Last year’s shipment index was 15.6% higher compared to the previous year. Historically, this percentage would mean things are going normally in the shipping industry.
This year, however, that percentage represents a five-month low. In other words, there’s limited third-party logistics (3PL) service provider availability during a rapidly expanding demand for shipping.
As a logistics coordinator, it’s always been important to choose the right shipping partner. In this tight market, however, it’s more important than ever.
Keep reading for the best tips on RFP logistics planning and execution.
Most likely, you’ve seen the news. There are issues with the global supply chain.
The demand for goods is plentiful. However, there’s a lot of important stock stuck on docks and ships waiting to get delivered.
What’s worse is these issues may worsen before they improve. If you’re a logistics exec, you need to figure out what’s causing problems in your supply chain and how they’ll affect your organization.
Historically, companies have relied on 3PL partners capable of delivering large quantities of goods the quickest. By working with these kinds of suppliers, shippers can order supplies whenever needed.
Companies never had to worry about running out of stock. Now, the same firms must rethink this strategy.
Today, logistics coordinators have trouble finding 3PLs that can deliver supplies at all. For some of these individuals, the luxury of fast delivery isn’t even on the horizon.
These market conditions highlight the importance of finding a quality 3PL partner. You can do so by finding the best service providers using intentionally crafted RFQs and RFPs.
It’s all about covering the bases when it comes to creating an effective RFP. It’s easier for 3PLs to understand your needs when you create a clear RFP. A clear RFP also makes it easier for bidders to give you the information you need to make an informed decision.
There are three documents you can use to find out information from potential 3PL suppliers:
1. Request for Information (RFI)
2. Request for Quote (RFQ)
3. Request for Proposal (RFP)
You may have familiarity with these terms. Often, shipping stakeholders use them interchangeably.
Yet, each term has a different meaning and purpose. Let’s have a closer look at each request document term.
A request for information is relatively straightforward. As its name suggests, it’s a request for information.
You’d use an RFI to learn about a potential 3PL’s qualifications. It can also help you learn more about a company’s capabilities.
You can use an RFI to learn about the services offered by a freight carrier. However, it’s not a request for a quote or proposal.
It creates no obligation to any company that might respond. You might simply use an RFI to assess what companies to invite to the RPF stage.
Among these three terms, people most often co-mingle the terms RFP logistics and RFQ. However, they’re different.
Depending on your needs, you might submit an RFQ as part of an RFP. Alternatively, you might use an RFQ as a standalone template for potential 3PL partners.
You might also use a standalone RFQ when requesting information about a standard service, such as a full truckload shipment. This kind of document is helpful when you need to hire a service provider quickly based solely on price.
Conversely, the RFP logistics process is more formal. It’s a call to available 3PLs to provide detailed proposals.
The idea is to find several service providers that can meet your needs and choose the best one. As a result, you need to create an RFP that’s granular and specific about your requirements.
An incomplete RFP logistics is ineffective. It creates more questions than it answers.
However, a comprehensive RFP logistics receives thorough and innovative responses. Also, it allows you to compare information equally across all submissions from potential shipping partners.
Over the last two years, we’ve witnessed seismic disruptions in the global supply chain. There’s still plenty of uncertainty. Now, preparing for your next transportation bid is a mission-critical objective.
There’s much more change to come in the shipping industry, so now is an excellent time to re-evaluate your current procurement process.
By revamping your procurement process, you can better prepare for whatever changes may come. Even if the world were to experience another supply chain shock, you’d find you’re better prepared to make the best of the next supply chain disruption.
You may need to prepare a multi-round bid event to cover thousands of lanes. Alternatively, you may only need to create a basic Excel document you use to keep track of a limited number of carriers.
In either case, the following RFP logistics tips will help you manage your procurement process more strategically. These tips include:
Tip 1: Manage Market Uncertainty
Tip 2: Know Your Goals
Tip 3: Get Your Team on the Same Page
Tip 4: Learn More About What’s Going On
Tip 5: Assess Your Resources
You can execute bid solicitations successfully by learning these RFP tips. Let’s have a closer look at each one in more detail.
You want to optimize your firm’s bidding process. First, however, you must ensure you’re performing well in procurement process basics.
It may surprise you to learn that many companies haven’t established a foundation for operational excellence. Yet, they readily jump into advanced optimizations like consultative supply chain engineering and benchmarking studies. It’s like they’re doing algebra before they’ve learned how to do multiplication.
Instead, it’s a good idea to establish a stable operating environment by taking stock of your company’s technology and human expertise before working on advanced procurement optimization.
Covering the Procurement Process Bases
Let’s start with your technology. Regardless of the size of your company, you need a centralized way to collect, track, store, and analyze your supply chain data.
Of course, different company networks have varying levels of complexity. For example, your organization might make use of a simple shared Excel document.
Alternatively, your group may use a sophisticated transportation management system (TMS). On the opposite end of the spectrum from an Excel document, your company may use a powerful enterprise resource planning (ERP) or warehouse management software (WMS).
