Clinging to traditional patterns and practices of contract freight has become an increasingly large liability in the world of volatile supply chains. So what can we do about it? Our customers are leaning into new approaches starting with their most problematic freight. You can too.

The fundamental flaw of traditional freight contracts

The RFP is a cornerstone of the freight procurement process. For high-volume shippers, it provides a foundation for annual budgeting. Its resulting contracts are meant to provide transportation teams with reliable, quality capacity, budget predictability, and operational savings.

At the same time, the RFP process takes months to complete and costs millions in operational expenses each year. Even after contracts are signed, they quickly break down. In tight markets, tender rejection forces transportation teams into their routing guides, where they spend thousands of hours manually sourcing capacity at higher rates. In soft markets, shippers renege on volume commitments, spending operational hours to find cheaper rates on the spot market, at the risk of working with unfamiliar, lower-quality carriers.

Regardless of market conditions, the RFP creates a zero-sum game that pits shippers against brokers and carriers, establishing a relationship founded on mistrust. Within six months, much of the effort that went into the RFP is moot, with half of all negotiated contract rates or tender acceptance levels no longer being honored. 

The pandemic has further highlighted the fundamental flaw of traditional freight contracts — they attempt to assert control and predictability over an unpredictable freight RFP market. And because of this, they invariably fail to deliver on their promises.

The broken promise of reliable, quality capacity

Without RFPs and contracts, every shipment would be subject to the spot market. There’d be no guarantee of coverage, and transportation teams would work with many carriers who aren’t experienced in hauling their freight.

RFPs hold the promise of providing reliable capacity, binding carriers to a shipper throughout the contract term and improving service quality through greater carrier consistency. Yet in tight markets, this promise is quickly broken. When contract rates expose carriers to sufficient financial risk, they reject tenders and gravitate toward the more profitable spot market. As a result, shippers fall back into their routing guide or spot, where they’re more likely to work with unfamiliar carriers, receive lower-quality service, and face higher risk of service failure.

An analysis of data from FTR, DAT, and FreightWaves shows a strong correlation between tender rejections and the difference between contract and spot rates. As spot rates climb further and further away from contract rates, tender rejections increase in tandem.

A look at 2019 data from one Convoy shipper shows that even in soft markets, spot surges can immediately follow RFP agreements and drive up costs as carriers fail to meet volume or rate commitments.

A new approach to sourcing primary freight

In 2019, Convoy began to pilot a program called Guaranteed Primary. It set out to deliver on the key promises of the RFP without the overhead of running a months-long procurement event. The program officially launched in September 2020 and allowed our customers to participate in a dynamically priced contract agreement that guaranteed tender acceptance.

How Guaranteed Primary works

1. No RFP overhead

When a shipper uses Guaranteed Primary for any particular lane, they completely eliminate the need for an RFP. Instead, the shipper agrees to allocate all volume on the lane to Convoy.

2. A low fixed margin rate

In contrast to traditional contracts that set a fixed rate per mile, Guaranteed Primary establishes a fixed margin over the course of the contract — this margin can be up to 50% lower than the industry average of 15% to 18%. On each load, shippers pay a dynamic rate generated by Convoy’s predictive pricing algorithm. The rate is visible prior to tendering, which delivers pricing transparency upfront and removes the need for budget reconciliation.

3. 100% tender acceptance

As the shipper tenders loads to Convoy, we guarantee acceptance by tapping our nationwide network of more than 400,000 trucks. And through the use of an automated bidding system, carriers compete to haul loads, ensuring that our customers always get capacity at competitive rates.

4. Unparalleled transparency

Throughout the process, Convoy provides pricing transparency, sharing our truck costs for every shipment. Each month, customers receive an insights report detailing the estimated savings they’ve received comparing their actual costs to what they would have spent using an RFP or the spot market.

5. Shippers can cancel at any time

If a customer is unsatisfied with the program for any reason, they can cancel at any time.

Isn’t this just a cost-plus program?

At first glance, Guaranteed Primary looks a lot like a traditional cost-plus program. Although both programs make use of a fixed margin, there is an important difference. Cost-plus programs are backward looking, whereas Guaranteed Primary is a predictive (future-looking) program. 

