Going through the RFP process can easily become an overwhelming and time consuming task, yet many shippers continue to release one every one-to-two years in an effort to reduce freight costs. However, are RFP’s really needed, and do they truly assist shippers in saving money? Let’s talk through the different RFP options and how there is actually a financial advantage to instead forging strategic relationships with transportation providers.
Why the RFP Process?
The volatile freight market has led many shippers to pursue the RFP process. For a bit of history, the events listed below caused significant rate hikes combined with a capacity crunch. Once rates are locked in through an RFP, shippers are better protected from the shifting market.
When deciding on whether or not to do an RFP, the process can be approached in three different ways.
- Comprehensive RFP – release to all interested parties.
- Selective RFP – release to your top carrier partners.
- No RFP – risk double digit rate increases and high rejection rates by continuously reaching out to the spot market.
Benefits to Strategic Transportation Provider Relationships
All shippers have different rationales for issuing an RFP, but in the end it comes down to the fact that shippers should be willing to commit to long-term relationships with their best transportation providers in order to experience the following:
Better Rates & Service
When shippers work with the same transportation providers over a long period of time, relationships, volumes, and rates can be leveraged. This also allows for providers to become embedded into the supply chain, leading to increased service and cost savings initiatives. While some shippers feel that the fluctuating market requires constant rate comparison, they truly aren’t able to capitalize on consistent rates.
More Efficient Network
When sending out a comprehensive RFP, time and resources are put into reviewing every RFP submitted, and shippers aren’t able to focus on their core job duties. A significant amount of transportation provider turnover can also cause disruptions to the supply chain, specifically during the implementation and transition phase. Shippers should also consider benchmarking their transportation providers against various performance areas, which would ultimately lead to increased network efficiency.
When partnering with the same providers and showing commitment to the relationship, providers will be more likely to make an investment in customized technology to best fit the shippers’ needs. This ultimately would lead to better visibility into shipments and less time spent on finding the right carriers.