A considerable percentage of shippers use WMS. Likewise, many companies also have a TMS in place. Also, more than half of today’s companies use an RFP logistics management eSourcing platform.
Is Your Team up for the Task?
Just as you need competitive technology, you also need human expertise. As with your technology, your need for human expertise will vary depending on the complexity of your operation.
In some instances, some companies require entire teams dedicated to every facet of their supply chains. In other cases, a company can rely on a few people to cover the full spectrum of its supply chain needs. Regardless of where your company stands, you should have people focused on a few critical areas, including:
• Order Management
• Load Tendering
Let’s have a closer look at these roles.
Here, you must have staff competent in order taking and overseeing customer service. These individuals or team members might also coordinate with load planners and help build shipments.
These staff members focus on establishing the strategy for purchasing transportation. They might also keep records of all the steps involved in the procurement process.
Load Tendering and Planning
This part of your team acts as a conduit to 3PLs and carriers. They also manage conflict resolution and develop carrier relationships.
Ideally, this part of your team would also help with logistics optimization. For instance, a member of this part of your team might include a supply chain analyst.
You must establish key performance indicators (KPIs) that define success for your company. With a data-driven supply chain, you can reduce costs.
Data will also help you to improve efficiency. Yet, it’s not always simple figuring out what data to track.
Unfortunately, there’s no uniform set of supply chain KPIs. Also, every business tracks and weights KPIs differently.
When it comes to KPIs, it helps to start with your business goals.
Tracking Your Metrics
With KPIs, you must first define what you want to achieve. Now, you can work backward to determine what KPIs will measure your success.
In some instances, you could report on a KPI. Yet, you’re not completely clear on how it leads to a business goal.
In this instance, you’re collecting data for data’s sake. Even worse, this information may potentially create confusion within your organization.
Again, it’s vital not to start with KPIs. You must start by choosing your business goals, then you can select the proper KPIs.
It’s also essential to align your procurement and operations goals. In other words, you must have your team and processes in place.
Also, you must know what you’re measuring and have the capability to do it. With this in mind, it’s vital to ensure that everyone on your team is on the same page.
You might have a smaller operation. In that case, you’ll find that this task is easier. However, there’s usually a healthy debate between procurement and operations in larger operations.
In some ways, this plot reveals itself identically among larger operations. Procurement wants to cut costs. Meanwhile, operations wants to maximize service.
Typically, these business units will bump heads, as their respective compensations are tied to these outcomes. Most often, however, the best procurement strategy for your company lies somewhere between these two extremes.
Getting Things Lined Up
Your procurement strategy must match your company strategy. For example, you might serve as a low-cost commodity provider. In that case, your procurement strategy should reflect this circumstance.
Conversely, you might manufacture a premium good. In that case, your procurement strategy should reflect that context. No matter the value of your goods, you must get everyone on the same page before soliciting RFP bids.
With this in mind, it’s a good idea to establish a steering committee. The committee should encompass leadership from every relevant business unit.
Your committee members should meet routinely during the year. The frequency of those meetings should increase in the months leading up to your annual procurement selection process.
It’s critical to understand the current shipping market. You must also have familiarity with emerging trends.
As a logistics coordinator, you must have a solid grasp of how supply and demand work in the trucking industry. You should also have a full understanding of the truckload market in the country where you operate. You must also have the most up-to-date truckload market updates and forecasts available.
Now, you have baseline knowledge. You can use this information to guide your procurement strategy.
Planning With Partners
When assessing your resources in the trucking market, it’s helpful to lean on your strategic relationships. For example, you might award as much freight as possible to high-quality, prudent providers that are always available when the demand for shipping services is low. This way, you can build a relationship to ensure they’ll remain available when demand becomes high.
Also, if you work in procurement or finance, you might shudder at the thought of paying more than the lowest rate available. However, it’s not always wise to automatically give spot freight to the lowest bidder.
Remember, shipping operates in an inflationary market. You can use available loads at the current rates to serve as leverage to secure future shipping capacity. A carrier’s much more likely to give you capacity in a tight market if you give them access to your spot freight.
Now that you’re getting close to the meat and potatoes, it’s time to start working on your RFP bid.
Now, you might manage your RFP process using one of several resources. For example, you might use your TMS system. Alternatively, you might use your ERP system if you have one in place.
A lesser percentage of companies might use a completely homegrown process. An equally small portion of firms may outsource procurement altogether.
As a logistics coordinator, you’ll need to create a proposal that accurately depicts your company’s needs no matter which resource you use.
Successful RFPs have a few things in common. They provide the necessary information and solicit high-quality, accurate responses from 3PL bidders.
There’s one thing that always precedes a successful set of responses. It’s an RFP that enables you to collect the vital information you need. An effective RFP also enables vendors to communicate how they can help your company.
You can accomplish these outcomes with the following structure and framework for your RFPs.
It’s critical to express your unique needs to 3PL bidders. With this in mind, it’s important to take care in crafting the introduction section of your RFP.