With cost-plus, transportation teams don’t have access to accurate carrier costs at the time of tendering. Instead, shippers just receive an invoice after delivery. This leads to operational headaches and unexpected costs because shippers are expected to reconcile the actual carrier costs for every shipment.

By contrast, Guaranteed Primary is based on Convoy’s predictive pricing models. When transportation teams tender their freight (e.g., daily, weekly), Convoy generates a rate that predicts our costs to source the truck. Our pricing is based on machine learning models that get smarter with every shipment. And we take on the liability of our predictive rates being accurate. When our rate predictions are off, we shoulder the financial burden, eliminating the need for any billing reconciliation.

Start with your most volatile freight

Customers have tested Guaranteed Primary across a wide range of scenarios, including with their most problematic freight. I’m proud to share that at the time this article was written, every customer we’ve onboarded to the program is still using it today.

When the industry tender rejection rate was hovering around 25% in Q3 2021, Convoy accepted 99.997% of Guaranteed Primary loads.

This is strong evidence that our network is resilient and reliable even during periods of extreme volatility. 

While we’re still in the early days of this monumental shift away from the win/lose dynamic of traditional RFPs, the easiest place to start evolving your contract strategy is with your most volatile freight. Instead of lumping your “problem” freight into your RFP, consider carving it out as part of an intentional move into a program like Guaranteed Primary. Here are some of the top qualifiers you can look for within your freight portfolio based on what’s been working for our customers.

1. Stockout avoidance (or anywhere you really need to guarantee service)

One of our large retail customers was struggling to keep products in stock with a typical tender acceptance of just 15% on surge freight. When they began using Guaranteed Primary, tender acceptance shot up to 100%, allowing them to realize millions of dollars in revenue by keeping shelves stocked.

2. Just-in-time manufacturing or inventory management

Some of our customers don’t have the luxury of advanced planning. Despite having an average lead time of only 24 business hours, we eliminated the need for spot and serviced more than 350 problematic lanes for a multinational auto manufacturer. They were previously experiencing rejection rates of up to 30%. But with our elastic carrier network, we have covered 100% of loads while meeting the strict OTP and OTD requirements inherent with the coordinated relays of just-in-time manufacturing.

3. Low-volume lanes or low-lead-time freight

Low-volume and low-lead-time freight typically experiences high tender rejection rates and relies more heavily on the spot market. Our customers are putting this freight into Guaranteed Primary to reduce costs while improving service. One customer’s analysis demonstrated a 16% savings on truck costs for the lanes they moved to Guaranteed Primary, and an estimated $90,000 savings on administrative costs by avoiding the spot market.

Overall, we’re seeing positive shifts in the market, indicating a collective effort to modernize contract freight. Mini-bids are more common. Technology is making traditional RFP processes less cumbersome and manual. And other freight companies are evolving their existing cost-plus programs to more closely mirror Guaranteed Primary.

Now’s the ideal time to start running your volatile freight through a dynamic pricing program. Guaranteed Primary customers will benefit from even more cost savings by riding rates down in soft market conditions. Beyond these financial benefits, our customers tell us that the improvement to service quality alone is enough reason to make the switch. Regardless of market conditions, dynamic pricing programs like Guaranteed Primary are well positioned to take substantial volume from spot and traditional contract markets in the future by creating more balanced freight portfolios that benefit both shippers and carriers.

This story originally appeared in Convoy’s “The Future of Freight,” featuring 40 thoughtfully curated pages on supply chain disruption, freight procurement, market volatility, and more.

The post Stop Wasting Your Time Putting Volatile Freight in RFPs appeared first on Convoy.

Today’s announcement is the next natural step in reinventing drop-and-hook freight. We’re building on years of experience in automating the brokering of loads to power-only carriers, efficiently relocating trailers to meet fluctuating demand, and finding backhauls in our network through the use of machine learning. The result is a unique service that enables us to serve our customers in a new way while also reducing waste and inefficiency in truckload freight. 

I’d like to share a bit more about the problems we’re addressing with this new service, and why we think flexible on-demand power-only capacity will be a game-changer for private fleets.

