Rethinking the Freight RFP Process
Once a year, shippers and carriers begin the arduous freight RFP process, when shippers send out request for pricing (or proposal) for contract rates to their list of trucking companies. Unfortunately, “process” might be a generous term for what’s really going on.
The process is broken and dreaded by both shippers and carriers. It is not a good way to start or manage a shipper-carrier relationship. It is why many companies are rethinking the freight RFP process.
Every shipper is different and manages the process differently, but in general the current process looks like this:
Step 1 – Compile a Big List of Carriers
Typically, the process begins with the shipper compiling a list of all the carriers that they want to include on their RFP. The list begins with existing carrier relationships, but shippers figure they should cast a wide net, so they add all the carriers they can: carriers who have dialed their number in the past year (which they have been diligent to jot down), carriers found on LinkedIn, through Google searches, or anywhere else. Perhaps, the right carriers are involved, and they are properly vetted, but just as likely some great carriers are missing and some duds were included on the list.
Step 2 – Compile the Lanes
Next, the lanes that will be included in the RFP are compiled in a big spreadsheet. Ideally, the list will include shipment frequency, accessorials, freight characteristics, pickup, and delivery location requirements, etc. In many cases, the information required to properly quote the freight is missing – nothing deliberately devious, just a natural result of a using the wrong technology for the job.
Step 3 – Send Lanes to Carriers
Next, the spreadsheets are emailed to the carriers along with quoting instructions. At this point, the shipper realizes that some number of shipper emails bounced, and even more are ignored. While shippers think that their RFP is a great opportunity for carriers, the carriers are not always thrilled. To be profitable, carriers need to be very specific and deliberate about the lanes and freight they move. Carriers operate on thin margins and giving rates that are good for one year can be a very dangerous proposition, especially in these volatile times.
Step 4 – Receive and Organize the Quotes
At some point, the shipper receives quotes back from some carriers. Quotes from responding carriers are organized into one spreadsheet so they can be compared to other quotes. The quotes are evaluated, however without the proper tools, the insights gained are minimal. While some shippers may add a service quality dimension, for the most part, the emphasis is on price rather than quality.
Step 5 – Award the Business
The quotes are evaluated, and carriers are awarded lanes, usually because they are the lowest price. The quotes are unfortunately treated like a zero-sum game rather than a win-win relationship. If the market rates fluctuate significantly over the next year, the rates become “paper rates” that are only good on paper.
The current freight RFP process often doesn’t provide either the shipper or the carrier, the desired results. Shippers end up with far too many tender rejections and their freight moving via the spot market. Meanwhile carriers struggle to find the steady direct shipper freight that will enable them to run profitably. The huge carrier lists, mass emails, and unwieldly Excel spreadsheets is the problem, not the solution. The technology, or rather the lack of technology puts the focus on making the broken process work rather than developing win-win relationships.
The Freight RFP Process Doesn’t Work for Shippers or Carriers
Shippers Hate the Current Process Because:
- The lack of technology makes the process clunky, cumbersome, and time consuming – so time consuming that most shippers only want to endure the process once per year.
- Results in paper rates – rates that are only good on paper.
- Too much focus on the process and not enough focus on building win-win relationships with carriers.
- Lack of carrier vetting and not enough of the right carriers involved.
Carriers Hate the Current Process Because:
- Bid fatigue – too much time wasted on RFPs for shippers that never move freight with your company.
- Shipper motivations are unclear. Are they seriously looking for new carriers or are they just market testing their current carriers?
- Predicting the market and developing solid rates for the next 12 months is pretty much impossible.
- Not enough focus on building relationships with the right shippers.
There is a Better Way to Manage the Freight RFP Process
The fine folks at Emerge have reinvented freight procurement by developing a technology platform specifically made for managing freight RFPs. The founders of Emerge also founded the pioneering freight brokerage, Globaltranz so they know a thing or two about moving freight.
Emerge provides a freight RFP platform that streamlines the process for free – yes, free. Getting registered and set up is a breeze and the results are significantly better than mass emailing spreadsheets to every carrier you know.
When you use the Emerge platform, the process looks like this:
Step 1: Load Incumbent Carriers and Brokers into the Emerge Platform
The Emerge platform is purpose built for RFPs so uploading carriers’ information into the system is simple and easy. Once the carrier information is loaded, it never has to be loaded again. By the way, there is a good chance your carriers are already on the Emerge platform, because it gives them access to the very best direct shipper freight.
Step 2: Load Lanes into the Platform
No more spreadsheets! The Emerge platform makes it easy to upload your lanes from your TMS or even your Excel spreadsheets. The platform prompts the shipper to add the information pertinent to carriers. The platform is completely customizable so shippers can add or delete fields.
Step 3 – Create an RFP event
No more mass emails! With the push of a button, carriers are invited to bid on lanes. The Emerge platform will also recommend vetted carriers who are interested in those lanes. If you choose one of the recommended carriers, Emerge will receive a 9.9% fee from the Carrier, which is how Emerge makes money. Carriers have flocked to Emerge because the low 9.9% fee is much less than the markup that traditional freight brokers add to a load.
Step 4 – Evaluate the Bids
As the bids are received, the system organizes the information and enables better decision making. While carriers respond to the bids, the shipper has access to a dashboard that provides useful insights. In the Emerge system every carrier is vetted so shippers can make informed freight procurement decisions based on price and service quality.
Step 5 – Award the Business
Awarding lanes to carriers is easily managed within the system. Shippers can create and manage contracts and documentation within the application, including digital signatures. The streamlined process makes it so easy to conduct RFP events that most shippers who use the Emerge platform do quarterly bids, which means carriers can be more confident when quoting lanes.
A Streamlined Process and Improved Shipper-Carrier Relationships
In addition to streamlining the process and making it much more robust, the Emerge platform has a few other key advantages:
- Freed of the time consuming, clunky process, shippers and carriers can spend more time discussing the freight characteristics and getting to know each other.
- With the process streamlined, shippers are moving to quarterly RFPs, which enables the carriers to deliver more competitive bids – and live with them (no more paper rates).
- In addition to their incumbent carriers, shippers have access to thousands of vetted carriers within the Emerge system.
Over the past few decades, the supply chain has become digital and freight tech has evolved to streamline the shipping process. However, for many shippers the freight RFP process is stuck in the past, relying on Excel spreadsheets and mass emails. If your company is rethinking the freight RFP process, Emerge’s purpose-built RFP technology platform is a good place to start.