Best Practices to Drive More Productive LTL RFP Negotiations
Authored by SMC³ on May 13, 2021
Four Steps to Help Drive Success
Over the last year, the pandemic has changed many aspects of the transportation sector in unexpected ways. From the sharp increase in e-commerce activity, to changes in the amount of freight moving through specific shipping lanes, driver shortages and the resulting capacity crunch, it’s no surprise many carriers and shippers are seeking to redefine the terms of their partnerships to account for this “new normal.”
Yet, conducting a new transportation request for proposal (RFP) — or putting together a proposal, in the carrier’s case — can quickly begin to feel like an overwhelming experience. As a part of the SMC³ LTL203: LTL Carrier Pricing and Costing course, Ryan Poynter, SVP of LTL carrier relations and pricing at GlobalTranz, John Kruzan, director of client success at SMC³, and Dave Woodwyk, VP of pricing and yield management at USF Holland, joined students for a closer look at how both carriers and shippers can work together to drive more productive and efficient RFP processes.
Here are four best practices recommended to achieve a more seamless, successful RFP process.
1. Define long-term goals and consider underlying objectives — All too often, the conversation quickly turns to price, Poynter says.
“I always try to steer RFPs away from price,” he says. “Shippers will say they want to save 10 percent—but why is that? Once we look a little deeper, we might be able to figure out what problem they are actually trying to solve and help them create synergies to get there.”
Defining a shipper’s goals can take several different forms. For starters, it’s important to think about how success will be measured going forward. Is the shipper looking to increase or reduce the number of carriers they currently use? Also, be sure to address any other pain points present in the shipper’s current LTL strategy. It’s important for carriers to know these goals up front, so they can better assess their ability to meet a shipper’s expectations for timely delivery, frequency, and any other delivery challenges they may encounter along the way. And from the shipper’s perspective, clear decision criteria and end goals can help cut down the number of proposals from carriers that are not well equipped to handle their shipping needs long term.
2. Collect ALL of the data — It may sound overly simple, but the more data shippers can provide in the RFP, the more successful the RFP process will be. According to Woodwyk, historical data from at least one year of shipping activity is a foundational piece of the RFP process that can help carriers gain a big-picture view at what resources they would need to allocate to the business.
“Shipment level data is a key component,” he says. “Most industries have some degree of seasonality to them and by seeing a year’s worth of data, we can begin to identify all the dips and peaks in a carrier’s volume.”
Beyond assessing how much and how often, carriers also need to confirm that the dimensions, freight classifications, weights, origins, destinations and handling requirements provided in the RFP represent an accurate portrayal of a shipper’s shipping story.
For this reason, creating summaries of key freight data points for fear of overwhelming a carrier is the wrong approach to take when pulling together an RFP. The more data carriers have to work with, the more likely they are able to provide an accurate estimate of cost and price on the first attempt. Even photo submissions of products on pallets can help a carrier more accurately decide how much space on their trucks they would need to allocate to your business. Without this information, carriers are forced to make educated guesses. Often, these educated guesses will lead to renegotiations and general rate increases (GRIs) later to bring prices back in line with true carrier costs.
3. Transparency, transparency, transparency — Over time, situations change and shipping needs change. That’s why it’s important to lay the foundation for a transparent partnership throughout the RFP process. By being upfront and transparent about goals and historical shipping data, shippers can help their carriers deliver a better experience to their end customers. They can also foster long-term partnerships that will continue to meet the needs of both parties over time.
“Transparency is really the key to helping both [shippers and carriers] meet their goals simultaneously,” Kruzan says. “It introduces valuable efficiencies and empowers carriers to become real partners in a shipper’s business.”
4. Automated RFP tools — Of course, even when each of the above requirements have been met, the RFP process can still create plenty of challenges—stemming from the time required to pull together an RFP, consider proposals and work with carriers to make sure they have the data they need. Fortunately, that’s where technology can help. Bidding tools like SMC³’s Bid$ense® solution deliver valuable automation and price negotiation capabilities to help streamline the RFP process and help carriers and shippers manage all of their bids from one portal.
As a result, shippers can source from a wider array of potential carriers, while reducing time spent on considering proposals. And for carriers, it standardizes the data capture process, so they can create informed proposals that meet both their needs and the needs of their shipper partners right from the start.
Want to learn more about the technology at the center of RFP innovation? Learn more about SMC³’s Bid$ense tool and how it can help facilitate more efficient sourcing and pricing negotiations.
The 2021 SMC³ Online Education Hybrid Schedule has been released! View the full 2021 LTL online education hybrid schedule here.