Bid Don't Bet

1 Trimble Transportation Bid Don’t Bet Guide Confident Decision-Making for Bid Season Bid Don’t Bet

2 Trimble Transportation Bid Don’t Bet Introduction What do you think of when someone asks you about bid season? To many (if not most), these are some of the most stressful weeks of the year. It’s not just the nature of bidding that can be painful, it’s that the stakes are so high - the contracts you lock in can spell out the difference between a great or terrible year for your business. Bid season is your opportunity to win the right freight at the right rate, if you can execute efficiently. It’s your chance to realize your corporate vision and strategy through the nature and strength of your relationships with shippers. The marketplace of shippers and carriers is enormous. And according to the American Trucking Associations all are competing for part of the $796.7 billion gross revenues made in the trucking industry in 2018 . Who gets how much of this profit pie is decided quite early on, as January bidding results in contracts with shippers that usually last for the next year. To put it simply, the opportunities presented by bid season are immense , and it’s up to carriers to navigate the space intelligently to secure revenues for the year to come. Understanding the Marketplace TRUCKING ACCOUNTS FOR OF AMERICA’S ANNUAL FREIGHT BILL 81.5%

3 Trimble Transportation Bid Don’t Bet Contract is Key While the market is huge and full of opportunity, it’s important to be selective when looking at lanes you want to bid on. Growing your business is good, but to do so you need to think in terms of quality, and not just volume of contracts. Here are some key elements to consider when analyzing a potential new agreement. 3 Fuel Surcharge (FSC) Contract Duration Power Detention and Stop Pay Payment Terms Detention Without Power Cargo Liability Performance & Equipment Standards Trimble Transportation Bid Don’t Bet

4 Trimble Transportation Bid Don’t Bet Generally, if you like a shipper’s terms, a longer contract is nothing but good news. A longer period implies an opportunity for stable revenue for maybe even years to come. A nuance worth considering, however, is the contract’s addendums. To get the most out of any contract, it is valuable to be able to review, analyze and adjust the rates within the contract at least once a year. Shippers vary in their stipulated payment terms. In most contracts, the shipper promises to pay within 30 days of receiving the invoice - but this period can vary in length from as little as 15 days to as much as 90. It’s important to remember that the contract isn’t money in itself, so to speak. If your business is trying to pay its bills in the coming weeks, and a shipper won’t pay until two months down the road, you should factor that into your rate. In this case, you are essentially giving the shipper a loan. The standard insurance requirement usually limits the carrier’s liability to $100,000 per shipment. Should a shipper require insurance beyond this point, you should at the very least increase your rate in order to account for the increased exposure to risk on your part. When determining how to adjust the rate, consider the expected volume you will be carrying for that shipper, and make sure this increase covers the higher liability. That way, if a shipper were to make a claim, you will have enough collected at this premium rate to cover the liability payment. Both of these concepts should reflect how valuable a driver’s time is. Once the driver is on the clock, you can’t stop that clock according to the current hours of service (HOS) rules. The contract should contain stipulations about stoppage and delays, which cost you money but can be accounted for in the rate paid by the carrier. Additionally, pay attention to your route history and do some research - make sure that the stop pay schedule is realistic. Contract Duration Payment Terms Cargo Liability Power Detention and Stop Pay Destination City: Seattle Carrier Miles: 1189 Trimble Transportation Bid Don’t Bet Bid Flat Rate: 6663 Bid Volume: 520

5 Trimble Transportation Bid Don’t Bet The most common shipper complaints relate to the trailer itself. Frequently, you may hear a shipper talk of finding trailer damage or about not having enough on hand. It’s important to realize that shippers are sometimes inefficient in their loading and unloading of the trailers, and that they sometimes use them for storage. As a result, it’s important to have the trailer detention accessorial as a basis for charging the shipper for poor utilization of your trailer. As diesel prices fluctuate, it’s absolutely crucial that you are aware of the shipper’s fuel surcharge program and to have one of your own. As is the historical standard, the base line haul rate of any lane usually covers the cost of diesel up to $1.20 per gallon. For diesel prices above this “peg,” an additional fuel surcharge (FSC) per mile must be applied. When reading a contract, be sure to note how frequently the shipper calculates the FSC. The standard is weekly (mirroring the government’s reporting of diesel prices), but some programs only make these calculations and the associated payments on a monthly basis. This may be harmful to your business, as it’s important that these calculations closely adhere to your actual fuel costs. When reading through contracts, you may find some shippers to be unreasonable in their requirements. For example, you may opt to pass on an agreement with a shipper who requires 99% on-time service. On the other hand, these kinds of contracts present the opportunity for a dedicated arrangement, which may be valuable to your business if you can somehow meet these expectations. The same goes for equipment - shippers often have specific demands for the trailer, mostly pertaining to the age or condition of the trailer. If a company demands that you only use newer trailers to haul their product, this may be enough of a hassle that the contract isn’t worth it. Detention Without Power Performance & Equipment Standards Fuel Surcharge (FSC)

