The digital freight network Convoy on Monday morning announced enhancements to the way trucking carriers bid on loads in its platform that are intended to improve the carrier experience and create more transparency into how loads are awarded.
Now carriers can see in the offer details a specific bid range and the exact time when the auction will be closed, for example, “Best bid below $1,644 will be accepted at Wed 01/27 at 0:800 am PST,” according to screenshots provided by Convoy.
Drivers reportedly like auction-based bidding processes because they can set the price they’re willing to perform a job at, go about their day and then wait to be notified if they won or lost the auction. Convoy was the first to introduce auction-based bidding on a wide scale in 2016; other digital freight platforms at the time offered carriers fixed prices that could be accepted or rejected.
While auctions cut out awkward negotiations that can be costly for both parties, there were still inefficiencies in the model. On Convoy’s side, it was difficult to decide when to end an auction — the longer the auction went on, the more offers and market information Convoy could gather to factor into its award decision. But carriers didn’t know when they would learn if they had won or lost the auction, and that uncertainty could prevent them from planning out their day or week ahead of time.
Now carriers bidding on Convoy loads will know exactly when the freight will be awarded, allowing them to quickly find alternatives if they don’t win the auction.
“We thought about two different systems — one is variable closing times and the other is always at the same time during the day,” said Ziad Ismail, Convoy’s chief product officer. “The reason we decided on the same time during the day is that carriers may be bidding on multiple things. If they bid on three different loads and they hear about them all at the same time, they can then make a decision, and having all that information at once is a big advantage for the carrier. We’re also trying to drive down the empty miles in our network, and we have to make trade-offs between individual shipments — what we call singletons — and batches.”
Carriers also want to know why they don’t win auctions. The winners of auctions are largely driven by price, although Convoy incorporates carrier service quality scores into its decisions (i.e., a top-performing carrier can be awarded freight even if its bids are higher than other carriers). The biggest reason why carriers don’t win auctions is because their asking prices are too expensive; the carrier is out of step with the market and with, perhaps, other carriers’ sentiment toward the load’s destination.
Building the technology to set auction bid ranges transparently was quite complicated, Ismail explained.
“Every day we get lots and lots of bids through our network,” Ismail explained. “Based on those, we’re constantly learning where the market is — not just the market in general, but the market specific to Convoy. As things are shifting around, that information is training underlying models on markets, time of day, facilities, truck type, cargo type and lots of other things. Then the models make predictions. I have a confidence interval and I think the prices are going to be within this range. But there isn’t really one price — that’s the reason auctions are so powerful in trucking. Different drivers have different preferences: One driver doesn’t want to leave a city, one driver really wants to get to a specific destination. If we set it too low, carriers don’t think it’s interesting. If it’s too high, it’s not competitive on the demand side and we don’t win enough freight to drive our marketplace.”
These new features are now live in Convoy’s platform and so far, according to Ismail, the response has been overwhelmingly positive. Convoy began working on auction timing and pricing transparency early in 2020 and started testing in the middle of the year. COVID forced Ismail’s product team to work from home, and while initially the teams worked together “surprisingly well,” Ismail said he noticed that informal collaboration and serendipitous brainstorming sessions were hard to replicate. The team planned around short-term, quarterly goals, reflecting at the end of each quarter on what it had learned and making adjustments.
Ismail said his team shifted in December to an annual planning process designed to help get product managers out of their near-term tactical thinking — which had been to some extent reinforced by working from home — and think more strategically.
“In December planning leading to Q1, we went to a one-year planning cadence,” Ismail recounted. “Let’s take a one-year view of what can be done, let’s take more time to create space for brainstorming that otherwise would happen informally inside the office. Those are the changes we’ve made. It’s too early to tell how it’s going to play out — our plans ended up being much more ambitious. Our most ambitious products are now in our pipeline.”
Steve
Yes, but you can always bid more than the range Convoy posts. I’ve had bids accepted that were much higher than their posted range. It just takes them longer to accept it. You know your costs and considering the area the load is going to, those extra costs need to be taken into account. Many drivers are feeling pressure to bid within those ranges, or accept low rates on Uber, knowing they can’t make a profit running that cheap. I prefer Convoy because I can bid a reasonable rate that will both cover my costs and earn me a bit more than a company driver. Don’t run just to make your truck payment, you will make much more money if you post your truck/s on internet truckstop and DAC/ truckersedge load boards. There’s much more money that way, it’s just a little more work to make bids on the fly. You can double your revenue per truck by posting your truck, at the same time you can bid on Convoy loads, then the first one to come up with a reasonable rate you take. Considering the area the load is going to as well. Also you should subscribe to FreightWaves newsletters, they send out a map that shows areas where the rates are stronger. I try to keep going to the blue areas where the freight market is stronger.