24 January 2023
Getting freight from point A to point B, on-time and damage-free, is the most essential function of shipping. Yet according to our research, no shippers are completely satisfied with their current shipping process. In the search for better carriers and third-party logistics partners, known as 3PLs, you’ll become familiar with one very important component: the freight RFP, or request for proposal.
What is an RFP in shipping?
The RFP is a process shippers use to request, evaluate, and secure contracts with logistics providers and freight carriers. The acronym can also refer to the document itself, which outlines the shipper’s needs and asks for detailed information about a potential partner. The goal of an RFP is to create beneficial partnerships that help you meet your business goals.
Logistics, transportation, and operations managers typically manage RFPs, but it depends on the size of the organization. Larger organizations may even outsource their RFP logistics process.
When does it happen? Most shippers time their RFPs to coincide with annual budgeting, but some have shifted to quarterly or bi-annual RFPs. You’ll want to send out RFPs about eight weeks before you set your budget so that you have time to evaluate partners and award contracts.
RFP vs. RFI vs. RFQ
RFPs are often confused with requests for information (RFI) and requests for quotations (RFQ), but these terms have different meanings. An RFI asks potential partners for information about their product or service, but it may not include detailed cost information. An RFQ asks for detailed pricing information.
Businesses typically use RFIs to explore potential solutions and gather basic information. In fact, you can use RFIs to help narrow down your short list or carriers or 3PLs before you send out RFPs. Businesses use RFQs when cost is the only parameter they are evaluating. While freight RFPs typically do include quotes, they also collect information that goes beyond service offerings or price to evaluate a potential partner’s overall value and fit.
What is the RFP process?
Issuing an RFP involves a series of steps that go beyond simply writing up a document and sending it out to prospects—especially if you’ve never created one before. However, the steps for how to submit a freight RFP don’t have to be complicated.
- Determine your business requirements: What services do you need? What is the goal of your RFP? Involve key decision makers and stakeholders at your business.
- Choose your evaluation criteria: Be clear about how you will evaluate vendors and set specific KPIs for them to meet.
- Create your RFP document: This is the actual questionnaire you will send out to potential partners.
- Choose your RFP recipients: Referrals, lists of previous vendors, RFIs, and vendor profiles can help you create a short list.
- Send your RFPs: Be as detailed as possible about what you’re looking for, how to submit the document, and what deadlines must be met.
- Evaluate your submissions: Score potential vendors based on the evaluation criteria you laid out in Step 3.
- Make your awards: Ensure that expectations and rates are final, as carriers and other vendors often make bids based on contingencies, and things change quickly.
- Sign your contracts: Your RFP will spell out the length of your contract and other specifications. The process should result in a win-win partnership.
More tips for freight RFPs
Shippers can make the transportation RFP process easier by being open, honest, and responsive—and by following these tips:
- Highlight the problems you want to solve and let vendors offer solutions. You may discover a new solution you didn’t know about.
- Diversify your short list. Invite different-sized companies and those with various transport methods to ensure you capture every opportunity, but don’t spread yourself too thin.
- Remember that you can make multiple awards for your most important and highest-volume lanes. Issues do come up, and you don’t want to be left with no carrier.
- Be willing to negotiate. The RFP process is a back-and-forth that should benefit both parties—and both parties should hold up their end of the agreement.
- Don’t choose based on price alone. While it is an important consideration, remember that ultimately, the cheapest vendor may still “cost” you in terms of unhappy customers.
- Don’t take too long. The RFP process should take six to eight weeks.
What’s included in a freight RFP?
A detailed, thorough RFP document streamlines the process and ultimately saves time for both shippers and carriers. Including specific needs up front helps you qualify carriers and quickly eliminate those who don’t fit your criteria. From there, you can get into more details. A freight RFP template typically includes the following sections:
- Introduction and business needs: Provide basic background information about your products, customers, and other vendors. Detail your business needs, not only in terms of specific services required but also your overarching goals.
- Pre-qualification questions: This is where you list the minimum standards required for a vendor to be considered. This may include licensing or certifications, technology requirements, claims records, safety ratings, insurance, coverage area, and fleet size.
- Terms and conditions: Your RFP should include standard operating procedures (SOP), payment and billing terms, general terms and conditions (GTC), and contract terms if the contract is awarded.
- Scope of freight: To provide an accurate quote, carriers need to know your seasonality, cargo types, value, average weight per load, and equipment types, as well as detailed information about the lanes up for bid.
- Bid template: Providing a standard template for carriers to fill out will help you make a more direct rate comparison.
- Surcharges and accessorials: Be strategic about fuel surcharges and accessorials like blind shipments and detention fees, which can eat up costs.
- Submission process: Your RFP should spell out key deadlines, including the number of bid rounds and when you will make awards.
- Evaluation criteria and KPIs: Be specific about how you will evaluate vendors, including whether you’ll give priority to incumbents and the KPIs you will look at.
Common KPIs requested in freight RFPs
Including specific KPIs will help you find the best match for your business. What should you choose? Some of the most common carrier metrics are:
- Claims rate: Claims are a fact of shipping, but a high claims rate could mean trouble.
- On-time pickup/delivery rate: Loads should be picked up at the agreed-upon time, not early or late.
- Delivery on-time-in-full: This metric means the delivery is not only on time, but the customer also gets the correct amount of product.
- Load rejection rate: A high load rejection rate means a carrier often declines to deliver loads.
- Average dwell time: Dwell time means a truck is not moving your goods, which can be a bad sign.
- Average loading and unloading times: Slow loading and unloading can affect your delivery times.
- Time between tender and scheduling: Delays between when the carrier agrees to the load and when they schedule a pick-up time can indicate inefficient internal processes.
- Fuel efficiency: High fuel efficiency can save your business money.
Data you’ll need to complete your freight RFP
Transportation RFPs aren’t just about collecting information on potential vendors. You also need to provide plenty of information about your business so you can ensure the process results in the best possible fit. Before you create your RFP, collect the following information from your transportation management system:
- freight volume and dimensions
- freight handling
- shipping frequency
- special equipment requirements
- delivery windows
- pick-up wait times
- loading and unloading needs
- facility profiles including hours
- average detention time at the delivery destination
- known seasonality or variability
- current costs and pricing structures for comparison
Flock Freight’s alternative to truckload RFPs
RFPs for logistics, carriers, and other third-party vendors have followed a traditional format for decades. Carriers typically offer less-than-truckload (LTL) rates with fluctuating linear feet caps that can result in additional charges, or full truckload (TL) rates that result in you paying to ship air when you don’t fill a truck. Truckload RFPs promote this inefficiency, forcing shippers to leave money on the table.
It’s an impossible question: Would you rather pay for empty space or pay fees for exceeding the linear feet cap? Flock Freight has the answer: neither.
Our shared truckload solution allows you to pay only for the truck space you need. We’ll combine your LTL freight with other shippers’ freight, creating an optimized, hubless, multi-stop route that provides the benefits of TL at a lower cost.
Our Instant Prebate Program automatically converts your truckload shipments to shared truckload (STL) and gives you a discount based on the percentage of trailer your load uses. With Instant Prebate, shippers can save up to 20% on contracted TL freight.