6 Trimble Transportation Bid Don’t Bet The Lane File Having read the terms of the agreement, you must now carefully examine and consider the lane file. This document has great effect on how you determine your rate, and can help you decide if you truly want the contract. Consider the following components. 6 Trimble Transportation Geography Shipment Volume Shipment Type Facility Profile Commitment Bid Don’t Bet

7 Trimble Transportation Bid Don’t Bet When looking at the lane, uncertainty is a huge factor in determining your rate. In the easiest, simplest case, the shipper will submit their lane as point to point (PT PT), in which case you are provided with a departure and destination of either “city-state to city-state” or “ZIP-to-ZIP”. These cases allow you to simply set a line haul rate with ease, but oftentimes shippers do not afford carriers this luxury and submit their lane in a less specific format. Some lanes may be presented as a 3-digit-zip to another 3-digit-zip, or from a region to a point, or from a state to a state. In these cases, there is a much greater degree of uncertainty, and you should account for it by submitting a higher line haul rate and securing the guarantee of a minimum charge. The uncertainty of the lane creates risk for the carrier. You may find that the lane ends up being shorter than expected, or that the zip range creates an excess of empty miles for your drivers. Having a minimum charge protects you from the possibility of unexpectedly low revenue in a lane. In the lane file, volume is a rough estimate based on shipper history. The actual volume will invariably differ from the estimate, and you also can’t count on the volume being evenly distributed across the period of the agreement. At most, you can use volume as a rough basis for your expectations, and also as a factor in keeping trailer pools at the necessary locations. It is common that shipper may request a trailer pool at the shipping and receiving points, and the volume is useful in estimating how big this pool should be. Geography Shipment Volume This information is really useful in providing insight into how the business will actually operate. Knowing the specifics of the shipment gives the lane a greater level of understanding into the predictability of the lane, the flexibility of the customer, and the ease of operation afforded to you. Shipment Type

8 Trimble Transportation Bid Don’t Bet This element of the lane file is key in your pricing, and in your overall decision to bid for someone’s business. Knowledge of the shipper’s facilities tells you if they can set you up for a successful operation. If a shipper can offer you flexibility and convenience, your rate should reflect that to show them that you value their business. The facility profile may include information such as whether they live load or preload trailers, how many dock doors they have, where to drop empty trailers and so on. All of this information can be put together to create a holistic picture of how easy planning and execution will be, which you will ultimately factor into your rate. In some cases, the shipper may ask for your capacity, and you should be prepared to answer. It’s expected that your capacity will be experiencing some degree of flux, and you may plan to downsize or expand. In the event that you expect to grow, it is recommended to overcommit when providing your capacity, as the risk of having to expand your capacity is outweighed by that of not getting the contract. These commitments themselves are a reason to grow, or even a force that will enable growth. Facility Profile Commitments Knowledge of the shipper’s facilities tells you if they can set you up for a successful operation .

9 Trimble Transportation Bid Don’t Bet Know Your Network As you go into bid season, it’s absolutely fundamental to evaluate your trucking network, and then use bidding as an opportunity for optimization. This is how you will strengthen your network and ultimately grow your business. Network evaluation is similar to a medical health assessment. Just as you determine what elements of your body are at risk or need attention before making a change to your diet or starting a new medication, so too must you assess your network before deciding what new business agreements can help you the most. The network of a trucking company is a complex system, and it operates on two planes - geography and customers. Both of these have their own sets of considerations that relate to and affect your finances and your manner of operating. Perhaps the most basic geographical consideration is area: what is your operating territory? Do you aim to be a nationwide carrier, or regional? If you haul nationwide, do you have or want to have a stronger presence locally? These considerations apply to both customers and the geography in which you operate. Beyond area, there are plenty of other elements on which to evaluate your network. 9 Trimble Transportation Bid Don’t Bet

