Are you considering new sourcing origins, adapting to e-commerce shipping patterns or trying to reduce costs?
Here are our top tips to help you launch a freight RFQ that adapts your supply chain to current needs and market conditions.
Know what your goals are
An RFP can be a mechanism for meeting many goals. If cost savings is a goal of your project, set a specific financial target based on your company’s business outlook and budget. You may also have service issues to be resolved or a need to reduce the number of providers, or new activity that needs to be brought under contract. The first step toward a successful RFP is defining all of your goals – and articulating them to vendors.
Build the right tender team
Include all your stakeholders: representatives from the major global shipping and receiving locations, procurement, supply chain and potentially trade compliance and legal. A team approach will ensure that the RFQ encompasses all cargo and needs, and that diverse viewpoints are considered. Once an award is made, an inclusive process helps ensure everyone is on board with the decision, and complies. Few things in logistics create push back faster than a transportation RFQ where participation was limited to headquarters personnel.
Set a realistic timeline
Take the time to plan out the RFQ’s steps and timing and set deadlines for each step. The average global transportation RFQ takes between 8-12 weeks from launch to award. Four 30-day segments is a good rule of thumb to cover prep time, supplier meetings, supplier response time and a proposal evaluation period.
Network to explore new options
An RFQ is a great time to consider new tools, systems, and providers. Don’t go through this process alone. Use your industry contacts, outside providers and information gleaned from logistics conferences and webinars to learn what’s new since your last RFQ and how it might benefit your business. Industry contacts may have transportation providers they recommend you consider. New logistics applications such as freight marketplaces and benchmarking platforms are disrupting traditional transportation and freight forwarding companies. Can they inform your RFQ, or even be a future transportation provider?
Focus on flexibility and service first
With the team, define and capture your service needs, any gaps experienced today, and potential needs in the future. What do you need in terms of expertise, service portfolio, geographic coverage, customer service, systems and reporting tools? The lowest price won’t be meaningful if the service doesn’t meet your requirements or can’t handle a change in sourcing or distribution. So, define your requirements and use your company’s service criteria to narrow down the list of prospective bidders.
Take time for conversation
Meet face to face with current and prospective providers in each of your key markets. Bring them to your facility to learn about your product, shipping patterns and requirements. Tour their local facilities and meet management and operational staff to assess whether they are the sort of company you want to work with. The only way to get a sense for how your team will like working with a company is to come out for a close look. Similarly, providers want customers where there is a rapport and a partnership can develop. By developing a relationship, you’ve laid the groundwork for future cooperation, even if a provider is not successful in this RFQ.
Use the Goldilocks Principal
Use service capabilities and qualitative requirements to narrow down the list of bidders to a manageable size, say five to seven, including incumbents. If you invite too few providers, you run the risk of missing out on new capabilities or savings. Too many invitees and you may find that providers decline to respond. Most providers receive more RFQs than they can respond to. You want to signal that you value more than just price, and that there is a realistic chance of gaining your business.
Mind the T&Cs
In addition to a rate template and historic shipping information, the RFQ should include terms and conditions for the transportation rates. This section of the RFQ must be very clear to ensure providers respond on a level playing field. Some T&Cs, such as those pertaining to surcharges, rate increases, free time, and capacity commitments, have an outsized impact on the final costs paid. Vendors will evaluate the risk and expense of special requirements against the benefit of the business award. Use your professional network to review your options and then have the team create a clear, comprehensive and realistic T&C section.
Keep selection simple
If you’ve done a good job of defining your company’s goals and needs and taken time to get to know providers, you’ll have a tough decision to make because you’ve received multiple attractive offers. Luckily, you can use the team and a scoring system to keep decision making relatively simple. One method to consider: have team members assigned one specific section of every proposal to evaluate and have them rank the providers for that section. For each provider, add up the score of all sections to reach an overall score. If you then weight the sections by the importance of that criteria to your company, you’ll have a weighted score for each provider.
End on a high note
Contract negotiations, business implementation and managing a supply chain can all be challenging. Strike a fair deal so your provider has an incentive to go the extra mile for you and the flexibility to handle unexpected situations. Then, take the time to send out thank-you messages to participants who weren’t selected, inviting them to debrief and to stay in contact for the future. If a transition from one provider to another will occur, discuss and plan the process with representatives from each provider and the key stakeholders at your company.
Ending on a high note will build the goodwill and flexibility necessary to adapt to any unforeseen change in the future.