckstop semi-annual freight broker survey reported that about 37% of respondents had a lower gross margin in 2023 than a year earlier. A recent DAT study found that freight brokers’ average gross margin was less than 13.5% in 2023.
The current economic climate is also affecting shippers. Customers increasingly expect brokers to provide consistent and added value for their loads. That added value often comes with the expectations of lower shipping costs and fast turnarounds. Your challenge is building strong business relationships by meeting those expectations while maintaining slim margins. A large part of making that happen involves ensuring your team quotes shipments accurately, reliably, and promptly.
When was the last time you reviewed your team’s quoting process? Is it fast? Is it accurate? Is it reliable? These are the questions you should ask your team today. Today is a great day to review how your team quotes shipments, a critical and common Area of Improvement for freight brokers.
The Eight Areas of Improvement
Quoting a shipment is the second of eight (8) common areas of improvement in the freight broker process. How your team manages these tasks can cause inefficiencies in their daily performance and pain points for your customers. To read more about the Areas of Improvement, download our eBook, Don’t Let Inefficiency Eat Your Bottom Line: 8 Areas to Improve Your Freight Brokerage, here
This blog will focus on evaluating your company’s process for quoting a load and uncovering the inefficiencies that arise there. By optimizing this fundamental aspect of your workflow, you can more successfully navigate shrinking margins and increasing customer expectations.
Evaluating Your Quoting Process
When evaluating any area of improvement, there are several crucial questions to ask yourself and your team. The answers to these questions help you know where to focus on enhancing and scaling the quoting process. The questions fall into four categories: process, time, tools, and improvements.
This exercise aims to uncover bottlenecks and inefficiencies that are getting in the way of your team’s ability to quote loads quickly and accurately. When you nail down this process, you’ll win more business. Now, let’s focus on the common pain points for quoting shipments.
The Freight Quoting Process
For many brokers, quoting shipments can be a manual process that includes searching multiple websites and tools to find the best overall carrier price, calculating the distance and cost of fuel, labor, and fees, and adding your brokerage fee. Your goal is to produce an accurate quote that will win the business and maintain healthy margins. It can be time-consuming and confusing, especially for new brokers. And time is not something you have on your side. Speed is often more important to shippers than cost. Your customers will frequently take the quote that arrives in their inbox first. Some brokers attempt to manage the quoting process by hiring a pricing specialist.
Utilizing a Pricing Specialist
Pricing specialists develop their quoting strategies. They’ll monitor the market for price fluctuations, maintain relationships with carriers, and negotiate rates for each load. Pricing specialists have deep knowledge of the market, including lanes and all modes of over-the-road transportation. They should also know your company’s cost structure, business growth objectives, and profitability targets.
In addition, the process for quoting LTL and FTL differs, affecting your pricing specialist’s performance. In LTL, it’s essential to have powerful integrations and a fast way to respond since quotes are contractual. The big challenge for many pricing specialists is around FTL because they are at the mercy of supply and demand. It is important to have historical data, market intelligence tools, and other resources that help them quote accurately.
Pricing specialists can be territorial of their hard-earned quoting process. Brokerages often rely on one expert using a method they’ve perfected but have yet to document formally. This can make it challenging to run or scale a brokerage.
If you have one pricing specialist on your team, evaluate their daily performance and capacity. Are they negotiating the best rates? Are they fast and accurate? Are there ever instances of bottlenecks or confusion? Ask your reps if they are waiting for quotes or if they would know how to quote a bid if the pricing specialist is unavailable.
Also, consider what would happen if your business grows. What is the total number of loads your pricing specialist can quote in a day, week, or month? Would you hire another pricing specialist once you’ve reached that capacity? If so, do you have the tools and documentation to train them? Now is the time to build the strategies and tools you need to scale so that your team can hit the ground running when the market opens up.
Team Quoting Process
If you don’t employ a pricing specialist, evaluate how your reps determine both spot quotes and contract rates. Measure how long it takes your team to respond to a client’s quote request and the method they take. If there is no standard process, your less experienced reps are probably either taking too much time by doing a lot of research or making guesses at rates that may not cover your margin. In both scenarios, you’re losing money.
If you don’t have a set procedure, ask your reps if they know the questions to ask when negotiating between a carrier and a shipper. For example, are they thinking ahead and negotiating for more than just that one load? You also want them to have the historical data they need to make informed pricing decisions. Most importantly, they should understand the costs associated with each lane and each load and what your target margin is. Growing a freight business without a standard pricing process is difficult to achieve.
Quoting Tools
There are plenty of digital software solutions and platforms that can assist your team in quoting loads. This overabundance can be both a blessing and a curse. A 2023 McKinsey report found that 34% of logistics providers have as many as nine different software solutions in their tech stacks.
While these tools may be helpful in accurately quoting a price, accessing multiple tools and manually comparing and contrasting rates can slow down your progression and confuse your reps. In addition, if you haven’t integrated these tools into a single dashboard or TMS, the insights they provide are lost for future use.
In addition to digital tools, benchmarking websites provide essential information on competitive rates and trends by sector or region. Surveys and newsletters are also valuable resources giving updates about competition or alterations within the supply chain.
While reviewing this area of improvement, evaluate the tools your team uses and the process they use to pull and compare rates. Measure the time it takes each rep to compare and choose a rate. Spot-check the rates for consistency and accuracy. Ask your team which tools they use more than others and why.
Wrapping Up Your Evaluation
The key to optimizing the quoting process lies in standardization and transparency. Ensuring your procedures are documented and visible to everyone on the team will eliminate bottlenecks and inefficiencies. Each rep must be thoroughly trained on the available tools and understand how to pull quotes and load data into TMS.
If you employ pricing specialists, create a training program to onboard new pricing specialists successfully. In addition, make it a priority to track and store quotes and other load data for future analysis. Ensure your team understands all the expenses that can affect margin so you aren’t inadvertently losing money on loads and help your company scale operations.
In terms of tools, artificial intelligence and machine learning will make quoting tools even more accurate and efficient in the future. DAT’s Freight Focus 2024 study says, “Sophisticated pricing departments no longer need large teams of data scientists. Access to deep wells of data coupled with sophisticated freight analytics has effectively lowered the barrier to entry as transportation organizations build out their business intelligence capabilities.” Evaluate and choose tools that offer your team the data and efficiencies you need to scale your business successfully.
The powerful combination of a comprehensive TMS that stores and analyzes historical data and integrates with good rating tools and new marketing intelligence software will enable your reps to produce the most accurate and timely quotes, every single time.
In this competitive industry, quoting loads is a pivotal area of improvement, directly impacting your margins, customer satisfaction, and overall company growth. As you’ve noticed during this evaluation, inefficiencies in your quoting procedure can compound into significant business challenges, particularly in today’s economic climate where margins are already razor-thin. Whether standardizing procedures, effectively leveraging pricing specialists, or seamlessly integrating digital tools, the path to efficiency lies in a comprehensive understanding of the tools, time, and data needed for this critical step and a commitment to continuous improvement.
Now is the time to take proactive steps towards securing a stronger foothold in the industry.
