It’s RFP Season in the North American Freight Transportation Industry
The current downturn in the freight industry has encouraged many shippers to place their freight transportation out for bid. In 2007 large numbers of shippers view the RFP as an opportunity to offset the rate increases experienced in recent years. As a consultant who works with shippers, carriers and 3PL’s, I find myself in the unique position of preparing and issuing RFP’s on behalf of some clients and responding to RFP’s on behalf of other clients.
RFP’s have become so prevalent in 2007 that they are literally “swamping” some carrier pricing departments. In speaking with a mid size 3PL this past week, I was informed that they have received over 30 RFP’s so far this year. Their pricing department is so busy responding to these bids that they now have to turn down some of them to keep up with the demand.
Here are a few thoughts on issuing and responding to freight RFP’s.
• Make sure you have a mandate from senior management to implement the results of your RFP so you don’t waste your time and the time of your carriers.
• Make sure that you can come up with a year of clean, quality data with each your commodities and shipment weights clearly identified.
• Make sure that you have accurate baseline freight spend data for each of your cost components ---- freight rates, fuel, accessorial charges.
• Determine the objectives from your freight bid up front and make sure you don’t just focus on price.
• Leverage your volumes with your short listed carriers over multiple rounds to achieve the best results for your company.
• Take your time and do it right.
• Give your carriers adequate time to respond. In view of the number of RFP’s in the market today, carriers will need three weeks of more to prepare a quality bid
• Sign multi year contracts to achieve rate stability.
• Meet with the carriers’ senior operations personnel to ensure a successful implementation.
• Drill down and probe on the carriers’ capacity on various lanes.
• Establish metrics with your carriers.
• Track compliance on a consistent basis.
• Even if you are the incumbent carrier, don’t assume that your company is in the driver’s seat.
• Develop your “boilerplate” bid packages in advance with your company’s differentiating features clearly articulated.
• Focus on those bids and on those lanes that work best for your company.
• Since there is no guarantee that you will secure the lanes of most interest to your company, don’t forget to focus on those secondary lanes that could be of benefit.
• Make sure your costing model is up to date.
• Be creative.
• Check the math.
• Be prepared for multiple rounds of bidding.
• Be honest with the shipper about which lanes your company is able to handle effectively. There is no point losing a block of good business because your company fell down on a few lanes where you cannot supply the equipment on a consistent basis.
• Submit your bid on time.
• In addition to your sales and pricing team, make sure you have a strong implementation team that can move the freight if you are awarded a block of lanes.
In addition to the items specified above,
• Assemble a team of core carriers that you can count on to move your customers’ freight in a reliable manner.
• Select carriers that are best able to meet the specific needs of each shipper.
• Pay your carriers in a very timely fashion to build loyalty and dependability.
• Negotiate aggressively with your carriers
• Since you are in a position to hand pick your carriers for each customer, articulate to the shipper your value added proposition and how your company differentiates itself from asset based companies.
These are interesting and challenging times. Shippers and carriers can each achieve their objectives by following this list of principles.