Hauling trailers is inefficient and costly

In the last couple of years, large retailers and manufacturers have increased their investments in private fleets. For these shippers, the massive capital and operational costs of in-housing transportation are outweighed by the benefits—namely, having direct control of their capacity and costs, and ensuring consistent and high-quality service. These benefits have only become more pronounced in the last 18 months as the pandemic has driven up truck costs and tightened capacity. 

Today, trailers within private fleets number more than half a million, and there’s a constant need to haul them from one location to another. This includes moving product from distribution centers to stores, rebalancing trailer pools, and bringing trailers in for repair. The resulting demand for power-only capacity has accelerated in the last decade, as online commerce continues to grow and supply chains require more short-haul, rapid-response fulfillment.

The problem is that power-only capacity is often scarce. According to the National Private Truck Council (NPTC), private fleets have 4 trailers for every tractor, on average. As a result, many shippers operate with a shortfall of power units and drivers needed to haul their trailers. 

When demand surges, these shippers often have to rely on the spot market, which brings higher rates, increased risk from working with unfamiliar carriers, and the possibility of service failure. The risk of service failure has only increased in recent years, as the number carriers offering power units for hire has declined over the past two years. 

Beyond the power-only capacity crunch, private fleets incur significant financial and environmental costs in the form of empty miles. Today 40% of all private fleet miles are driven empty⁽¹⁾, wasting fuel and money while needlessly increasing CO2 emissions. In aggregate, private fleets spend billions of dollars annually on these empty trailer moves.

Save money and the planet with a new approach to power-only

Over the last three years, we’ve developed a unique, nationwide drop-and-hook program called Convoy Go. It consists of thousands of drop trailers that are shared among our customers and the tractors owned by carriers in our network. The program has experienced tremendous growth since we launched with demand from both shippers and carriers, and today there are more than 300,000 dispatch-ready tractors in our network that can haul drop-and-hook loads.

In our conversations with private fleets over the last several months, it became clear to us that the power units in our network could serve a new purpose, supplementing private fleet tractor capacity to help them move their preloaded and empty dry van trailers. In addition, we could help these shippers reduce their carbon emissions from empty miles through the use of backhauls and loadouts (a loadout is when we find a live load in our network to put inside an empty trailer en route to its next stop). 

These conversations led us to pilot the power-only freight program with a number of private fleets, spanning specialty and big-box retailers, food and beverage manufacturers, and packaging companies. Based on the success of these pilots and the increasing organic demand for our power-only capacity, we’re excited to officially launch Convoy Go Power-Only for private fleets. 

At the foundation of this new service are four innovations that help save our customers time and money while improving service quality and shipment visibility:

• Flexible tractor capacity – With more than 300,000 power units in our digital freight network, we offer the nation’s largest fleet of on-demand tractor capacity. And with our unique machine learning models that automatically match trailers to carriers, we can quickly flex capacity, providing reliable coverage as demand fluctuates. In many cases, we can provide next-day, and sometimes even same-day, service for these trailer moves.
• Automated loadouts and backhauls – With thousands of loads moving through our network every day, our machine learning models can often find backhauls or live loads to haul in empty trailers. Both result in cost savings to the company moving the trailer, while also reducing carbon emissions from empty miles.
• Industry-leading GPS tracking – More than 95% of the loads in our network can be tracked end-to-end and in real time based on GPS location services in our carrier app. By signing into our online platform, shippers can see the precise location of their trailers on a map, and share this information with their distribution centers and stores.
• Automated carrier safety and compliance – We’ve taken a unique approach to carrier safety standards that uses machine learning models to ensure that every load is hauled by an extensively vetted, high-quality carrier. The result is a crash rate 16% lower than the industry and 99.95% of loads being delivered without a cargo claim.

Loadouts bring the sharing economy to trucking

Loadouts are a unique part of our power-only service that benefit shippers, carriers, and the environment. For shippers, loadouts can significantly reduce transportation costs by sharing empty trailer space. For carriers, loadouts improve fleet utilization by eliminating deadheads. And for the environment, loadouts reduce CO2 emissions from empty miles. 

In the example below, a traditional distribution center-to-store delivery results in a deadhead on the backhaul. This isn’t uncommon for private fleets, since trailers that deliver product to stores need to then be hauled back to the DC in order to rebalance the asset pool.

