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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.

 

LTL Rate Increases and Market Saturation

High demand and favorable market conditions mean most LTL carriers find themselves firmly in the driver’s seat when it comes to pricing and choice of freight as we enter the second half of 2018. Peak shipping season occurs during the third and fourth quarters along with contract negotiation between many shippers and carriers. With LTL companies already operating at full capacity and the undeniable impact of freight rates on profitability for most companies, shippers will be better prepared for what’s ahead when you understand the why behind the current state of the LTL market.

  • LTL Capacity
    While the economy is certainly a catalyst of LTL demand, there are other contributing factors. Tight LTL capacity also stems from the changing retail landscape (brick-and-mortar to ecommerce), spillover from full truckload demand, available equipment, and competition for available drivers.
  • Retail
    The “middle mile” of ecommerce shipments are often handled by LTL carriers. With a 16 percent growth in online retail purchases in 2017, and little sign of slow-down in 2018, ecommerce will continue to impact LTL capacity. Some carriers have adjusted operations by adding hubs and service centers to accommodate the industry, including their more rigid on-time delivery expectations.
  • Truckload Demand Spillover
    The overly saturated truckload market has some shippers looking to LTL carriers. That being said, heavy partial truckload shipments are not always ideal in LTL carrier operations. This has many carriers weeding out the freight that does not complement their network.
  • Available Equipment
    According to an article from Supply Chain 24/7, LTL carriers have not added much equipment to their fleets in the past few years. They speculate, however, that even a surge in available trucks would not have much impact due to the driver shortage.
  • Available Drivers
    Several growth sectors, including construction and manufacturing, share a workforce with LTL carriers. Competition within other industries that may offer more lucrative opportunity is a challenge for LTL carriers. The driver shortage of the truckload sector has not yet had a large impact on LTL.

Unexpected Consequences of High Demand

The benefit of high demand for LTL carriers is revenue growth — which is up 10% or more through volume or yield gains. It is not all roses though. There are challenges for carriers operating over capacity, and shippers are likely to feel it.

Carriers are maximizing profits, in part by weeding out freight that is less profitable — not a good fit for their network or operations. They are using pricing initiatives that make the shipments costly and ultimately leave shippers disinclined to tender freight that carriers find unattractive.

The freight that is moving through the overly saturated LTL operations may experience inconsistent service levels. Some terminals are already running weeks behind. The holiday surge will likely bring more missed pickups and transit delays for shippers. Without enough employees or equipment to handle such high shipment volume, some carriers have embargoed their guaranteed transit services. YRC Worldwide has suspended reimbursement of their Time-Critical service due to their struggle to keep up with demand. A note on their website indicates they may reinstate the practice, but are still facing difficulties, “We are currently working on a re-launch of our time critical services. While our service is improving, we continue to face industry challenges including peak shipping volumes, driver shortages and capacity constraints.”

Summary

With carriers’ eyes on profits and high demand in the market, freight shipping rates are likely to continue increasing during shipper-carrier contract negotiation the remainder of the year. Prices will go up, but do not expect service levels to do the same. Most LTL carriers are not operationally equipped to handle this surge in demand. Shippers will need to prepare for inconsistent transit days and allow time in their supply chain for things like missed pickups and late shipments.

Together, we can simplify logistics. Contact us today for a free consultation. Give us a call at 844.713.6723 or email us at inquiry@agforcets.com.