7 tips for a better transportation RFP process and bidding strategy

A request for proposal (RFP) is a necessary aspect of finding a transportation provider that can ensure freight is moved safely, efficiently and cost-effectively. However, it’s no secret that transportation RFPs take a lot of time to compile and review. This results in procurement team burnout and the inability to focus on other core areas of the business, such as conducting network studies or focusing on sustainability initiatives.

Here are seven tips to keep in mind as you prepare to request freight bids and assess the results—and minimize the pain traditionally associated with the RFP process.

Issuing an RFP shouldn’t be considered the only time a shipper is actively conversing with transportation providers to discuss network optimizations. Ideally, shippers and transportation providers should be working together all year to identify places in the network that can be improved and implement solutions. At a minimum, shippers and transportation providers should assess their current networks 90 days ahead of any RFP and determine what fits best because networks aren’t static. A change within either network can impact where a shipper and transportation provider fit best together, and being aware of that on a more regular basis can mitigate service issues and allow for timely, flexible optimizations.

It’s one thing to have a transportation provider, but it’s another thing to have a collaborative one. A collaborative relationship will help shippers identify ways they can actualize additional cost savings, such as looking beyond lane-level origin-destination pairings. If a driver can go into a location with a load and leave with another, that provides balance for the transportation provider, and the resulting savings gets passed along to the shipper as a package. Financials aside, shippers benefit because there aren’t excess transportation providers in the yard for pickups and drop-offs, while transportation providers benefit because there aren’t any empty miles being driven.

Accessorials can be a sticking point during RFP negotiations. These charges are based on inefficiency and occur outside of what is expected as part of the pickup and/or delivery process. If a shipper says they want the transportation provider to remove accessorials or that the provider should use their own program, the shipper may lose visibility as to where they have specific issues within their network without saving any money. Why? A transportation provider will likely opt to increase the line haul rates to account for potential accessorial charges. As a result, the shipper loses awareness of where they operationally have issues, and instead of finding and fixing the problem, it’s simply masked by higher rates on every load. An accessorial deal will result in a lower line haul rate and provide insight on targeted areas that need improvement.

RFPs can be a time-consuming process, so finding ways to adjust pricing to meet current market conditions without issuing an RFP saves time and resources. If a shipper and transportation provider can collaborate and agree on parameters such as the lane mix, price point, rate index and timing (e.g., semi-annually, annually), prices can be automatically adjusted based on the market conditions without involvement from the procurement team. Shippers can put a price floor or ceiling on the index pricing, and everything can be negotiated through the original RFP process before it’s officially put into effect for the agreed-upon duration. This is especially helpful for shippers who are in the cycle of conducting RFPs every six months. In these cases, by the time one is finished, the next is starting. Having an automatic adjustment process in place can likely eliminate multiple RFPs in one year. In addition, you can make these deals flexible by adding or removing a certain percentage of volume to accommodate network changes for either party.

There are a lot of benefits to incumbency, but shifts in the supply chain or the industry could lead to more effective options for a shipper’s business. Admittedly, there’s a lot of cost in change, such as the learning curve of acclimating new drivers to all new lanes and acquiring the necessary equipment, so electing to start fresh with a new transportation provider is a decision that shouldn’t be made lightly.

Conversely, staying with an incumbent transportation provider because it’s what’s comfortable may not be doing a shipper’s business any favors, either. Be strategic about when and why you’re switching transportation providers. If you switch too early, you’ll likely become inefficient because what you save in a rate you may lose in setup time and efficient execution. If you don’t switch at all, you may be missing out on cost savings and a nimbler network.

To get the most accurate quote from a transportation provider—and the best service—make sure you accurately state the needs of the freight at the onset. Misrepresenting the number of loads per week can negatively affect a transportation provider’s business because it can cause a misallocation of resources and ineffectively moved loads.

It can also impact whether a shipper is viewed as a shipper of choice, which is a premier designation to have. Becoming a shipper of choice means you’ve gone above and beyond to make sure that transportation providers can do their jobs well. For example, providing driver amenities, on-time payment, open pickup and delivery times, pre-loaded containers and drop-and-hook freight, among other things, are all ways that transportation providers assess and rate shipper locations. In turn, favorable locations mean transportation providers are much more apt to provide capacity for your loads. Combined, it’s a win-win for everyone.

The transportation bidding and RFP process remained relatively static over the years, but recent evolutions and revised practices have shifted how a shipper should approach the process. Here are five more facets to consider while preparing your proposal.

• Use the core transportation provider concept. Instead of relying on freight brokers and a lot of small transportation providers, use four or five big asset-based transportation providers that also have a brokerage that can support a network across the supply chain. Routinely turning to brokerage stretches procurement and operations teams since they’re constantly trying to get freight moved. Additionally, this tactic results in a lack of overall collaboration and optimization because the attention is on getting loads booked instead of focusing on improving the business. Transactional shippers lose time and money, whereas strategic shippers that stick to a core transportation provider group are more successful in network optimizations and overall service.
• Don’t shift RFP parameters mid-process. Implementing a moving target is an example of what not to do. When RFP parameters are set, transportation providers respond and provide their quotes with those guidelines in mind. Extending deadlines, increasing the number of rounds or changing freight requirements, among other things, reflects poorly on a shipper and makes transportation providers more apt to not trust the process and hedge against potential

• Don’t chase the market. RFPs used to occur on an annual basis, and now the process is becoming an every-six-month endeavor. The uptick in frequency means that there is never a break from this task and procurement teams are always focused on managing round after round of RFPs. Strategic shippers will stay consistent with RFP intervals regardless of how the market is faring. Transactional shippers who follow the market cycle may get a low rate in a down cycle, but as soon as the market turns, they’ll end up paying more because they’ll need to rely on the spot market to secure capacity.

• Invest in bid software for easy execution. The industry is no longer in a spreadsheet world. The use of bid software and digital connections to exchange information has changed how bids are received and executed. Technology is now an integral piece to the transportation puzzle for a seamless exchange of information.
• Shine a light on sustainability. Sustainability goals, such as reducing emissions, have been added to many shippers’ requirements when reviewing and selecting a transportation provider. Shippers may want to start integrating this requirement into their RFPs as a way to find eco-conscious transportation providers who are forging green paths within the industry.

There’s more to the RFP process than meets the eye, and the key to success is being strategic across multiple aspects of the transportation process. Reviewing RFP and bid submissions carefully, finding ways to optimize the network and keeping a pulse on trending developments will help shippers be more strategic—and efficient—when it comes to managing their freight needs. The result is a less painful RFP process and a more optimized and flexible network—making it worth the while to take a more holistic, collaborative and strategic approach from start to finish.

Learn how to optimize your RFP process and choose the right transportation provider for you.