With Convoy Go, we can significantly reduce empty miles on the backhaul by finding a live load in our network that requires pickup in the vicinity of the store and drop-off in the vicinity of the DC. Our digital freight network automates the matching of loads to trucks, making this a seamless process. When a carrier uses our app to book the DC-to-store power-only delivery, they see that it’s already been paired with a loadout on the backhaul.

The use of loadouts at scale within Convoy Go brings the sharing economy to truckload freight. In recent years, platforms like Airbnb and Turo have made it possible for people with underutilized assets—in this case, rarely used bedrooms or mostly parked cars—to rent out their spare capacity. This has increased asset utilization and, by extension, lowered their carrying costs. The spare bedroom suddenly becomes a revenue source that offsets a monthly mortgage.

In the same way, loadouts improve the utilization of empty trailers. By sharing this empty space with another shipper, asset utilization increases and carrying costs are reduced. Convoy passes along these lower carrying costs to shippers, resulting in savings of up to 30% on trailer moves.

Try Convoy Go Today

Convoy Go Power-Only is available to private fleets across the nation. Interested in giving it a try? Learn more by visiting convoy.com/power, or drop us a line at sd@convoy.com.

 (1) Convoy Freight Economics analysis of empty miles among private fleets, asset-based carriers, and independent owner-operators

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Today, I’m excited to announce the industry’s first nationwide, automated drop-and-hook service for backup and spot freight. This expansion for Convoy Go makes it the most flexible drop-and-hook service on the market, offering shippers quality, nationwide drop capacity across their routing guides. 

Flexible drop gives shippers on-demand drop-and-hook capacity across primary, backup, or spot. When demand surges, flexible drop quickly supplies shippers with additional capacity, enabling them to keep their freight moving via drop trailers without needing to convert to live loads. When demand ebbs, flexible drop allocates resources elsewhere, avoiding asset underutilization costs. As a result, flexible drop can save shippers millions of dollars in annual costs, representing 9% of their transportation budget, on average, while increasing efficiency and service quality.

This moment has been years in the making, possible only through investing in technology to develop a drop service that provides shippers with the ultimate flexibility. Today, our vast carrier network, shared pool of telematics-enhanced trailers, and machine learning models that predictively route trailers and dynamically price freight come together in an expanded Convoy Go service that can flex in unprecedented ways to meet shipper demand. 

I’d like to share a bit more about the big problem with traditional drop, and why we think flexible drop is a game-changer for shippers now and into the future.

Traditional Drop’s Big Problem

Drop-and-hook is the most efficient way to ship truckload freight, and is hugely popular with shippers across nearly every industry. Yet despite the benefits, it’s always been plagued by a fundamental flaw. Traditional drop is inflexible.

Specifically, traditional drop operates well with a fixed set of tractors and trailers running predictable head hauls and backhauls between a fixed set of facilities. For this reason, it’s used almost exclusively for primary contract freight on lanes with consistent volume. 

Of course, even dense lanes with consistent demand aren’t immune to freight market dynamics. Shippers experience volatility in their supply chains every day, while seasonal storms and “Black Swan” events like the COVID-19 pandemic create additional, unexpected surges in demand that disrupt drop’s stability. These unforecastable events result in hidden overhead costs, reduced operational efficiency, and increased risk to service quality.

Let’s take a look at why. 

In the chart above, the gray line represents forecasted demand on a drop lane, and the black line represents actual demand. Every time these lines diverge, shippers suffer the consequences of inflexible drop. 

When demand surges above expectations (in orange), carriers struggle to flex tractor or trailer capacity, rejecting tenders and forcing shippers to switch to live loads on the spot market. This drives up costs, creates logistical hassles of appointment scheduling and live loading, and increases service quality risk by introducing unfamiliar spot carriers.

Even when demand sinks below expectations (in blue), shippers face hidden costs. As tender volume drops, trucks stop moving. This lower fleet utilization results in punitive fees either charged directly to shippers or indirectly by carriers passing along their higher fixed costs. 

This ongoing cycle of spot market spillover and punitive fees has always been part of traditional drop, creating undue burden and risk for transportation teams and constraining the potential of this otherwise highly efficient form of shipping.

