There are three letters that most logistics and transportation professionals dread: “RFP.” However, new software solutions that provide clean, accurate freight data are a huge step forward in making the carrier RFP process more efficient and effective.
Surviving the RFP Process
Most companies perform an annual or biannual Request for Proposal process with their carriers. This long and arduous process can take up to six months to complete. The process typically starts with gathering data from their freight payment provider or system. Then the user must clean the data to remove all the non-standard shipments, balance due bills or incorrect data. All this data is placed in a spreadsheet and sent to the carriers with a cover letter outlining the shipper’s timelines and service requirements.
Once the shipper receives the proposals from the carriers, they must manually compare each carrier’s rate to determine what they must do for the second round. After numerous emails, phone calls and face-to-face meetings with the carriers; the new rates are finally agreed upon. But it’s not over yet.
Now the second phase of the long and arduous process begins: loading the new rates into the TMS and publishing the new routing guide for their inbound vendors. After all of this is completed, the rest of the year is spent working on the lanes that were missed during the RFP.
The Risks of Poorly Prepared RFPs
For both shippers and carriers, there are numerous pain points involved in the RFP process. For the shippers, the most notable is the incredible amount of manual work they have to do to gather data, analyze proposals, load the final results and perform the post-bid support. For the carriers, it’s having to guess on what they are bidding due to the lack of transparency from the shipper. The carrier knows that the data is only an incomplete, abridged version of what actually happens during the year. These scenarios present significant financial implications for both parties.
In college, one of my electrical engineering professors used to say, “Two things can happen when a mistake is made: 1) People die; 2) Money is lost.” Luckily, we’re in the business where only money is lost, and that’s exactly what happens when the bid packages are prepared poorly. When RFPs are built on incorrect or incomplete data, there are three scenarios: Either the shipper is losing money, the carrier is losing money, or in some cases, they are both losing money. It’s the definition of a “lose-lose” situation.
The Benefits of Using Big Data to Improve the RFP Process
With the data available today and the software tools that exist in the market, outdated manual RFP processes are no longer needed. I’ve seen some systems that can provide full transparency to the carrier. This means that the bid package contains the exact lanes that they can service, along with a targeted price to win that lane. The benefits of clean, actionable freight data are many – and they can dramatically improve the financial and strategic performance of your logistics. Here are three of the most important benefits.
Transparency. Because both parties (the shipper and carrier) have accurate and real-time shipping and freight data, bids can reflect the actual costs for each party. This results in “win-win” situations where carriers take the freight that’s the most profitable for them while offering the best possible rates.
Meeting higher expectations. Data has changed both the shipper’s and the carrier’s expectations. Both expect that their data and RFPs should be more accurate. Shippers are realizing that leveraging a clean, standardized and normalized dataset in an automated fashion will allow them to be more accurate in their forecasting. Carriers are leveraging the data to be more efficient and optimize their loads, so they can maximize their profits while delivering the services that the shipper needs.
Revealing the hidden costs of freight. Access to more and better data in real time means shippers are now able to see the true cost of freight by accounting for the expense and opportunity costs associated with the integration to their carriers and data quality. While the freight cost may be slightly higher with a given carrier, if this carrier is able to integrate with the shipper and automate the tender process, the track and trace information and the settlement process, the shipper will be wise to choose them over a lower (freight) cost provider. In this example, the true cost is actually lower from the “higher priced” carrier.