Market volatility from the ongoing labor shortage on top of increasing consumer demand, rising fuel prices, and port and terminal congestion will continue to challenge supply chains through 2022 and beyond. Given these disruptions, supply chain resiliency will be a critical factor in ensuring the success of your network.
The past two years of volatility have many logistics leaders evolving from an annual Request for Proposal or freight (RFP) event to quarterly or more frequently to accommodate the changing supply chain landscape.
Developing and using a solid freight RFP process will help increase service levels, create stronger vendor partnerships and drive supply chain resiliency despite market swings. A well-constructed RFP provides enough information for the provider to develop a custom, innovative response and outline how they are uniquely qualified and prepared to serve your needs.
As you create your freight RFPs for the coming months, here are 10 components that will help you successfully evaluate partners who can contribute to your success.
10 Freight RFP Components for Success
- Company background. Introduce your company and your unique shipping needs. Provide enough background to help providers understand your products and supply chain.
- Objectives and goals. Define your business needs, requirements and operating models. Providers will be better able to tailor their proposals to support your goals.
- Terms for submission. Do your shipments require specific licenses, technology or service capabilities and requirements? Specify any high-value or niche insurance requirements.
- Pre qualification questions. Ask foundational questions to help you understand a provider’s business capabilities, how they will meet your requirements and their scalability as your company grows. Include questions about their business history, coverage area, network size, and any relevant certifications. Also, ask for payment and billing terms, deadlines and length of commitments. If you’re looking for information on a standardized service – say, truckloads between two major hubs – you can use a less complex standalone request for quotation (RFQ).
- Use data to drive the RFP. Even if you’re working with familiar partners, provide detailed lane data, including origin and destination zip code info, freight volume and frequency, commodity types, cargo values, special equipment and delivery requirements, terms and conditions and facility profiles. A strong provider will leverage this data to analyze your supply chain to identify network optimizations, consolidation opportunities and create custom solutions for your unique business.
- KPIs. Be clear about how you will measure success. Tracking transportation metrics provides context for understanding and implementing transportation best practices to support continuous improvement in the relationship. Common KPIs in a carrier relationship include on-time performance, least-cost carrier compliance and cost per lb./mile. Creating a data-driven relationship will help you manage your supply chain providers for performance and accountability.
- Provider capabilities and supporting teams. Ask providers to include information on how many people and who will be assigned to your business. What capabilities does the provider have? Are they asset-light or asset-based? Are they full-service? Do they have technology or consulting capabilities?
- Define evaluation criteria and timeline. While cost is important, consider other factors that create overall cost savings and efficiencies. Include technology, managed transportation capabilities, reliable capacity, and value-added services. Cyber security is becoming a more critical factor in these relationships.
- Capacity strategy. Be clear about the goal of the RFP. Identify primary and secondary lanes to target as well as seasonality and frequency of shipments. Work with providers to identify cost-efficient lanes. for their network and account for the rate situation when there may not be a good match. Consider providers with a diverse mix of carrier size and coverage. You may find untapped capacity with regional and niche carriers.
- Bid implementation and rollout. Ask what the implementation and rollout process will be. Ask the provider to identify specifically who will be involved, such as any sales rep participation. Outline the schedule of onboarding calls and the mechanism for evaluation and performance tracking. Also, request the ratio of committed lanes vs. uncovered lanes.
Market volatility will continue to challenge supply chain planning for the foreseeable future. With a transparent, equitable and dynamic freight RFP process, shippers can improve their relationships and secure the capacity that is critical to their performance.
Growing complexity in the supply chain demands innovative and consultative approaches to logistics management. To learn more about custom solutions for your supply chain, request a consult.