Inbound Logistics | January 2024

“I’d advise shippers to provide the most accurate, complete data they can during the RFP process, as that facilitates a carrier’s best possible oer.” —Kevin Day, President of LTL, AFS Logistics

It is essential to be truthful and transparent. “When it comes to setting terms, service levels, and performance metrics, maintain transparency, clarity, and consistency in what is being measured and how it will be assessed,” Weaver says. “Establish clear processes for handling disagreements or discrepancies in the future,” he recommends. “Finally, follow through on the dened terms and agreements.” Payment terms, particularly as they relate to late fees, are an especially important element in parcel freight shipping. “In the past ve to six years, carriers have shortened payment terms and the late payment fee is now 8%, up from the 6% it used to be,” McDonagh says. “You might be able to negotiate some savings, but if you’re hit by a late fee because you can’t turn payment around fast enough, that nullies that benet. Late fees can kill your negotiated savings.” Choose a timeline, then evaluate and adapt. A fair bidding process means that carriers have sufcient time to respond to an RFP. Weaver recommends a minimum duration of two weeks. In addition, limit the number of bidding rounds to no more than two or three. More rounds than that “can be a signicant waste of time for all parties involved,” Weaver says.

Define the scope of services. Shippers should clearly outline the services to be provided and dene the roles and responsibilities of all parties, while also establishing measurable performance metrics and service level agreements. The scope of services should also align with the overall goals and objectives of the RFP. Shippers will want to strike a balance between how much information they provide and request in the RFP process. “Avoid providing too little information, such as lanes without any volume estimates, but also refrain from overwhelming carriers with excessive details, such as massive amounts of highly granular data on past history and lengthy paragraphs on company vision,” Weaver recommends. In addition, be careful not to game volume estimates, “where instead of presenting actual low volumes, there is a tendency to round up to one shipment per week or more,” Weaver says. Accurate lane information and data, and all information that would impact pricing—seasonality, equipment types, special requirements—are among the essential components of an RFP. Shippers and providers should have a clear understanding of the priority between service and cost savings. Shippers should provide any additional documents related to locations and hours of service, shipping days, and volume estimates. In addition to providing the basics—such as lanes, routes, and volumes—Langeld adds that shipper/ receiver characteristics such as hours, appointments required, driver work needed, scorecards, and payment terms, can all have a large impact on price and attractiveness to a certain carrier. Langeld recommends shippers

incorporate live shipping data to give carriers an idea of the frequency, consistency, and capacity needed when compiling lanes and putting together routes. Not providing an accurate picture of lanes and routes is a common mistake. “For example, if you bid a lane from Atlanta to Minneapolis year round, and it is 100 loads per year, carriers can presume around two loads per week,” Langeld says. “However, if that volume falls within a three-month period or a seasonal capacity crunch time—for instance a produce time—it can impact not only the service levels that you can get when it comes to acceptance of the loads but also how the carrier rates it.” Set the terms. Terms, service levels, and performance metrics “should be clearly set and understood by all parties prior to engaging in any pricing exercises,” Burke says. “They should be fair and measurable and have reporting capabilities to share between parties that are consistent across all providers.”

For parcel shipping, the RFP lead time should be particularly long. Parcel agreements are typically three years long, so shippers need to allow plenty of time to negotiate before the contract expires.

160 Inbound Logistics • January 2024

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