Almost all Transportation Managers will agree that a well executed Freight RFP is both time consuming and analytically challenging. With everyone’s resources stretched to the max, freight tenders are often delayed, or not completed at all. So when you do bite the bullet and invest in an RFP project, it pays to make sure you are getting the best result possible.
Based our experience with conducting numerous carrier sourcing engagements, we have discovered 5 key tactics that will ensure your next Carrier RFP generates the best results possible.
1. Sell Your Freight
It is often difficult for new carriers to compete with incumbents. Your current carrier understands your freight well, and what it costs them to move it. Without this information, new carriers will often include a “risk premium” in their price to ensure that they do not end up with “bad freight”. 
Your objective is to reduce the risk premium by providing as much information as possible about your requirements, your operations and the products you are shipping. In essence you are “selling” your freight to the carriers. Of course, this information needs to be accurate and complete. Misleading carriers only ends up bad outcomes for everyone involved.
A comprehensive, accurate and informative bid-package, combined with carrier information sessions will work well to reduce the “risk premium”.
2. Time
Give your carriers the right amount of time to respond. Without enough time to analyse your requirements and consider the fit with their network, you will get a response – but it won’t be their best response. We recommend 3-4 weeks depending on the time of year. The reality is that your bid-package will stay on someone’s desk for the first week. Pricing will likely have it in their queue for another week, so you won’t really get any mind-share until week 3-4.
If a carrier feels pressured to respond, you likely won’t get their best proposal.
3. Standardize Your Accessorial Program
The variety and complexity of accessorial programs make evaluating bid responses complex, not to mention the difficulty you will have auditing the invoices when they come. A common way to address this is to create a standardized accessorial program with one uniform set of charges that will apply to all carriers. If you develop and present a fair program to carriers, there may be no adjustment needed in their base rates, and you will have greatly simplified your evaluation and auditing processes.
A standardized accessorial program will make it much easier to compare carrier rates, and audit invoices once you implement any new contracts.
4. Fully Analyse Your Rate Proposals
Due to the difficultly in aggregating and analysing multiple carrier proposals, many shippers will just look at the key lanes and weight breaks that generate the bulk of their business. The problem is that carriers know this. As a result a common strategy is to offer aggressive discounts on major lanes, while keeping rates to less common destinations, or in less frequently used weight breaks higher. Depending on your shipping profile, you may end up paying a lot more, even though you have lowered rates in your major lanes.
Re-rate a large sample of historical shipments against each carrier proposal to fully understand which carrier is the most cost competitive on an overall basis.
5. Benchmark Your Results
The funny thing about RFP’s is that 6 months after they have been completed it is hard to know if you actually saved any money! Freight patterns change from period to period, so just looking at the expense line in your P&L can be very misleading. If shipping volumes go up, well so will your freight costs – which doesn’t mean that you didn’t save money (even though you spent more).
Further, volumes could stay the same, but shipping mix may change. Smaller orders to destinations further away will increase costs on a $/lb basis. Again, it is possible that you saved money, even though your freight spend is increasing.
It is also possible that your new carrier that offered great rates is also assessing every accessorial charge possible, while your old carrier often let these slide.
The only way to really assess your results is to “shadow rate” your current shipments using your old rates. This will tell you with certainty what you would have paid before and accurately quantify the savings you have generated.
About Nulogx
Nulogx has significant experience in designing and executing carrier sourcing projects. With sophisticated bid management tools, rating engines and good-old negotiating smarts, we are well positioned to enable you to execute an RFP quickly, with optimal results.
We will enable you to start saving more money … sooner … without impacting customer service.
Click here to find out more information on our Strategic Transportation Sourcing service.
Results published today by the Canadian General Freight Index (CGFI) indicate that the cost of ground transportation for Canadian Shippers remained essentially the same in February when compared to January, while Fuel Surcharges assessed by carriers rose significantly during the same period.
Results published today by the Canadian General Freight Index (CGFI) indicate that the cost of ground transportation for Canadian Shippers dropped for the fourth consecutive month in December, while Fuel Surcharges assessed by carriers rose to the highest level in over 2 years.
Results published today by the Canadian General Freight Index (CGFI) indicate that the cost of ground transportation for Canadian Shippers dropped for the third consecutive month in December, while Fuel Surcharges assessed by carriers continued to rise.
Nulogx Inc. today announced that it has joined the SmartWay Transport Partnership, an innovative collaboration between U.S. Environmental Protection Agency (EPA) and industry designed to significantly reduce greenhouse gases and air pollution.