When shippers distribute an RFP, they’re hoping to find reliable carriers at the best prices while making their supply chains more predictable. Carriers respond to RFPs hoping to contract out their assets and resources for consistent volume. But instead of a thoughtful give and take, today’s market volatility often creates a cycle that erodes success and trust. Shippers can help break this cycle by taking a few steps to improve the RFP process.
The RFP Process Explained
The shipper starts the process by distributing the RFP to incumbent carriers and potential new partners, which usually includes details about the shipping operation, volumes, lanes, frequency, seasonality, lead time and other factors.
Interested carriers respond with a bid for each lane and, upon shipper acceptance, must honor the bid price and volume for the contract term.
Next, the shipper selects the most attractive carrier bids based on their particular strategy, giving different weights to various factors like price, on-time performance, experience, and areas of expertise. After ranking carriers according to their strategy, the shipper uses the list as a routing guide to tender loads.
Where the RFP Process Goes Wrong
The goal of the RFP process is to make supply chains more reliable, predictable, and cost effective. It can also be used to ensure pricing is aligned with current market conditions. But market volatility works against that goal:
- Some brokers and carriers deliberately bid low to win the business. But when the market tightens, they reject load tenders when shippers won’t pay more than contracted rates.
- Some shippers sign up more carriers than they need to hedge against tender rejections. But when the market slows, the shippers can’t uphold their commitments, harming their relationships with their carriers or brokers.
- Shippers may place too much emphasis on cost. Service is a critical component when assessing bids. If price is the only factor considered, you run the risk of unreliable carriers and service failures.
5 Ways to Improve the RFP Process
Market changes may continue to affect carrier pricing, but you can take better control of your transportation spend. Here are five ways to get more from the RFP process:
- Start with a Request for Information (RFI). Use an RFI to gather broad data and facts before requesting rates. Investigate a carrier or 3PL’s financial performance, experience, areas of expertise, mutual connections, network strengths, and service standards to eliminate those carriers that seem incompatible.
- Communicate needs thoroughly. The more information you provide about your needs and requirements, the better. Clearly state any mandatory requirements up front, including vendor or customer information, hours of operation, etc.
- Think bigger than lane-by-lane. View your network holistically to find cost-savings through package discounts and lane bundles. Options include single-source bundles where one carrier handles all volume from one location, round trips that create a headhaul-backhaul loop, a group of local runs, or a group of lanes on a major freight corridor. Higher volumes create more leverage for shippers. Even better, more volume with fewer carriers increases your level of service and continuity to further drive cost savings.
- Request performance metrics and referrals. Understand more than rates. Ask your transportation partner for tender acceptance track records, weekly inbound shipment volumes into your locations, on-time delivery performance, and carrier ratings. Define the benchmarks that matter to you and hold your carriers accountable. Ask for referrals so that you can validate what your carrier tells you.
- Encourage your carriers to articulate their strategy. If your carrier prices all the lanes you submit, ask how they plan to service those lanes. Assess their carrier network strength, expertise with your unique requirements, and other important synergies. And consider vetting carriers through a reputable 3PL.
Becoming a Shipper of Choice
The RFP process can be a source of uncertainty and frustration—or a proven exercise to help you improve relationships, increase services levels, and reduce costs. Taking a few steps can help you move beyond transactions with carriers to building meaningful partnerships that yield greater returns over time.