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Prepare for an RFP in 4 Steps

As a large-scale shipper, you use a request for proposal (RFP) to put freight out for bid, typically on an annual basis, correct? You are smart. This process helps keep your current freight providers on their game and gives you the opportunity to evaluate the capability of newcomers. Here are four steps that will have you well-prepared for your RFP process:

1. Get Organized

Details. And lots of them. That is the basis of a good RFP. The homework you need to do is not only for the sake of line items in the RFP but also for the alignment of your internal team. You need to work together to define the ideal outcome of the process. Once you are in lockstep regarding what a successful RFP looks like, there will be numerous facts to gather and decisions to make. You should get a jump start on these:

  • Know your annual freight spend and volume
    • When you can, break your spend out by mode. This will help pinpoint your savings potential and give you data to measure against.
  • Profile your freight in detail
    • The particulars will help freight providers create tailored solutions for you. Document your freight’s handling requirements, load time, standard weights, pickup and delivery times. Providers will also want to know if you have driver-friendly facilities and how quickly you pay. It is also beneficial to document the efficiency of your check-in and check-out process.
  • Outline the full objectives of your RFP in your clear and concise bid package
    • This is where you define your expectations for the RFP. What do you hope to achieve? Freight services want to provide the information you are looking for. This will help both your organization and those invited to bid to act with intention throughout the process.  
  • Set the number of bid rounds
    • The number of rounds in the RFP process helps those bidding understand your communication cadence and informs their own strategy in regard to winning your business.

Pro tip! Gather visuals of the products you ship. Part of your job is to make your freight attractive to the service provider. They need to want to move your freight.

2. Determine the Participants

Your carrier strategy likely includes a mix of carriers and third-party logistics companies (3PLs) — small, large, national, regional. The tender percentage awarded to each is deliberate and likely based on the requirements of your freight. Bring this same thought process as you determine the invite list of your RFP. You want a good mix to help you thrive in a changing logistics landscape. Balance this group based on fit with your supply chain operations.

The RFP process is the perfect opportunity to evaluate your incumbent shipping services against potential new providers — how they compare on rates as well as overall fit in your strategy. Remember, these partners can make a large impact on how customers view your reliability. So, once you have your carrier mix determined, go ahead and prepare your list of hard-hitting questions:

  • How does our freight fit into your network?
  • Where will we rank among your clients in freight spend?
  • Are we aligned on KPIs?
  • Have you done X before?
    • Whatever your freight requires, make sure they have handled that situation in the past.

3. Establish a Benchmark

To determine your RFPs success, you have to know if it helped you hit your established goals. So, you need a baseline for comparison. There are a few ways you can accomplish this:

  • Gather historical data from your company
  • Reach out to industry trade associations that may share their knowledge
  • Work with an outside consultant

As you are compiling this data, be on the lookout for opportunities to optimize your transportation program. Maybe your RFP should consider modal conversion or the opportunities for lane aggregation.  

After a set time, once your new RFP is in place, look at the numbers in comparison to your baseline. Are they trending in the manner you had hoped? Preparing for measurement and analysis is a plan for success.

4. Outline RFP Administration

You will need to create a system of checks and balances for the RFP process to help secure the best outcome for your business. Define the communication pattern so you have a game plan to reach out to the participants after each round. We also advise an open line of communication with carriers and providers throughout the course of the RFP.

Pro tip! Do not provide target rates in your initial RFP. It could adversely impact the results and cause you to overlook providers that are a great fit with your operations.

After the RFP Process

You prepared and administered your RFP. Now what? Once your freight has been awarded, there is still more to do to get the trucks rolling. Onboarding calls are very important to make sure you are on the same page with each provider regarding service levels and volume commitments. You put a significant amount of your time and energy into the RFP, work to make sure it was worth the investment.

3PLs are a vital part of success in most supply chains. Your carrier strategy likely endorses a mix of 3PLs and asset-based carriers. We provide the value of strategy and solution that only a 3PL can. If our networks compliment one another, we will be a trusted resource to help your company succeed in hitting the goals of your RFP and beyond.

Submit your RFP to inquiry@agforcets.com.

 

What’s Driving the Trucker Shortage?

The U.S. trucking industry is short of drivers—about 50,000 short, according to an October 2017 estimate from the American Trucking Associations (ATA). The developing driver drought is a critical issue that has captured the attention of the trucking world: In an annual survey conducted by the American Transportation Research Institute, driver shortage ranked first among industry concerns.