Let’s take a look at what drives traditional drop’s cost to shippers.

Traditional Drop’s Cost

Traditional drop’s hidden costs can represent an average of 9% of a shipper’s annual transportation budget, or $9.5 million for shippers who move 250,000 drop loads per year. This cost is driven by four factors.

Higher Spot Market Prices

When a shipper’s primary drop load fails and needs to be converted to a live load on the spot market, they end up paying 18% more per load on average. With an average drop-to-live failover rate of 15%, this can equate to $4.2 million for a shipper moving 250,000 drop loads per year.

Increased Facility Costs

When a failed drop load is replaced with a live load, it requires more facility space and employees to load and unload it at the dock. To accommodate these converted live loads and meet the expected volume at any given facility, shippers maintain larger warehouses and workforces, which increase operational costs. A shipper who moves 250,000 drop loads per year could pay $3.9 million more in annual facility costs and operating expenses to support converted live loads from failed drop loads. 

This lower facility productivity also presents an opportunity cost. Live loading and unloading keeps trucks at the dock substantially longer than drop loads, reducing the number of shipments a facility is able to move each day by 2.7x. For example, a facility with four docks moving 96 drop loads per day could only move 36 live loads per day.

Lower Carrier Performance

When a shipper’s primary carrier fails to accommodate a drop load, the shipper turns to different carriers on the spot market. In doing so, they lose the benefit of their primary carrier’s familiarity with the pickup and drop-off facilities. Our data shows that carriers who are unfamiliar with a facility have a 0.7 higher marginal probability of failure, and each failure increases truck costs by 5%. With an average drop-to-live failover rate of 15%, this can equal $860,000 for a shipper who moves 250,000 drop loads per year.

Higher Prices or Fees from Underutilization

Even if drop demand falls below forecasts, shippers still pay more than anticipated, because the carrier still has to cover their expensive, asset-heavy operations. Some carriers charge underutilization fees to shippers who tender less than their contract stipulates. While other carriers might not charge these fees, they still charge shippers higher rates over time to cover their structural asset costs. 

These fees can range from $25 to $75 per day per asset, depending on how long the carrier’s assets remain underutilized. For example, consider a shipper who moves 250,000 drop loads per year and has 28 facilities. If this shipper has nine drop trailers that have been unused for 30 days at each facility, these fees could equate to $485,000.

That’s a lot of wasted heartburn, time, and money, simply because of drop’s inflexibility. 

Introducing Flexible Drop

We’re excited to announce a new approach to supplying shippers with the nationwide drop-and-hook capacity they need, on-demand, whether primary, backup, or spot. We call it flexible drop.

Convoy Go is the most flexible drop-and-hook service, offering shippers quality, nationwide capacity across primary, backup, and spot freight. With Convoy Go, shippers can move as much drop as they want, avoiding having to convert to live loads when their primary carrier fails.

How Convoy Go Works

In 2017, we introduced Convoy Go, a unique drop-and-hook service that turned the traditional model on its head by opening up drop freight to the million+ US carriers with small fleets, creating a massive addition to capacity while maintaining high efficiency and reliability. Unlike traditional drop’s rigid structure and fixed equipment, Convoy has access to a shared pool of telematics-enhanced trailers that can be hauled anytime by tens of thousands of power-only carriers in Convoy’s network.

We’ve since grown Convoy Go nationwide, scaling its ability to offer flexible and reliable primary drop capacity through machine learning and automation technology that rebalances trailers and matches head hauls with backhauls. To learn more about the technology that makes Convoy Go possible, download our free white paper.

Today, we’ve put the final puzzle piece in place, expanding Convoy Go to backup and spot freight. This novel solution turns traditional drop’s costs into savings by avoiding live loads while moving as much nationwide drop as shippers want, all from a single provider. 

To make this work, Convoy Go overcomes traditional drop’s constraint of fixed assets, where capacity is limited by trailers, tractors, and drivers. Each represents a potential failure point when a shipper needs to expand beyond established lanes or react to a demand surge. Convoy, however, has tens of thousands of power-only carriers and thousands of telematics-enhanced trailers in our network. This, combined with our predictive routing and pricing models, allows us to supply drop capacity to shippers through backup and spot freight. 

