Freight bid season is here. And as Q4 ramps up and the fiscal year pushes into the home stretch, businesses with enough volume typically send out their transportation request for proposals (RFPs) for the coming year.
New to conducting a bid? There are multiple ways in which you can successfully leverage freight bids to benefit your organization, locking in transportation savings for months to come.
We have compiled some useful background information about the bid process and practical tips for you to get the best outcomes from your freight contracts.
What is a Transportation RFP?
A transportation request for quote (RFQ) and request for proposal (RFP) can be used interchangeably as they almost always refer to the same thing. A transportation RFP refers to the process of bidding your freight lanes out to transportation providers for an upcoming period of time.
The purpose of a transportation RFP is to go to market to ascertain the best available service and price for your regularly trafficked freight lanes, locking in capacity. When shippers request a freight bid, they are looking to negotiate a constant price on a particular lane for a given period.
Usually, the shipper sending out a transportation RFP notification has a complex supply chain with many origin and destination points. Because of the nature of a nationwide logistics network, shippers often select a variety of asset carriers and freight brokers to fulfill orders on different lanes, playing the strengths of each provider.
Shippers will award lanes individually to whichever carrier can provide the best freight bid. Meaning the provider who offers the best price on a Chicago to Los Angeles lane may not be the lowest cost provider for your Denver to San Antonio lane.
Shippers will award the lanes to the different providers, locking in the best rate for both and diversifying their “freight portfolio.”
What Should Be Included in a Transportation RFP?
Transportation RFPs do not have to be particularly complicated. However, there are a few key points that you should be sure to include in your transportation RFP:
- The lanes that you are requesting to be quoted.
- The duration of the bid. How long will the bid last?
- When is the start date for the bid? Is it for next year? Next month?
- The volume on a given lane. How many moves will need to be executed in a given day/week/month?
When Should You Accept Freight Bids?
There is no universal deadline for inviting vendors to compete your transportation RFP process. Even though we typically see more companies going through their bid process during the last quarter of a given fiscal year, there is no exact timeframe for when you need to entertain bids.
In fact, many companies go through the bid submission process several times during the year. Some look to get bids that last for several months, some for the entire calendar year.
Due to the cyclical nature of the trucking market, many companies choose to run bids quarterly so they can lock in ideal pricing as the market continues to shift.
It’s best to entertain bids when it makes the most sense for your business. We find that most often retailers will submit RFQs in Q4 and food/beverage producers will ask for bids in Q1.
Who Should You Ask to Compete in Your Freight Bid Process?
First, you should ask yourself, “What am I trying to accomplish with this bid.”
Who should be included in your transportation RFP will vary depending on the answer to the above question.
If you are simply chasing the cheapest option and do not feel that you are reliant on beneficial partnerships, then you should have as many participants as you can get. But, if service and partnership are of importance to you, you may opt to include a shorter list of vendors.
Showing you are serious about a partnership and including a carefully selected group of both trusted and new providers can go a long way in achieving competitive pricing and optimal outcomes.
It is also crucial to include both new and existing vendors. Incumbent participants will have knowledge of your freight and will know the current rates and the costs associated with your specific needs. New suppliers can help ensure you are choosing the best option available.
Should You Include Non-Asset Based Brokers?
In the past, it was a common goal of large shippers to focus heavily on direct asset-based carriers; however, today’s market of drivers is more inclined to work for small fleet carriers that are typically only accessible through a non-asset-based 3PL.
For example, Chicago to Bozeman, MT is not an easily covered lane because of the lack of outbound volume. Asset-based providers are unlikely to have terminals near these regions and will be unable to provide competitive pricing.
But because a freight broker works with a wide carrier network, they can find capacity with small fleets and negotiate better pricing for undesirable moves.
A 3PL can help find effective solutions for your difficult moves that would otherwise prove costly if you went directly through an asset-based provider. A non-asset-based broker can be an effective resource for booking odd lanes that fall outside a carrier’s typically traversed coverage area.
Why Should You Request Freight Contracts?
It is fair to say that requesting quotes for every freight lane in your logistics network is an educated gamble. Because the market is cyclical and can be volatile, locking in a set rate for a given lane can be both beneficial and detrimental.
Rates can rise and fall throughout a given period. The market can be in your favor during one freight contract, and in the carriers’ favor for the next.
Depending on which way the scale tips throughout the duration of your trucking contract, you can either be overpaying or receiving substantial savings. It is important to perform an analysis before the beginning of the your RFQ period to predict which way the market will trend in the near future.
If timed correctly, freight contracts can provide your organization with optimal savings and guaranteed capacity for frequently shipped lanes.
Ready to Accept Freight Bids?
Zipline Logistics accepts logistics RFQs at any time throughout the year. We offer competitive pricing and secure capacity for all domestic freight lanes. Zipline leverages a vast carrier network that extends the continental US and parts of Canada.
We wield the buying power of other Top 100 3PL providers while offering the specialized service of a boutique firm.
If you are interested in receiving our quotes, reach out today.