A number of factors are contributing to the shortage, ranging from economic trends to demographic and regulatory shifts to the rigors of the job:

  • Freight volumes are on the rise, thanks to healthy commerce and a strengthening economy.
  • The average driver age for commercial truck drivers in the U.S. is 55, and 25 percent of current drivers near retirement age.
  • The trucking industry is having trouble attracting younger people to the profession. One issue is that prospective drivers must be 21 years old to hold an interstate commercial driver’s license. That typically means three years after high school, by which point many potential candidates have pursued jobs in other sectors.
  • A range of federal regulations—most recently the Elog mandate put in place in April—require truckers to track the time they work, which can impact productivity, and thus pay.
  • The long hours and requirements of the job can limit its appeal. Most drivers—especially newer ones—are on the road for extended periods of time, returning home only a few times a month. Adapting to life on the road (showering at rest stops, limited dietary choices, safety issues, and more) can make the job less appealing to some.
  • Drivers must pass a DOT (Department of Transportation) physical at least every two years. Some with specific health issues must do this annually. A lot of times the driver must pay for the physical out of their own pocket.
  • Sleep apnea and diabetes can disqualify a driver if certain criteria are not met.
  • Carriers cannot find drivers that can pass the required drug test at hire and then randomly throughout their employment.

The ATA estimates that because of industry growth and retirements, the trucking sector will need to recruit nearly 100,000 new drivers every year to keep up with the demand for drivers. The shortage is particularly acute in the long-haul, over-the-road truckload segment.

There are steps the trucking industry can take to help address the need for drivers:

  • Try to expand the demographic. For example, women currently make up only 6 percent of the truck drivers. Some observers see veterans seeking career transition after military service as another good potential source of prospective truckers.
  • Continue to boost driver wages. The national median for truck driver pay is $53,000, which represents a $7,000 increase from the previous year. For private fleet drivers, the pay increase is up $13,000.
  • Decrease time on the road. Trucking companies can address lifestyle issues of the profession by offering route options that are closer to drivers’ homes, reducing the long-haul lifestyle aspects of the job.

The truck driver shortage affects the entire economy and could have a significant impact on supplier costs and shipping delays. Agforce Transport Services monitors and tracks trucking industry developments like the driver shortage to provide informed consultation to customers.

Agforce specializes in customized transportation solutions for our customers’ specific business requirements. To learn more about how we can help address your company’s needs, contact us today for a free consultation. Give us a call at 844-713-6723 or email us at inquiry@agforcets.com.

Rail Price Spike: What You Need to Know

A capacity crunch in rail shipping is occurring earlier in the year than anticipated has the industry bolstering for substantial and sustained price hikes. Shippers should be aware of this trend. Rail prices are expected to continue to rise over the course of the year.

Market observers are pointing to fully booked rail lines on freight routes out of Southern California as an anomaly that indicates the trend, since the current level of demand typically doesn’t take hold until later in the year. Experts are anticipating unprecedented pricing peaks in rail prices in late summer and into the fall as many factors push more freight to railroads, including overall strong economic growth, a shortage of truck capacity, rising diesel prices, and reduced driver productivity attributed to the electronic logging device (Elog) mandate.

These factors, along with the capacity availability and reliability of intermodal shipping, are shifting the market:

  • Total domestic intermodal traffic expanded 7.4 percent year-over-year in the first quarter of 2018 (the strongest gain since the second quarter of 2014), according to the Intermodal Association of North America, as shippers that could not find truckload capacity turned to the rails.
  • The four-week moving average on U.S. intermodal is up 7.9 percent, according to the Association of American Railroads.
  • The Cass Intermodal Price Index rose 6.6 percent year over year in April to 141.9, close to the all-time record of 143.2 established the month before. The three-month moving average is up 5.9 percent.

With capacity so tight, shippers will need to be more proactive and flexible than ever, and look to lock up capacity as soon as it is available—especially smaller shippers that don’t have predictable volume and weren’t able to lock in capacity contracts earlier on. Those shippers will need to rely on the spot market to find capacity at a time when prices are at record highs.

All of that means shippers are likely to face a difficult year of negotiations and decisions. And in unpredictable markets like the current one, experienced partners and advisors are more important than ever. Agforce Transport Services monitors shipping markets closely and advises our customers how best to navigate the volatility that typically characterizes the market. We can help shippers navigate market fluctuations and better manage rate volatility by leveraging a wide variety of carriers.

Agforce specializes in customized transportation solutions for our customer’s specific business needs. To learn more, contact Agforce today for a free consultation. Give us a call at 844-713-6723 or email us at inquiry@agforcets.com.