10 Trimble Transportation Bid Don’t Bet Network Evaluation Amount In essence, measurements of amount help you evaluate the pure magnitude of your operation. Questions like “how does my rate compare to market rates?” or “how many out of route miles have we incurred while hauling for Customer X?” all relate to an amount, and provide some of the most fundamental information about the nodes in your network (nodes being shippers, your trucks, your drivers, their destinations and everything in between). Other amounts worth carefully evaluating include: | Historical | Market and Bid Rates | Cost per Mile | Cost per Day | Shipping Volume | All Forms of Mileage, Revenue, Margins | And, Ultimately, Profit Quality Velocity Considerations of quality are less black-and-white than calculations of amount. It’s important to consider metrics like operating ratio (OR) when looking at a shipper, but these numbers require careful consideration, as they don’t always accurately capture the value of a lane or customer. A lane may have an excellent OR, but these cost and revenue results may be completely offset by the fact that the lane has sunk a disproportionate amount of time, making it ultimately not worth the trouble. To this end, numerical measures of quality like OR are used best in conjunction with a measure of velocity. Measurements like miles per hour, revenue per truck per day, trailer turns, rate and revenue per hour, and in transit delay all provide you with a sense of momentum. Rather than just giving you a static sense of how you’re performing, these metrics help to understand your business’s trajectory. Because of this value, measurements of velocity should not be overlooked. It’s important to consider metrics like operating ratio (OR) when looking at a shipper. Trimble Transportation

11 Trimble Transportation Bid Don’t Bet Data Can Help You Answer: | What is the best way to reduce my presence with a certain industry? | Which lanes have the worst in-transit delay? The best optimization engines are those which have a simple output. In other words, a truly good optimization solution will result in simple answers to a complicated set of questions the like the ones listed above. Ideally, these answers will be a simple list of lanes to: What’s more, it’s important that these simple answers aren’t the result of simple calculation and processing. A good optimization process must be as comprehensive as possible, and so you should seek out solutions that attest to this quality, and be wary of systems that over-emphasize only one or a few criteria (an algorithm that optimizes lane profit but ignores future loads, for example, may leave your operation in a tough spot a few months down the road while you think that you’ve just “optimized”). Not only do the optimization algorithms need to be comprehensive for your network, but also in terms of the shippers you work with. Incorporating shipper lane file data opens up a ton of space and opportunity for you to make smarter, more informed choices. Finally, an optimization solution benefits greatly from having a human element. As effective as the algorithms may be, it is common for optimization engines to forget the value of preferred customers. Whether it be a legacy relationship, or a shipper that you count on to achieve future growth with, an optimization engine benefits immensely if it takes into account the customer network and its subtleties. Time The way you measure time in your network needs to be all-encompassing - from all angles, so that you can capture efficiency and utilization of geography, customers and driver hours. Having evaluated these pieces of your network, you have conducted what is akin to a health screening. You should have a holistic view of your network, and perhaps identified some shortcomings that detract from the “health” of your network. The next step is optimization. Asking yourself questions about what can be improved and how you can change the current situation will help to generate a protocol for optimization and growth that can ultimately be achieved by seeking out the correct business during bid season. The most surefire way to ask and answer optimization questions is to employ data, analysis tools and supportive technology, thereby creating a platform that enables and simplifies your attempts to optimize. Trimble Transportation | What is the best way to reduce empty miles? | How can I change my freight mix to increase rate? | Which customers have freight where drivers live? | Are my rates in line with the market? | How does the network change if I want to grow my tractor count? | What is the best way to reduce my tractor count? | Which lanes allow me to increase revenue with a certain customer? Grow Recuce Eliminate Bid Don’t Bet

12 Trimble Transportation Bid Don’t Bet Determining how to price your lanes and the loads associated with them requires you to funnel in a lot of information, and ultimately distill all of those considerations into a single number. One basic consideration is that of supply and demand. As with any service, you must consider the capacity of supply and the demand for it. Rates will be sensitive to the relationship between the supply and demand of carrier capacity in any given area. This forms the basis of headhaul and backhaul areas, in which you can price higher and lower, respectively (since headhaul areas are generally industrial areas that produce more shipments, or demand, for lower capacity of carriers, or the supply). It’s good to pay attention to supply and demand that emerges in specific lanes - you may find that developing strong channels of multiple lanes between, say, two particular states may be very profitable because the demand for that lane is naturally very high. It’s also important to pay attention to the government’s role in the trucking economy, and in turn, your pricing. Policies issued by the Fed are designed to manipulate the cost and supply of money and can affect any industry - not just your own, but those you choose to do business with. So, it is wise to keep track of who these policies are most actively affecting, as a change to the money in their industry can easily affect your business as well. Additionally, it’s good to pay attention to Congress and its fiscal policy, as government taxing and spending can affect industries across the board, and thereby affect who you want to work with. Beyond considerations of an economic nature, pricing also needs to be looked at from an investment perspective. Most importantly, you need to consider risk/reward ratios, industry characteristics, diversification and returns. Figure Out Pricing Risk/Reward Ratios Industry Characteristics Diversification Returns Bid Don’t Bet