This flexible drop capacity creates a new way for shippers to look at how they allocate their overall freight mix. Traditionally, shippers move a fixed portion of their loads as drop, and then supplement whatever fails or is needed in a surge with live loads from brokers. Today, shippers can use Convoy Go to cover all of their nationwide primary drop, and they can supplement their existing drop loads from asset-based carriers with Convoy Go’s backup and spot freight, effectively eliminating the need to ever rely on live shipments.

Nationwide Capacity with Dynamic Backup

One last thing. Shippers who manage freight through a TMS can also secure backup drop using Convoy’s Dynamic Backup program. Dynamic Backup offers 100% tender acceptance with real-time rates, acting as a virtual safety net to protect loads from falling to the spot market.

Try Convoy Go Today

Convoy Go is available to shippers across the nation. Interested in giving it a try? Learn more by visiting convoy.com/drop, or email sd@convoy.com.

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Contract Freight for Shippers and Carriers Can Be a Win-Win

Customers across all major vertical industries are turning to Guaranteed Primary to secure high-quality capacity, reduce overhead costs from managing requests for proposals (RFPs), and avoid the cost and service quality risk of the spot market.

I wanted to share a little more about the challenges of today’s freight RFP process, and why we think Guaranteed Primary will be a game-changer for shippers and carriers alike. 

Trucking’s Paper Rates vs. True Contract Rates

It’s no secret annual bids rarely work out as planned. In reality, the freight market is volatile, with booms and busts independent from the rest of the economy, making it very hard to predict.  In fact, the freight industry experiences a major swing roughly every three to four years—twice as often as the overall economy. 

So, this volatility—this unpredictability—is not new. The challenges of running and executing an annual RFP and the resulting contract are well-known by shippers, brokers, and carriers. What’s less understood, however, is the premium that shippers pay for these non-binding contracts, and how little budget stability and cost savings they actually provide. 

Said another way, traditional contract rates are a myth; the true cost a shipper pays is 3-21% higher per mile[1] than their paper contract rate.

Let’s look at why that is. 

First, contracts take nearly as much time to plan as they do to break. For a shipper moving 225,000 loads a year, an average RFP takes four months to execute, in the end costing $2.5 million to administer. According to industry experts, those contracts are typically broken within six months, due to changes in the freight cycle that weren’t predicted during the planning process. 

Next, when contracts break, routing guides fail, sending shippers down the backup tree, and eventually to the spot market. In an RFP, carriers are motivated to bid low in order to win business; however, when the market tightens and truck prices increase, they often decline the freight they earlier agreed to take. Shippers then have no choice but to re-negotiate contracts, move to more expensive backup carriers, or shift into the high-priced spot market. This all adds costs to the RFP’s paper rates. 

The graph below shows a shipper’s true spend per mile when factoring in both the RFP’s overhead, plus additional backup and spot costs following contract breaches. Suddenly, the contract’s rate has increased 3-21% higher, per mile. This hidden cost is typically not accounted for in the company’s transportation budget line.

Shippers face additional hidden costs and quality risk when their primary freight moves to the spot market, using unknown carriers who may not have the same service quality as those who haul familiar lanes under contract. This can sometimes result in delayed shipments, missed appointments, or worse, accidents and cargo claims.

As a result, a shipper’s True Contract Rate is actually at or above the spot market rate.  To get a sense of a shipper’s True Contract Rate, you take their all-in spend (their paper rate, plus costs stemming from an RFP’s overhead and freight spillover into spot) and compare it to the spot market. You’ll then see that in tight markets, the True Contract Rate is roughly equal to the spot market. In soft markets, it’s substantially worse—around 11% higher than spot, shown in the graph below.  In this case, shippers have a decision to make: either overpay, or opt to break contracts and risk quality of service to source capacity through the spot boards and take on hidden costs in the form of operational hours spent sourcing those loads. 

RFPs present a zero-sum game with either winners or losers between shippers and carriers, with practically no way of predicting who will end up on top. In the end, everyone feels terrible, no matter the scenario.  

We’ve been working with select customers since 2019 on a better approach—one that promises capacity in any market, on any lane, all while reducing costs, and ensuring carriers aren’t left behind. 

