What is a request for proposal (RFP) in transportation?
A request for proposal (RFP) is the formal call for a carrier or logistics provider to design a solution to a shipper’s business needs once the shipper has chosen a select group to consider. When a shipper receives carriers’ completed proposals, it provides the opportunity to compare and contrast information on an equal level across all submissions. During the process, shippers narrow down the potential carriers to those who will best execute the work.
The traditional RFP remains an important tool shippers use to evaluate carriers, but it has evolved substantially.
- The use of bid portals and digital connections to exchange information has changed how bids are executed.
- Shippers are shifting to non-traditional timelines and implementing pricing methods like market index pricing to insulate them from market disruption.
- Sustainability goals like reducing emissions have been added to many shippers' requirements.
- After multiple years of disruptions, shippers are leaning on core carriers and purchasing across multiple transportation modes.
To get the most accurate and effective bid from carriers, it’s important to have a user-friendly and informative RFP. Thoroughly creating and detailing the RFP at the onset of the process will save shippers time once the proposals are returned for consideration. With clear expectations set up front, it will be easier to both eliminate carriers who do not meet the basic requirements of the RFP and spot the ones that are indeed viable candidates.
Below are key steps and concepts to keep in mind when compiling a two-part transportation RFP.
Before compiling the necessary questions and statistics to create an RFP, make sure the following decisions are made in advance. These components will affect the final proposal and impact how a carrier crafts its response.
- Establish your RFP strategy and use optimization and visualization software to identify key objectives. Is your strategy to get the lowest current market cost? To develop density on your core carriers? To increase your drop trailer options?
- Determine the number of bid rounds.
- If packaging or bundling lanes, determine in advance how this will be evaluated in the bid process.
- Consider segmenting your lanes. Not all freight is equal (ex. store delivery vs. distribution center). If you have different expectations on subsets of lanes, you may need a different strategy for those lanes to meet your objectives.
- Decide the bid/price duration.
- Establish whether bid rates will be adjusted to value incumbency, minority status, sustainability objectives, operational performance, or a mix of other competing qualifiers easily analyzed within bid procurement tools.
- Utilize cloud-based software will allow your professional buyers to compare competing scenarios and further optimize your network through the procurement event.
Two formats are better than one
After these decisions have been made, it’s time to create the RFP
The RFP should ask for information that is both qualitative and quantitative. This two-part format allows a carrier to provide the most accurate and comprehensive overview of its capabilities.
This portion of an RFP allows carriers to report the details of their expertise and business, oftentimes in fill-in-the-blank or short-answer formats. When providing questions for carriers to answer, keep these guidelines in mind:
- Create clear, streamlined questions and avoid repetition.
- Include adequate space for respondents to provide context or add additional information to a numerical answer — numbers don’t always tell a complete story.
- Format the RFP so requested scores and data are provided accurately — outdated formats may inhibit correct reporting of data (e.g., CSA, SVI-CTPAT, SmartWay).
- Limit financial questions, as most carriers are unable to answer them due to privacy restrictions.
For the quantitative portion of the RFP, it’s important to provide as many details about your transportation needs as possible. The more the carrier knows, the more accurate the proposed solution will be. Additionally, more upfront information will help the carrier determine whether the potential business will be the correct fit, mitigating the risk of awarding the business to the wrong carrier.
When assembling the quantitative component of an RFP - the devil is in the details
The effectiveness of an RFP comes down to the details. To award a carrier the business, a shipper needs to see a clear and accurate picture of the carrier’s capabilities. A great fit goes beyond the price of the quote. A carrier’s expertise in the industry, portfolio of services, cultural fit, network and use of technology are just a few components to help shippers make the right choice.
- Provide details regarding origin-destination (O-D) pairings.
- ZIP/Postal codes.
- Freight volume between destination points on each lane, broken out by month or week. This is key as suppliers are matching your network to their broader flows and finding the right match to service your freight.
- Include detailed freight characteristics (e.g., drop and hook).
- Describe seasonality / variability.
- List required accessorials (e.g., top-off, trailer detention).
- Identify the shipper and the consignee.
- Include bid-to-implementation duration and objectives between the shipper and carrier.
- Be prepared to select 2–5 alternative carriers as a backup to the primary carrier. Consider utilizing dynamic pricing options in the routing guide.
- Create the RFP using cloud-based software to direct suppliers to a portal, aggregate responses and maintain files as carriers progress through the RFP.