13 Trimble Transportation Bid Don’t Bet Risk/Reward Ratio Your investment portfolio (your awarded lanes) will likely consist of a mixture of high-risk, high-reward and low-risk, low-reward contracts. The actual makeup of this mixture will be determined by your organization’s identity and what ambitions you have for the future. Establishing contracted rates gives you a lower-risk network design. If you prioritize contracted rates entirely, you lose the ability to capitalize on premium spot rates, but at the same time you have greater planning ability. Industry Characteristics Diversification Return Like any investor, you should bid with a solid understanding of the shipper’s industry, as this will undoubtedly affect their behavior, and therefore the rate you put forward. Some businesses, like retail, are more cyclical, and the holiday season comes with an expectation that you’ll be able to increase capacity. Other industries are more stable and consistent in their demand for your capacity, which may or may not align with your network needs. Seek out those that match your organization’s ambitions. As the old saying goes, “don’t put your eggs in one basket.” While in the trucking industry you may be inclined to put at least some of your eggs in the same basket, it’s generally a good idea to diversify your network, as this helps to minimize risk. Diversifying doesn’t necessarily mean spreading your resources evenly, however. Identify which customers represent how much of your total business revenue. For example, finding how many customers represent 20% of your total business may reveal that you rely too much on a small number of customers, or it may tell you that you need focus a bit more on a select few customers that you do well with. When working to tune your trucking network, it’s important to understand the impact your decisions have. A rate increase of just a few pennies can increase annual revenue by hundreds of thousands of dollars. Finding the right shippers that enable you to operate efficiently and at the optimum rate is a process that greatly benefits from constant consideration of rates of return.

14 Trimble Transportation Bid Don’t Bet Leaning on Technology for Bid Management 14 Trimble Transportation While you can take many different approaches and focus on different aspects during bid season, a holistic approach to analyzing the market is perhaps the best way for your organization to get the most out of the process. The problem, however, is that this holistic approach requires considerable manpower, a good bit of math and a wide-angle lens to see the big picture. Technology is perhaps the easiest way to overcome these barriers. The chief benefit of using technology for bid management is that it provides you with a tremendous amount of power - by automating some of these processes, you eliminate the strain and man- hours required to create a database of contracts, lane files and rates (the very database that will give you a better view of your own network). To be useful, bid management technology must be able to store and index master agreement and addendums, and be able to convert all the scattered lane file formats, so that you can see your network as an actual network, rather than a mish-mash of incongruent data. Furthermore, this technology needs to incorporate the old data with the new - your current contracts must be relatable to historical data, so that you have access to that predictive value. This type of software must also be powerful enough to keep up with multiple rounds of pricing. If it can keep up with all phases of a bid, the bid management technology is able to help you identify and analyze your awarded lanes and volumes and whether or not to publish rates for each lane. Ultimately, the power to achieve this level of organization and insight should result in a solid pricing platform that does the time-consuming work for you. A well-executed bid management software solution will do a lot of the hard work on your behalf. By improving the process for you, the bidder, technology enables you to participate in more bids, so that you can evaluate more opportunities for your network. It helps you store and organize all of your historical bid data in an easy-to-use format, so that you have a relevant and accessible bid reference resource for years to come. Most importantly, leaning on technology gives you the insight and market intelligence to bid with confidence. Bid Don’t Bet

15 Trimble Transportation Bid Don’t Bet Never Stop Evolving with Trimble Transportation. Ready to get started? Request a demo of Engage.Bid management software from Trimble Transportation to see how to make a world of difference in your next bid season. Phone: +1 866 914 5299 Website: transportation.trimble.com Trimble Transportation provides solutions to create a fully integrated supply chain, helping customers make more informed decisions and maximize performance, visibility and safety. With an intelligent ecosystem of products and services, Trimble Transportation enables customers to embrace the rapid technological evolution of the industry and connect all aspects of transportation and logistics — trucks, drivers, back office, freight and assets.