Carrier bid optimization tools allow companies to bid out different combinations of volume levels and lanes, analyze carrier bids, and then it selects the most optimal distribution of carriers for those lanes and volumes consistent with pre-determined rules and constraints. This tool will deliver conditional bidding which means if a carrier receives the business in a given lane that may be good for its overall network, it can offer a lower price in a different one. This works as a technology that you would never be able to analyze manually with all of the hundreds and thousands of combinations.
Dr. Chris Caplice and Dr. Yossi Sheffi, published research on carrier bid optimization. They found that using carrier bid optimization tools on average reduced their carrier base by 88% and final freight bills by 17%. Recently, IBM has combined two of its recent software acquisitions, which offers procurement-related software including bid optimization to provide a transportation-specific carrier bid optimization tool. The advantages to this include automating the tender and acceptance process, freight payments, a company can get tighter control over its transportation spend, and have a better understanding of the total freight bill.
Some of the concerns was how long it will take to prepare for a procurement event using these tools. It really depends on the event’s size and scale, but it can take 1-2 months to gather all the information needed to run the event. Then the opportunities are sent to the carriers, and they are usually given a few weeks to put their bids on it. Where a lot of the time savings comes from analyzing the data that comes back from these type of events, because optimization engine is able to do that for you, so you are not using spreadsheets.