Requests for proposal - commonly referred to as RFPs - in freight and logistics are a key component in planning and budgeting for the year (or more) ahead. An RFP sets a shipper's expectations for the freight and logistics market, and in turn allows the shipper to see whether the market agrees. As mentioned previously when discussing budgeting shipping costs, it's vital to have contract agreements in place to provide a level of cost certainty in an era of fluctuating rates. Perhaps more important than cost certainty - a well-prepared RFP process can lead to significant freight and logistics savings as finance leadership trims budgets.
What is an RFP in freight and logistics?
Simply put, a freight and logistics RFP - just as in any other industry's procurement process - is a request for proposal. In freight and logistics, shippers use the RFP process to secure contract rates with freight carriers, logistics providers, or both. Put another way, a freight and logistics RFP is a formal, detailed document outlining a shipper's transportation needs and requesting that companies provide detailed proposals to meet those needs. Shippers then spend time reviewing submissions before making a decision as to which transportation vendor(s) to work with.
What is the freight and logistics RFP process?
The RFP process in freight and logistics should begin with extensive research into market conditions, gathering comprehensive and complete internal and market data, and a clear, detailed statement of the business need. With all that prepared, the shipper should:
- Have a formal invitation process (pre-qualify firms that get to the RFP stage)
- Diversify invites among freight and logistics providers (different company sizes, transport methods)
- State clear terms & conditions and scope of work in the RFP (with neutral language)
- Include a standard pricing or bid template (to simplify comparison)
- Include clear expectations for fuel surcharges and accessorials (researched ahead of time)
- Set clear KPIs (key performance indicators)
- Explain the submission process, including a firm deadline
- Outline the evaluation process (appreciated by those who submit bids)
And a note, throughout the freight and logistics RFP process, remember to communicate with all involved. Open lines of communication with every stakeholder are vital to a smooth experience. With all those components included in the freight and logistics RFP process, the next step is conducting the evaluation. In that area, consider more than a simple price comparison. As in, don't automatically choose the lowest bids, as the low bidders may not be the right fit. In this step, also consider whether the spot market may be a better play on certain lanes.
Additionally, hedge bets on the most important and highest volume lanes by awarding them to multiple providers. That way, you're not left out in the cold if something comes up with one vendor. Finally in the evaluation process, be willing to negotiate, as compromise may benefit both sides. Once you've made your selection(s) and signed the contract(s), remember to hold up your end. Do what you said you would in the RFP, and be a shipper of choice that makes life easy for the freight carrier and logistics provider. The RFP can be the start of a long, prosperous relationship if the right choices are made.
Need more help with freight and logistics RFPs?
Right here on the InTek website, additional helpful articles include:
- How to Negotiate & Manage a Competitive Freight Rate RFP
- How-to Negotiate & Execute Best Freight Rates: Comprehensive Guide
- Freight Contract Rates vs Spot Rates - Comprehensive Guide
If you're ready to take the next step, at InTek Freight & Logistics, we can help. Just tell us what you need and we'll discuss how our expertise can help with the unique shipping challenges your business faces. Rather do a bit more research first? View our Freight Guides for comprehensive articles and eBooks on all things freight and logistics.