Introducing 100% Tender Acceptance with Convoy Guaranteed Primary

And that’s what we’re excited to announce today: a new approach to getting out of the RFP’s win-lose cycle. We call it Convoy Guaranteed Primary. 

Guaranteed Primary is a new way to RFP, offering shippers a fixed margin that can be 50% lower than the industry average, with 100% tender acceptance. This program can reduce a shipper’s transportation costs by up to 19%, increase quality by never having to go to the spot market, and save valuable employee resources spent procuring capacity as a result of failed routing guides.

As a digital freight network that serves both sides of the market, Convoy is in a unique position to offer a contract program that predicts prices and guarantees capacity for shippers, while also helping carriers be more profitable. Guaranteed Primary is a win-win program that breaks the painful up-and-down cycle of an RFP’s long-term contracts. 

Creating the Win-Win for Shippers and Carriers

Here’s how Guaranteed Primary works.

When a shipper uses Guaranteed Primary, they completely eliminate the need for an RFP or mini-bid. To start, they allocate all volume on any lane to Convoy. In contrast to an RFP contract’s fixed per-mile rate, Guaranteed Primary establishes a fixed margin that shippers pay (up to 50% lower than the industry average of 15-18%). Guaranteed Primary customers pay dynamic prices generated by Convoy’s pricing algorithm, which uses machine learning on historical and real-time data to predict truck costs on the awarded lanes, when the shipper is ready to tender, typically a few days out.

As the shipper tenders loads to Convoy, we guarantee acceptance by tapping into our nationwide network of hundreds of thousands of trucks. Through automated bidding, carriers compete to haul loads, ensuring our customers always get quality capacity at the lowest available rates. 

Convoy provides full transparency on truck costs and margin for every shipment. Each month, customers receive an insights report detailing their estimated savings, comparing their actual costs to what they would have spent using an RFP or the spot market. Customers can cancel anytime, for any reason.

Lowering Total Cost with Guaranteed Capacity and Complete Transparency

Over the last year, we’ve been piloting Guaranteed Primary with shippers in every major vertical industry. To date, these customers have seen annual reductions in their overall transportation spend while enjoying 100% tender acceptance. 

With Guaranteed Primary, a shipper that runs 10,000 loads through an RFP contract could save nearly $1 million annually, or 19% of their total transportation spend. A shipper moving 225,000 loads could save $5 million annually, or 5% of their transportation spend. And finally, a shipper with approximately one million annual loads could save $17 million annually, representing 4% of their transportation spend.

Guaranteed Primary also offers 100% tender acceptance. We achieve this by having access to a massive nationwide network of hundreds of thousands of trucks, and by using machine learning to accurately price loads and predict capacity at the time and location of pickup.

Transparency to Build Trust

When shippers use Guaranteed Primary, they’re making a bet that Convoy can reduce their transportation costs while knowingly riding the highs and lows of the freight market. This can be a daunting proposition based on how different the model is compared to traditional RFPs and contracts. 

To address this concern, and to ensure that Convoy is continually working to cost-effectively source capacity, we provide an unmatched level of transparency. Prior to starting Guaranteed Primary on any lane, we’ll forecast a shipper’s savings in advance, and share this information to help with budgeting. Then, on a monthly basis, we’ll track progress toward this goal. We will provide detailed analytics on our customers’ operational and line haul savings, and our actual truck costs with granularity into individual lanes by day of the month. As part of this, we show daily truck cost ranges by lane and how cost-effectively we sourced trucks on that day. For example, in some cases, we may not source the least expensive truck based on our confidence in the driver’s ability to make an on-time pickup. 

Try Guaranteed Primary Today

Convoy Guaranteed Primary is available to shippers of all sizes, across the nation, starting today. Interested in giving it a try? Learn more about guaranteed tender acceptance program or drop us a line at sd@convoy.com.

More on Guaranteed Primary

For more resources on Guaranteed Primary, check out our white paper or our webinar, which covers how to adapt to the freight market softening with dynamic pricing.

[1] Terrazas, Aaron. “Contract Freight’s Paper Curtain.” Medium. 9/17/2020.

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