Take a moment to fully introduce your company to potential bidders. For example, you’ll want to provide them with basic background information. This kind of information will give bidders a better understanding of your company and your shipping needs.
You must also provide a detailed description of the scope of work and your business needs in your RFP. This information will enable shippers to deliver customized solutions. In this way, they can provide solutions that will best match your shipping needs.
A detailed description of the scope of work helps you reduce the chances of awarding a contract to a shipping company that’s a bad fit.
For example, your firm may operate using a just-in-time, time-sensitive freight model. This kind of detail is vital for finding the right 3PL partner on each lane.
Most likely, you’ll receive between 10 to 12 bids from prospective 3PL partners. You must include a mandatory list of requirements in your RFP to qualify and disqualify bidders easily.
For instance, you might require specific licenses or certifications. Alternatively, you may need a 3PL partner that can help you leverage shared truckload shipping. It’s a good idea to include these kinds of needs in your RFP to eliminate companies that don’t meet your requirements.
If you didn’t use an RFI as part of your procurement process, you could instead use a pre-qualification questionnaire. Make sure the questions are clear and avoid repetition. Also, you must leave enough space for bidders to provide answers.
It’s critical to create crystal clear terms and conditions for bid submissions. You must state them explicitly. You should also mention which terms and conditions are negotiable.
You must also provide details about your scope of work. In shipping, some people refer to the section as “detailed freight characteristics.”
Here, you’ll answer the W’s. You must clearly explain to potential shipping bidders what, when, and how much shipping services your company requires.
This is the information sought after by most 3PL vendors. It’s what they think about when you say, “request for proposal.”
With a template, you can compare bids easily. Your bid sheet should contain detailed plan information.
It should also include the freight value and frequency of shipments needed for your company. You can use historical data, and total estimated volume forecasts to provide this kind of information.
A template puts you in control. It enables you to harmonize the structure of bids.
In other words, a template enables you to make an apples-to-apples comparison. You can make the process easier for yourself and bidders by creating this part of your RFP in Excel format.
As with many other things in life, the devil is in the details. For instance, you should provide full transparency about how your company feels about paying fuel surcharges. The more clarity you provide on this point, the easier it will prove to find a compatible shipping partner.
Regarding fuel surcharges, you can specify that you’re basing acceptable fuel surcharges on the national average, which is updated every Tuesday at 8 AM CST. Alternatively, you can provide a customized fuel schedule.
You must also provide clarity about any extras or accessorials. For instance, you could need a white-glove service. Alternatively, you may have special requirements like before- or after-hours deliveries.
By sharing any extra needs upfront, you can avoid nasty surprises when you receive your freight bill. Here, it’s important to provide a clear definition of accessorials and fees.
Finally, you must state a deadline for the submission of bidder RFPs.
It’s also essential to provide clear instructions on submission requirements, format, and mechanisms. You must also instruct bidders on how to submit questions and feedback.
With this part of your RFP, you should highlight evaluation criteria. This information will help bidders provide the information you need. It will also make it easier for you to compare and select the best 3PL partner.
All these details are critical. If you miss any of these important points, you risk losing out on high-quality bids.
Highly viable shipping partners might question the authenticity of your process. Yet other potential candidates might question whether they have a chance of winning the bid.
It’s also important to select two to four bid award backup proposals. If the partner you select proves a bad fit, you’re already prepared to move on to the next best candidate.
Also, you must highlight your KPIs to bidders. You must ensure a potential shipping partner has the performance tracking and reporting capabilities to meet your data analysis needs.
Furthermore, you can ensure that your chosen shipping partner meets this requirement by rolling specific metric tracking into your service-level agreement.
It’s essential to take your time as you move through the steps of creating your request for proposal. Also, creating an RFP is a team effort. The entire process should involve a cross-functional team of vested company stakeholders.
Before you begin the process, gather all the information needed to prepare your RFP. It’s important to gather high-quality data, as it will help you to solicit better responses.
You must also consider the overall quality of your RFP. This document will serve as a direct reflection of your organization. You must craft it to the highest standards.
It’s important to review, edit, and re-edit your RFP relentlessly. Only then can you send it for approval by all decision-making stakeholders.
Once approved, you must consider how you’ll distribute your RFP. You can use email or build a web-based portal. You can also use your completed RFP information to inform the work of a consultant.
As you gather bid submissions, immediately check for compliance. In this way, you can shortlist the best responses easily. As you go through the remaining responses, you can use a scoring system to compare the bidders.
Once you’ve selected a 3PL partner, you’re ready to set up meetings to close a deal and sign contracts with your chosen vendor. It’s helpful to include contract terms as well as general terms and conditions with your proposal. By doing so, you’ll make the process of final negotiations much easier.
We hope that you’ve found our tips about RFP logistics planning insightful.
If you’re looking for a 3PL partner, On-Site Global Logistics is an international service provider that’s ready to help you meet your shipping needs now. Please feel free to contact us today to learn how you can stay ahead of your supply chain needs.
Onsite Global Logistics is a third party logistics provider 3PL helping companies with innovative global logistics and supply chain solutions
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