RFP 2.0 – Part One: Think Beyond the Lane
Shippers • Published on April 18, 2019
The RFP is a key part of the planning process for high-volume shippers. In this three-part series, Convoy is going to present a unique and improved approach for shippers to get the most out of the RFP process. Please read RFP 2.0 – Improving the Shipper RFP Experience for the introduction.
In this installment of RFP 2.0, we describe a different approach to the traditional RFP. We’ll demonstrate how a holistic network view and a strategic bundling of lanes can deliver lower prices, better service, and rich data and insights for shippers.
Before diving into this new approach, it is important to first outline how the system works today. In its most basic form, the traditional freight RFP response includes simple lane-by-lane pricing. While this method leads to significant competition for highly trafficked routes, it also results in many lanes being overpriced and underserviced. In some cases, bid participants take into consideration single-sourced facilities and/or conditional bidding (“we’ll take Lane X at this price, but only if awarded together with Lane Y at that price”). This is an improvement to the basic approach, but still leaves gaps and is not widely practiced.
Convoy’s approach to RFPs takes all these factors into account and adds a layer of strategic bundling to address the overall business. This more holistic approach provides shippers with a better way to meet their year-round shipping needs.
Types of bundles
A “lane bundle” is a tailored collection of similar or complementary primary routes that are bid on and awarded as a package deal.
There are four types of bundles that Convoy offers, as illustrated below:
To design and construct these lane bundles, Convoy performs a deep analysis of each shipper’s lane network, including a visual comparison to Convoy’s carrier network. This ensures we identify lanes that, when awarded together, optimize for cost and service, while also accounting for truck type, carrier route preference, and operational considerations for both the shipper and carriers.
Once optimal lanes are identified, we build flexible bundles with custom conditions by which we can offer the most attractive discounts. For example, awarding 2,000 or more loads on a particular bundle might result in a 4% discount relative to our à la carte rates.
How do we do it? Discounts are determined based on anticipated cost savings from the volume. Specifically, the increased volume allows Convoy to secure trucks at more competitive prices with higher degrees of automation. Those factors, in turn, allow us to pass more savings to our shippers.
A real-world example
In a recent RFP response for a Fortune 1000 paper goods company, we understood that they were having a hard time finding reliable carriers for several routes out of a northern California facility. They explained that brokers only wanted the high-volume, most desirable routes, and that their low-volume and less desirable routes were overpriced and underserviced.
To solve this need, Convoy assembled a custom proposal that combined desirable and less desirable lanes. This approach allowed Convoy to build a strong base of carriers to service this business. Despite some of the lanes having low volume or less desirable destinations, the cost of trucks went down, while tender acceptance and on-time service went up. The shipper was thrilled with the outcome and sent a note to their Account Manager to let us know:
We appreciate the level of detail you and your team put forth in this RFP and [our] business. Thank you for your strategic approach.”
– Convoy Customer
Benefits to shippers
To summarize, bundling lanes presents a host of benefits for shippers:
- Cost savings – awarding in bulk allows Convoy to procure trucks more competitively and with greater automation. This reduces our costs, and we pass the savings to shippers.
- Superior service – Convoy’s tender acceptance rates far surpass industry standards (consistently above 95%, even in tight markets), and this applies to the whole bundle — including lanes that shippers often have a hard time servicing. Benefiting from excellent on-time rates and continuous truck reliability/visibility, shippers can commit more volume to fewer carriers and manage their supply chains more efficiently.
- Unique data and insights – dense lane sets created through bundling unlock more data for Convoy to analyze and share back to shippers in the form of actionable insights. Insights include (but are not limited to) driver feedback on facilities, appointment time optimization, and carrier supply data by lane or facility.
We’ll have more on this last part in Part Two, “Data and Insights are Key,” where we’ll dive into why rich data and actionable insights can improve a shipper’s supply chain.
Interested in learning more? We look forward to helping you reimagine your transportation network by thinking beyond the lane!
Shippers – to learn more about shipping with Convoy, visit the shipper hub or contact us at (206) 971-1237.
Carriers – to learn more about hauling with Convoy, visit the carrier hub, or contact us at (206) 202-5645.
Read Convoy’s Guide to Developing a Freight Transportation Strategy.