Streamline Your Spot Quote Workflow with Digital Tools

Preparing a quote is arguably one of the most important steps in the spot commercial freight process. Companies that get it right enjoy higher margins, higher conversion rates, more loyal clients and engaged carriers. According to McKinsey, a spot quote pricing transformation typically results in a revenue increase of up to 4%, which means a 50% operating profit margin increase.

While prepping a spot quote is a central process, the workflow hasn’t seen much change in recent years. Indeed, the vast majority of transport companies large and small still apply the traditional cost-plus approach and the associated process. First, they confirm the capacity and buy-side price and only then confirm the sell-side price and commit capacity.

In this article, we examine the traditional spot quote process and compare it with a more efficient digital approach. Spot freight, in this context, refers to transport requests that are not previously negotiated or covered by standard contracts like tenders.

An in-depth analysis of the traditional spot quote process

Sell-side quotation process (shippers)

The first step of any sell-side spot quotation process is the demand entry. Our experience operating in four markets shows that up to 90% of requests are received via an email, a WhatsApp message or a phone call*.

Having registered a request in their transport management system (TMS), or quote management system if available, most players use email to communicate with their providers and confirm price and availability. After receiving an order, the company needs to confirm receipt, capacity to execute the order and the final price. In the case of a spot quote, prices may differ significantly from the contract rates, which in turn requires further confirmation from the client before accepting the quote. 

To sum up, the spot quotation process on the sell side includes at least 6 steps, which are traditionally email exchanges: 

1. Email: Receiving a transport order.
2. Email or WhatsApp: Confirming capacity with internal or external providers.
3. The decision about the price: Manual or agent-based.
4. Email: Confirm the price and capacity to the client.
5. Email: Receiving final order and confirmation.
6. Manual input: Introduce the order to the system or TMS.

Buy-side quotation process (carriers)

On the buy side, the process depends on whether the logistics company has the capacity to execute the order or if they need to hire a subcontractor. In the latter case, the process looks very similar to the sell-side: 

1. Email: A request is sent to a group of providers.
2. Email: Providers confirm availability and their cost.
3. Agent-based decision: A decision is made on which carrier to select and whether they should accept the price or attempt to negotiate. 
4. Manual or automated email: Final confirmation is sent via email or an order is created in the TMS and sent to the carrier.

In the case where there is existing fleet capacity, the whole process is quicker: the request is checked versus internal availability and the information is passed to the potential customer. 

In the traditional quoting process, confirming the buy price and capacity precedes providing the sell price, necessitating a sequential workflow. This entails over 10 steps, numerous agent-based decisions, multiple data exchanges and ample space for human error.

Main KPIs and improvement levers for a spot quote

As in any spot quote process, the measure of success is the percentage of converted requests and the profit margin they make. 

The likelihood of conversion is significantly influenced by the speed of completion. Assuming that each step of the process takes 5 minutes, the overall process should take up to 50 minutes, provided there are no delays. While in some industries 50 mins is an acceptable lead time, in others, it’s considered to be too long. 

On the sell side, another key factor is securing a good price without a high spot premium. This is possible by having either your own or fixed capacity, or a pool of spot carriers that can be easily accessed. 

How to streamline the spot quote process

As shown above, the traditional spot quote process relies on multiple data exchanges and confirmations, involving a total of 10 steps. Digitalising information exchange and applying AI technology to automate some of the decisions can streamline the process significantly and improve the main KPIs: speed and conversion rate. 

1. A digital tool for the sell side

Depending on the main channel for demand entry, the process can be digitalised in the following ways: 

1. Integration and RPA process to “scrape” the orders from the customer’s platform.
2. Automatic reading of emails, provided they come in a plain text format.
3. Integration with customs or import platforms.
4. Customer portal for creating orders.
5. Customer portal to upload orders en masse.

In the traditional process, receiving an order from a customer triggers the buy-side quoting process. Digitising the process offers the possibility to either run processes concurrently, immediately upon the trigger, or, with adequate data and order volume, confirming price and capacity instantaneously.

2. Automatic buy-price negotiation

In addition to the automation of information exchange, real-time price negotiations can be added to the buy side. Whereas the traditional process takes an agent to call a carrier and re-negotiate a high price, digital tools can automate this process.

Depending on the industry and the need for negotiations, different levels of complexity can be implemented: 

• Historical data: The quick display of historical benchmarks showing expected costs can assist agents in deciding whether to negotiate and to what extent.
• Cost engine: An algorithm proposes costs and automatically sends them to carriers, optimising carrier selection and improving engagement by filtering out distant carriers.
• Bidding system: Allows carriers to counter the initial price with alternative proposals.
• Negotiations bot: System accepting counter-offers and capable of linking additional conditions, such as simultaneous orders on the same route.
• AI-enhanced cost engine: Algorithm proposing varied costs to carriers based on historical data, maximising either cost or time for supply confirmation within set boundaries.

In summary, implementing these digital tools in the spot quote process simplifies the workflow to 5-6 steps and reduces the overall lead time to 5-10 minutes, if not instantly. If instant pricing is implemented, Ontruck AI Tech clients see their conversion rates go up by 80-90%. 

Competitive spot quotes, generated in record time

The implementation of a new streamlined process relies on core technologies that can drive change in the existing spot quote process. These technologies include artificial intelligence (AI), forecasting and capacity planning tools and dynamic pricing processes tailored to individual client specifics.

In this context, AI plays a crucial role in the pricing process for both the sell side and the buy side. It enables instant pricing to drive conversion rates and facilitates quicker and more intelligent sourcing of capacity.

Wondering how to digitise your spot quote process? Each division within logistics service providers has varying price structures and levels of process maturity. Engaging a technology provider that has already undergone this improvement process can make a significant difference. 

At Ontruck AI Tech, we've been digitising every aspect of spot transportation management for over seven years. Request a demo of our solutions, and we'll demonstrate how leveraging technology can optimise your processes and enhance your business performance.

*Larger companies, such as multinational consumer goods or industrial OMFs, may have introduced different carrier portals. These portals enable them to send their transport requests to a high number of carriers simultaneously and receive quotes promptly. However, this practice remains more of an exception observed among very large multinational players.

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References:

• McKinsey & Company. (2020,December.). Getting the price right in logistics. https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/getting-the-price-right-in-logistics