30 May Shippers: Do You Really Need an RFP?
The RFP (request for proposal) process is a time-consuming task with a questionable ROI. Yet, it’s something a lot of shippers feel is a necessity and, as a result, routinely do every year to try and improve their rate and service agreements with carriers.
But are RFPs necessary, and do they actually save shippers money?
In many circumstances, the answer is yes on both counts. However, in other situations, RFPs can do more harm than good. Here’s how to make sure you get the most out of your RFPs if you choose that route.
The RFP Process
Shippers often use RFPs with good intentions and to protect themselves from rate hikes, capacity issues, and other market changes. This makes sense because a downside to not using RFPs is uncertainty regarding how a shipper’s current rates compare to market rates. Plus, lacking any rate agreements at all, a shipper subjects itself to the volatility of the spot-rate market with no ability to accurately budget or control shipping costs.
But these upsides of RFPs are not easily achieved. Let’s take a look at some of the reasons that RFPs fail to provide shippers the best result that locks in the best rates and services agreements with carrier partners.
Garbage In, Garbage Out
Many times, key information is missing from an RFP that dooms it from the start. This is especially true for shippers going out to market with an RFP for the first time. To receive the best rates and overall solution in response to an RFP, a shipper needs to be able to supply the carrier with all of the information necessary for the carrier to craft a proposal that best serves the shipper’s needs.
The shipper also has to prepare the right questions to be answered by the carrier. Carriers differ greatly, so each one needs the ability to present its advantages in a way that is discernable from the RFP process. For new or inexperienced shippers, vital information could be left out of the RFP by not asking the right questions.
As a consequence, many important and unique details of what a carrier can offer are often missed during the RFP process, and the shipper never knows it.
The RFP process also does not usually provide an opportunity for the shipper and carrier to have a REAL conversation about what the shipper needs and wants. Most often, the carrier responds only to the questions asked and nothing else. Carriers anticipate they’ll be evaluated solely on rates, so this is understandable.
An open conversation allows the carrier to understand the shipper’s requirements and expectations. The opportunity then exists for the carrier to provide feedback and thoughts on more strategic components of the shipper’s logistics operation that can lead to an even better dialogue on efficiency and cost reduction.
Start Slow: Request for Information
One way to get better results from an RFP is to start with an RFI (request for information). Here, the shipper poses questions intended to gather information on the carrier’s experience, surcharges, routes, lanes, quality of delivery, etc. This can give the shipper a sense of the carrier’s business overall, and eliminate those that may not be able to service the shipper’s needs before rates are even discussed. This way the shipper can concentrate on getting the most out of the RFP, taking into account the points mentioned previously.
RFPs have their place in carrier sourcing and negotiation. But for them to be truly beneficial takes effort and careful planning. Opening the process to collaboration and mutually sharing as much information as possible is the most effective method of achieving the best results from the process for both shipper and carrier.