Shippers will be sending out RFPs to a much larger carrier list than years past
Different year, same dance.
Over the past few months shippers have been sending out RFPs trying to secure pricing and determine their shipping costs for the next cycle. Because capacity is so tight, shippers will be extra liberal with their carrier selection and will be sending out invitations to a much larger group of carriers versus years past.
Transportation companies that have assets and can provide capacity on a consistent basis have an enormous advantage in the RFP process over fleets that can not. Plus, dropped trailers are going for a huge premium as live-load freight becomes fugly for most drivers to want to deal with (due to ELDs and HOS).
Some of the largest enterprise fleets have the internal resources to handle the large influx of bids from the market. Most fleets do not. Nor should they.
Now is not the time to go mad and participating in every freight bid, nor is it a time to be shy either. Shippers will be hungry to talk to new carriers, hoping to mitigate some of the upward pressure on rates they are seeing from their incumbents. This is your chance to get in the door of a new shipper that has freight you desire, a logo you want as a trophy, and a chance to increase your overall rates. Have that dream customer you have wanted to work with? Now is your chance.
If this were online dating, imagine your high-school crush has just moved back to town and you are both single and you match on Bumble. Yes- this is your shot.
Before you proceed, here are a couple of things to consider.
Many shippers send out RFPs without any intention to actually make significant changes to their routing guides. They use the RFP process as a way of handling price discovery and to keep their incumbent carriers honest. That is why smart shippers will send out multiple rounds, communicating where carriers have landed, giving carriers a chance to lower their bid. Shippers want to drive every penny from their carrier base.
Before proceeding with the RFP, get in touch with the decision maker. Have a frank conversation with them about your desire to bid on their freight. Get their reassurance that they have intentions of making changes to carriers and lanes and that this isn’t all about price discovery. Find out what lanes they are struggling with the most. Ask if there is a carrier that is driving them nuts. Transportation managers love the power over their suppliers and I would bet that they have strong opinions (good and bad) about a few of their vendors.
Most transportation decision makers are helpful during this time because they want the best rates, with the best carriers. If they are not, be cautious.
Ask yourself- are they just playing with you or is there a formal process of managing this, dictated by corporate bureaucrats?
Some companies have policies that every discussion must go through the procurement department and no discussions can take place with the transportation manager during the RFP bid window. This is a process by which procurement is trying to exert control. Find out if this is the case. You can tell because in the letter that introduces the RFP it will have strict guidance in your engagement with the shipper. If not and you are getting push back or cold responses, then proceed with caution.
At this point, you can decide to proceed- but avoid spending a truckload of time on the process. If this is a new shipper to you, decide which lanes are most important to you and give those the most attention. If they are unusual lanes, you might have a shot at them. If we are talking about a highly desired lane (Atlanta to Chicago) chances are you will be competing with a lot of companies. Unless you are bringing a lot of value (dropped trailers, teams, tracking visibility integration, established EDI connections, or minority carrier status) or willing to subsidize the traffic manager’s bonus program, you will struggle to gain traction if this is the only lanes you bid. One of the things you can do is to offer to take a horrid lane (inbound into Miami/NYC/Canada/Montana), in return for the highly desired lane.
Use a pricing index application to gain an understanding of the market. DAT is the benchmark. Your TMS provider might have one as well, and while the largest TMS providers offer reliable indexes, they are limited in companies that use their software. Smaller ones might not have a consistent methodology in how they capture and build their indices. Even if you use a TMS index, it is good to get a broader market index.There are cheaper rate index solutions, but this is one area to avoid playing Scrooge. Rates are your most important decision and impact 100% of your margins. Make sure you have not undervalued this.
Rate indexes are trailing indicators of a market and are not necessarily the rates that one would expect in the market on that particular day. The movement of rates over time will be caused by a large number of factors and a great view of the market is necessary to understand the things impacting it. We have been studying over 150 data sources and modeling things that are predictive. Our goal is to continue to release our findings on FreightWaves to subscribers.
Last, avoid gifts beyond a few hours of entertainment. It is tempting to offer to send the decision maker a gift during the process, but this is discouraged. Most companies frown upon this and some will even ban you if they suspect this is the case. If you want to get their attention and show your desire to work with them- entertain them. Lunches, dinners, golf outings, sports venues, fishing, and concerts are a great way to get to spend time and build the relationship that will help you in the process and most companies allow this, so long as you are not giving a material gift.
I have seen one exception that was quite effective. A company I know of sends the RFP on an iPad, enclosed in a ruggedized briefcase (think of Halliburton briefcase). On the IPad, they would also include a video that highlighted the company, team, and made the “pitch” on why they were the right carrier for the job. They had a mobile app and website, so they loaded links to those to show the technology off.
They would print off a copy of the bid, put the print version in the briefcase, create a foam casing for the iPad and ship it out to the company. They would include a letter to the decision maker explaining this is not a gift, but rather a way to showcase the business and the iPad could be returned, donated to charity, or to be shared around the company for reference. They would make it clear that the company could keep it as long as needed. They also included a return FedEx envelope and slip in the package, to show they were serious about this presenting the company and not some shameless attempt at bribery.
Funny enough, out of the ten times they did this, they won nine new customers and only received two iPads back. While this seems expensive and extreme, think of what you would spend flying out to a client to do the pitch in person. This was far cheaper and more classy of a move!
Last, be careful to not get in the penny negotiation game. You don’t want to be number one on the routing guide often in this market. There will be plenty of opportunities in the spot market to augment your network, so don’t take cheap freight. The company that won the number one slot probably won’t honor that rate very long.
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