Convoy, the nation’s most efficient digital freight network, today rolled out Convoy Guaranteed Primary, a new industry-first pricing program to procure capacity for primary freight that reduces a shipper’s total cost by up to 19%, while guaranteeing capacity. Pilot customers across all vertical industries are turning to Guaranteed Primary to secure high-quality capacity with a fixed margin that can be up to 50% lower than the industry average while reducing overhead costs from managing requests for proposal (RFPs) and avoiding the costly spot market.
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How Guaranteed Primary Works (Graphic: Business Wire)
Procuring coverage for primary freight has traditionally been handled through an RFP, a reverse auction where shippers gather bids from various carriers to lock in capacity at low rates. Even with the best efforts by all parties to predict the market, it’s an open secret that the resulting contract is mutually non-binding, and the inevitable demand shocks and market volatility drive up costs. Carriers who bid low are unable to meet their commitment when truck prices rise; shippers who’ve overcommitted are unable to meet volume promises.
As a result, tender rejections are commonplace, as high as 25%+ in tight markets, forcing shippers to pay a premium as they move down their routing guide or rely on the spot market. Alternatively, in soft markets, shippers either overpay or opt to break contracts and risk quality of service to source capacity through spot. As a result, a shipper is typically paying 3-21% higher per mile than what their paper contracts reflect.
“Annual freight bids create a perpetual win-lose that either favors shippers or transportation providers, depending on market conditions,” says Dan Lewis, Convoy Co-founder and CEO. “For years we’ve seen both sides spend months aligning on a contract freight award, only to have it become outdated in a matter of months. We’re excited to introduce a mutually beneficial solution that gives shippers committed service quality, full pricing transparency, and lower total costs in any market condition. It’s a win-win.”
Creating the Win-Win for Shippers and Carriers
When a shipper uses Guaranteed Primary for any particular lane, they completely eliminate the need for an RFP. Instead, the shipper and Convoy agree to allocate all volume on the lane to Convoy. In contrast to traditional contracts that set a fixed rate per mile, Guaranteed Primary establishes a fixed margin that shippers pay Convoy. The margin can be up to 50% lower than the industry average of 15-18%. Dynamic pricing replaces traditional static pricing, where Convoy’s pricing algorithm uses machine learning on historical and real-time data to predict truck costs on the awarded lanes at specific times. As the shipper tenders loads, Convoy guarantees 100% acceptance by tapping into its nationwide network of carriers. Convoy’s automated auction runs against hundreds of thousands of trucks, ensuring customers receive quality capacity at the lowest available rates. Throughout the process, Convoy provides full pricing transparency. Each month, customers receive an insights report detailing truck costs and margin for every shipment as well as the estimated savings they’ve received from the program. Finally, if a customer is unsatisfied with the program for any reason, they can cancel anytime.
“Transparency is a core tenet as we consider how best to bring the full potential of our industry-leading digital freight network to help solve our customers’ biggest problems across all types of market conditions,” says Mark Okerstrom, Convoy’s President and Chief Operating Officer. “We are so excited to be launching this new program in the true spirit of partnership. Industry thought leaders, forward-thinking customers and our track record for innovation make us confident that by giving our customers access to the data and insights behind our digital freight network, they will be in a better position to make the most of its almost limitless capacity.”
Lowering Total Cost with Guaranteed Capacity
Customers lower their overall transportation spend with Guaranteed Primary by up to 19%. With a low fixed margin, shippers benefit from the efficiency and automation of Convoy’s digital freight network, saving money over the life of the contract. With 100% tender acceptance, shippers avoid their backup routing guide or spot carriers, where margins can exceed 30%. In soft markets, shippers ride the market down and benefit from lower truck prices without the need to manually source capacity. And in any market, shippers save by eliminating much of the fixed and variable costs associated with managing an annual RFP or mini-bids.
Pilot Customer Sees Success in Guaranteed Primary
Modern shippers are breaking away from this zero-sum game where all parties involved either win or lose and no party can accurately predict the outcome. An international automotive company signed on as a pilot customer in early 2020. As their annual bid approached, Convoy partnered with them to identify a particular challenge with their supply chain. Lanes with low or inconsistent volume were notorious for tender rejections; the team was frequently going to the spot market to secure capacity, which often meant paying a premium for lower-quality carriers and high overhead costs.
With Guaranteed Primary, they removed a set of lanes from their RFP and awarded them to Convoy. A predictive, dynamic rate was generated daily, allowing the customer to see the rate in advance of tendering. After three months of substantial cost savings, the successful pilot was officially rolled out to over 4,000 lanes across their national network.
To learn more about Convoy Guaranteed Primary, go to convoy.com/guaranteed.
Convoy is the nation’s most efficient digital freight network. We move thousands of truckloads around the country each day through our optimized, connected network of carriers, saving money for shippers, increasing earnings for drivers, and eliminating carbon waste for our planet. We use technology and data to solve problems of waste and inefficiency in the $800B trucking industry, which generates over 72 million metric tons of wasted CO2 emissions from empty trucks. Fortune 500 shippers like Anheuser-Busch, P&G, Niagara, and Unilever trust Convoy to lower costs, increase logistics efficiency, and achieve environmental sustainability targets. Convoy.com