Five Best Practices Before Beginning a Transportation RFP
Tags: Logistics, Supply Chain, Transportation
Conducting a Transportation Request for Proposal (RFP) can turn into an overwhelming and time consuming task. However, an organized and well-prepared RFP can yield a variety of benefits for your company. Here are five tips to consider before starting an RFP:
- Define Goals — This process will involve several different parties—and ensuring everyone is aligned on your objectives will help manage time, resources and expectations. Questions to ask your team include:
- How will success be measured?
- Is your business looking to add new carriers or reduce the number you currently have?
- What type of savings are you expecting?
- Timing — Timing is everything and carrier rates fluctuate by season. Sending out an RFP during the summer months may result in higher rates as the market is generally tighter than normal. It may be better to conduct the bid process during the winter months, when everyone is searching for freight, resulting in more aggressive pricing. Another time factor to consider is a go-live date in the first quarter. That timing will allow carriers to establish themselves on the lane before the busy summer season, and could result in more consistent rates and better service for your customers.
- Execution —
- First, establish a baseline metric for your RFP that addresses your stated goals. If the main goal is to reduce cost, what is your current cost and how is that calculated? Whether you use rate per mile, dollars per pound, freight as a % of sales or some other metric, you will need a valid way to quantify expected improvements as a result of your RFP.
- Second, will your baseline enable you to look back six months or one year from your go-live date and verify the expected improvements? Your future volume will not be exactly the same as the historical data you used to build the RFP. Being able to control for those changes and have valid metrics that allow you to make meaningful comparisons year over year will be key to showing a return on investment.
- Third, determine which lanes are truly up for bid. Identify and separate the lanes that must be serviced by your asset partners from those that are open to brokers. If your brokers return attractive rates on lanes that require asset service, it may skew your results and distract your brokers from getting competitive on the lanes they can actually service.
- Gather Necessary Data — The better your data, the more successful your RFP process will be. In addition to lane detail, expected volume and required equipment, there are other pieces of information that should be considered. Facility profiles that include the number of dock doors, shipping/receiving hours and delivery appointment requirements will help the service provider deliver an accurate evaluation of each lane.
- The invite list — Selecting which carriers will participate in your RFP is one of the most important decisions to make. Do not take this step lightly as your reputation as a reliable vendor is at stake. Consider the following factors when choosing carriers:
- How well do the carriers understand your supply chain and your pain points?
- Is the carrier flexible and able to handle special requests?
- What is the carrier’s safety record and how well do they maintain their equipment?
- Does the carrier have the technology to provide real-time updates on shipment status, and support EDI where necessary?
Following the above steps may initially increase the time it takes to successfully complete a Transportation RFP process, but in the end it will lead to more qualified responses and increase your chances of receiving the best proposals for the project.