RFP 2.0 – Part Three: Creating a Predictable Future
Shippers • Published on May 10, 2019
The RFP is a key part of the planning process for many high-volume shippers. In this three-part series, we’re going to show how Convoy is providing a unique and better way to get the most out of the RFP process. Please read prior RFP 2.0 posts: Introduction, Thinking Beyond the Lane, and Data & Analytics.
In our final installment of RFP 2.0, we will revisit the key elements of the RFP process that have been covered in previous installments and reinforce why a different approach is more beneficial for shippers and for the industry overall.
Uncertainty in today’s RFP
The unspoken truth of today’s trucking industry is that contracts for primary business are essentially non-binding. Today, shippers put all their eligible transportation network lanes based on their current forecast into a freight RFP. In an effort to win over the shipper, carriers will overwhelmingly respond with bids for more lanes then they truly can accommodate. So, the perception in the eyes of the shipper is the carrier can cover the majority of their business. The reality is there are desirable lanes (e.g. highly trafficked, abundant supply) and less desirable (e.g. less trafficked, limited backhauls) lanes. For the latter, carriers will often times simply not accept the original bids put forth in their response, despite providing a bid on file for their primary business. This in turn fuels the spot market which can drive up costs to the shipper, especially when the market tightens during a peak season or due to other factors (e.g. weather, regulatory).
In an attempt to address this lack of commitment, shippers will include tender acceptance benchmarks within their contracts – typically ranging from 85% to 95%. Right out of the gate, shippers are essentially earmarking 5% to 15% of their business to secondary markets and unpredictable costs (and that’s during a good cycle. In much tougher markets, the tender rejection rates can increase to 25-30% or even higher). The threat of future business is the sole leverage shippers have in admonishing carriers that back out of their lane commitments. However, this impact is limited as these tend to be lanes with limited supply.
Convoy’s aim to address these issues is to respond thoughtfully to all RFPs by analyzing what lanes truly are aligned with our ability to accept all the loads with exceptional service. As you read in Part One, Thinking Beyond the Lane, there are a number of layers in our approach of creating various lane bundles.
This focus enables our tender acceptance rates to far exceed benchmarks and industry standards.+
Insights informing every step of the way
Other facets of transporting freight are just as critical to your supply chain.
As you read in Part Two – Data and Analytics – a whole host of personalized data points are shared with our shippers to improve their logistics and reduce overall costs. Convoy drills even deeper than program analysis by providing visibility and insights to each and every shipment, including the shipper’s facilities.
One example of this is reporting on average wait times by facility combined with detention costs and volume of shipments. By understanding these unit costs by facility, shippers can be proactive in improving their bottom line.
Digital transformation is more than tech
Technology is inevitably at the forefront of disruption within virtually every industry including transportation/logistics. However, technology alone does not solve all these inherent challenges. For example, it was not until smartphone adoption was prevalent across the U.S. that GPS tracking became a reliable way to track all trucks. And while this opens up exponentially more data, the true benefit comes in identifying how to leverage this information for true customer insights. A mere mobile presence is not the current standard for digital brokerage in our eyes. Rather, it is a platform that leverages and builds on the latest technology, and then applies insights and learnings to improve the shipper’s business overall.
By executing on RFPs in a more rigorous and holistic manner, Convoy is providing exceptional value to our shippers to address their transportation needs and reduce overall costs along the way.
This includes standing by commitments for our shippers and going the extra mile with insights into their supply chain. Through this collaboration, we collectively can create a more predictable experience and reduce overall waste within the transportation sector. This is RFP 2.0 in motion, this is thinking differently about freight.
Interested in learning more? Want to experience RFP 2.0 first hand? We look forward to helping you maximize efficiencies throughout your transportation network.
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.