Submitting a request for proposal (RFP) is an important part of finding the right transportation partner.
However, making mistakes when drafting your RFP can cost you time and money.
In this blog post, we’ll discuss some of the most common RFP mistakes and how to avoid them.
Have you ever been in a bidding contest before?
There are many similarities between an RFP and a reverse auction.
There’s an auctioneer.
There are buyers.
Only with an RFP the company acts as the auctioneer, and potential vendors are bidding to compete for potential projects they hope to win from the company.
The acronym RFP stands for request for proposal. It’s a document in the procurement process where you’re looking outside your organization at potential solutions to a particular issue you are experiencing.
In our industry that issue is typically high transportation costs, and you are responsible for finding options on how to reduce those costs.
You send out a request for carriers to provide price quotes, and the carrier can respond if they wish to complete the project.
This allows you to assess a companies’ capabilities and offer specific rates for your needs.
The RFP process is a great way to start getting input from potential partners about what you could do better in your organization when it comes to logistics and supply chain management.
Let’s get this out there right away – there is no standard process for transport bids, but there are certainly several things you should not do if you wish to find accurate and valuable responses from your potential partners.
Here are some of the most common mistakes made when writing an RFP.
What good is an objective if it’s based on inaccurate information?
If there are any discrepancies between what is happening at your company and what is represented in the RFP, it will only create more work for you down the road as you must explain these discrepancies to each individual carrier.
To have an effective RFP, it must be based on thoughtful and accurate data that is reviewed by people who understand your business.
Carriers are looking for shippers who have a clear understanding of their current shipping patterns, costs, and specific needs.
This allows the carriers to provide more accurate proposals that will address your specific needs.
When it comes to data you should:
Your RFP should include performance benchmarks for on-time pickups, on-time deliveries, claims rate, and accessorial charges.
If you do not have these benchmarks, how will you know if the carrier is performing to your expectations?
When transportation buyers issue an RFP, they generally have a good idea of what they are looking for in a transportation provider.
Transportation providers, on the other hand, sometimes do not have such a clear understanding. As a result, the proposals that transportation providers submit can be vague and unfocused.
To avoid this mistake, it is important that transportation providers take the time to understand the specific objectives of the RFP.
In 2021, capacity was an issue and being choosy about your partnerships wasn’t something offered up to most companies.
Many companies lived and died by the spot market.
The main objective was to ensure the number of missed shipments was as minimal as possible. Keeping costs low was simply a bonus.
Take the opportunity to optimize relationships with carriers to see you have the right partner when it comes to ensuring your quality score for OTIF and MABD remains in good standing, that the service you receive from the carrier is of good quality, and that you have a solid risk management strategy in place with your carrier.
When setting objectives for your transportation RFP, it is important to make sure they are clear and realistic.
Unclear objectives can lead to confusion and frustration for both transportation buyers and providers. Realistic objectives, on the other hand, will help to ensure the RFP process is successful.
Some things you’ll want to consider when setting objectives for your transportation RFP include:
It is important your objectives for the RFP align with your procurement strategy. Your transportation procurement strategy should be tailored to your company’s specific needs and goals. It is important to have measurable objectives so you can compare proposals and make an informed decision on which company to award the contract to.
Some objectives you may want to consider for your transportation RFP include:
When it comes to writing an RFP, clarity is key. You want to make sure you’re as clear as possible in your instructions and requirements, so there is no confusion on the part of the bidders. Be specific about what you’re looking for and be sure to include any deadlines or other important information.
Are you giving carriers enough information to set them up for success? You need to give the carrier all the relevant information to make a logical and accurate bid.
In your RFP communication you should be including:
The best place to start is on loser lanes. These are the lanes you are not profitable on and need to take a closer look at to see how you can improve your pricing.
You also want to consider putting out to bid any lanes where there has been a recent increase in spend or where rates have increased.
You may consider breaking your lanes out into two categories:
Consider the factors that will help you determine how often to put lanes out for bidding. These include your company’s contract terms, freight volumes, profitability goals, and the current market conditions.
You will also want to consider how often your rates change and if you are using the spot market for any of your lanes.
If you have a contract that is up for renewal, you will want to put the lane out for bid several months before the contract expires. This will give you enough time to review the bids and make an informed decision.
Negotiation is a vital part of business, and you should consider the needs, objectives, budget, and resources that will be available for this process.
You also need to ensure you have the buy-in of your key stakeholders from ground-zero. This includes getting the approval from the individuals who will be responsible for approving the final contract.
When you are negotiating with carriers, there are a few things you should keep in mind.
Start by looking at two different scenarios: one where nothing changes and one where there is the most amount of change possible. Look at what the cost would be for each scenario.
Build additional scenarios between those two extremes.
When you are reviewing bids from carriers, you will want to score and compare them based on a variety of factors that are important to your company.
Some of the criteria you may want to consider include:
Share the results of the scenarios with the key stakeholders. Ensure you receive feedback from them on what scenarios are realistic possibilities.
Question the way things are currently done and encourage taking risks.
The final decision should be something that can be done and that the people responsible for doing it approve of.
Spot market pricing is not only an option for cyclical drivers, but also a way to take advantage of capacity when it loosens and then becomes tight again. This is when there are more trucks than loads.
The spot market is a great option for shippers when:
When using the spot market, you need to take into consideration:
There are a few different ways you can find new carriers to add to your network.
One way is to attend trade shows and conferences. This is a great way to meet new carriers and learn about the services they offer.
Another way is to search online. There are several websites that list carriers and the services they offer.
You can also ask other shippers for recommendations. This is a great way to get first-hand information about carriers.
Finally, you can use a freight broker. A freight broker matches shippers with carriers. They can provide you with information about carriers that meet your specific shipping needs.
MVP Logistics is a full service 3PL supply chain management company focused on customer success through supply chain solutions made simple.
We ship freight – a lot of it.
Interested in speaking with our team about your freight shipping needs? Reach out to us today.
