Is it time to evaluate your carrier portfolio? Have your shipment volumes and package characteristics evolved beyond the scope of your current contract structure? Do you need to reduce risk by expanding your carrier resources?
Indelibly inked into our professional minds are the terms RFP and BID. From a transportation perspective, seasoned professionals utilize the RFP / BID process to avoid cost increases, validate market competitiveness and add leverage with incumbent providers. If you are the shipper, the responsibility of putting together an RFP, assembling a team, and awarding the business is a massive investment of time for an unknown potential return. If you are the incumbent provider, it is a threat to the partnership and will require untold hours with your sales, pricing, and operation teams to gain the approvals necessary to meet the customer’s timeline. If you are a transportation provider, you are highly skeptical that the shipper will move forward with any proposal and it is likely you are negotiation bait. For these reasons, it is time to modernize the process of sourcing and optimizing carrier negotiations. The industry is evolving rapidly and all the best planning does not equate to success next week or even next month. A change in engagement strategy is critical. Transportation providers are in the position of power due to the imbalance of supply and demand in our post-pandemic world.
As a provider of transportation service, you know it is just another request for lower pricing and an under appreciation of the services being provided. As a shipper, this process can be filled with angst; there is a constant balancing act between not wanting to alienate your partners and aiming to demonstrate that your carrier programs are competitive.
How do we streamline this cumbersome, yet necessary, process?
Our experts share the Top 3 considerations to achieve success in the proposal and negotiation process. There are, of course, many more, but we did not want to bore you.
1) Identify the organizations’ desired outcome. This requires a cross-functional team and a strong project sponsor. The ideal team would include all pertinent departments across the organization including Logistics, Finance, and Business Leadership with the anchor of Procurement. What is the key objective- Savings? Expanding carrier relationships? Reducing capacity risks? Improve on-time delivery performance?
2) Be Focused, Concise and Transparent. Remember, this is not a battle, but rather an opportunity to grow the partnership through transparency and communication of clear objectives. Success will require constant reminder of the desired outcome as defined by the team. Past frustrations need to be brought to the table and discussed in a direct, open manner to work effectively toward resolution.
3) Deep, Extensive understanding of your metrics. Last, but perhaps most important, it is imperative to have a thorough understanding of your shipping characteristics. Transportation providers have exponentially increased their pricing complexity and the days of understanding a pricing program based on discount level are long gone. The ability to speak in terms of carrier profitability and operational language will produce the most optimal pricing proposal.
In summary, success will always come with compromise. Every organization has unique impact drivers, whether it be capping fees associated with home delivery, later operational cut off times or reduction of dim weight impact. Our team provides a unique service to program manage the opportunity for strategic carrier negotiations… conversations, or as our parents would call it, carrier RFP or BID process. Our primary objective in any engagement is to understand the defined success criteria and help educate & facilitate the building of a long-term partnership. We are your transportation contract match makers. If you have an upcoming opportunity to expand your transportation partnerships, send us a quick note [email protected]. Conversations are always free.