Challenges of an Annual RFP and Why it’s Going Extinct

[WEBINAR]
Marney Edwards, Dennis Heppner, and Rush Feldhacker discuss the annual RFP process and why it's dying or it's dead, or it's on its last breath. Really, the challenges of an annual RFP come down to three things. Follow along with the full transcript below.

Marney Edwards 00:00
Hi, this is Marney Edwards, welcome to Loadsmart partner chat.

Marney Edwards 00:05
Today we're going to talk about the annual RFP process and why we think it's dying or it's dead, or it's on its last breath. Really, the challenges of an annual RFP come down to three things.

Marney Edwards 00:16
1. it's a really time consuming resource grabbing kind of situation. It takes a lot of people a lot of time to do this once a year on an annual basis.

Marney Edwards 00:29
2. the information just become stale over time.

Marney Edwards 00:37
3. the yearly pricing is unstable. And so as you've seen the last couple of years, the pricing has gone up and down. We see that continuing into the future.

Marney Edwards 00:50
So we're not we don't say to be the experts in this. And so we brought along a couple of our partners to talk to about this and ask them some questions.

Marney Edwards 00:59
Rush Feldhacker of Metafora has about 15+ years of experience in the brokerage services industry, and he's really going to let us know what the brokerages are doing out there in the 3PLs.

Marney Edwards 01:10
And then we've got Dennis Heppner who is a subject matter expert and a principal at JBF Consulting,. He's got 30+ of experience, and most of his clients are in the shipping side.

Marney Edwards 01:23
So Rush, what are you seeing or what are your clients seeing with the annual RFP process? Is this something that is going to continue going forward? Or is it something that's probably on its last legs?

Rush Feldhacker 01:40
Well, first, thanks for having me on today, excited to discuss this with you. Annual RFPs have been a staple of this industry for a long time, but I do think they are and will continue to be replaced by shorter bid cycles.

Rush Feldhacker 01:52
Especially when you look at the market now. As we see the steep decline in freight rates, shippers are incentivized to perform RFPs more frequently to lock in those better rates as the rate ramp goes lower and lower.

Rush Feldhacker 02:03
But even during the last few years, which saw rapidly increasing all time high rates, a lot of shippers felt their bids became quickly outdated. And more and more of what was previously contract freight was working its way to the spot board.

Rush Feldhacker 02:15
I think the primary deterrent keeping shippers from doing multiple bids in a year has been resources, money and time. But now with the tech in the space, and with the RFP management solutions available, that becomes a lot less of a burden.

Rush Feldhacker 02:31
So I do think the annual RFP is dying, and more and more shippers will go to shorter bid cycles, especially in times of high volatility, like we've seen the last two to three years.

Marney Edwards 02:43
Fantastic. And Dennis, what is JBf saying from the shipper side on this area, what are some of the changes in processes? What are they doing differently?

Marney Edwards 02:57
Thank you as well Marney for just this partner chat today. Tagging onto what Rush just finished his answer with is market volatility. It's a huge concern. And our shipper clients are seeing that it's becoming more of a transactional relationship versus more of a true relationship with their carrier base. So that's one.

Dennis Heppner 03:29
Yes, the annual bid seems to be dying and not for everybody, there's still some part of the market that is fine. But they generally just don't work anymore, because of the what we call the paper rates became very quickly. And we see that with shippers jumping from contract to spot and back and forth over the last couple of years.

Dennis Heppner 03:59
Additionally, some of the other things in the RFP guidance perhaps some of the traditional tools out there just weren't nimble enough. They couldn't react quick enough and there were still a heck of a lot of work that had to be done. Front-end data prep, and then back-end scenario management and then ultimately loading by rates.

Dennis Heppner 04:28
Another point is our shipper clients want to be exposed to the larger carrier market. They want to know who else is out there that can provide them the service rates and capacity that they are looking for. And it's very time consuming to go out and do that research and find them.

Dennis Heppner 04:51
And then I alluded to a moment ago finally is doing that scenario management. So if I put different constraints on the biz said I get back and I say things like, I want to have a certain percentage of my awards go to minority-based, or minority-owned carriers. What does that look like? What's the impact? Is there a smart way here, whatever it might be, I want to be able to do that analysis. And so with tools that are available now, I can do that. And I can do that much more quickly. And more cost effectively.

Marney Edwards 05:27
Got it. Thank you, Dennis. So jumping back to you Rush, nobody likes change. I don't like change, change. This type of change is hard. It's never easy. Are there positive impacts to those organizations. So those brokerages that are shifting to the shorter bid cycle?

Dennis Heppner 05:45
Yeah, this is definitely going to have an impact on all brokerages. And I think it can be positive or negative based on how you situate yourself knowing the changes coming.

Rush Feldhacker 05:54
So the old customer sales guy, and he kind of cringes when I think about doing two to four times the amount of bids as I did in the past. But I think the days of having a sales rep stay late to plug in 1000s of manual rates into an excel sheet only using DAT are over. And that's a good thing. So this change doesn't necessarily have to be bad.

Rush Feldhacker 06:15
But if I owned a 3PL right now, there are definitely some questions I'd ask myself. They would center around customer relationships, data and then carrier sourcing. And I'll start with data. The first thing I'd want to know is do I currently have the tools to quote these bids in a timely and accurate way?

Rush Feldhacker 06:32
Second would be people. Do I have a pricing director or pricing team know I'm gonna have to bid a lot more often? Where am I going to stay with having a ops rep or a sales rep, quote, these noises gonna take a lot more of their time, and probably wouldn't be as accurate.

Rush Feldhacker 06:47
And then how good is my internal data? Do I have good data integrity? If my rep looks up a lane from Atlanta to Dallas in the system and gets a rate per mile? Can they have faith in that number? And is that number accurate? Or is that number going to be skewed because things haven't been marked correctly in the system. And they're pulling in a lot different mode types, whether it's partial or LTL, that's going to throw that number off.

Rush Feldhacker 07:11
So then you think about customer relationships, obviously, those are always critical. But they're even more critical now. And the talking points are going to change a little, because bid strategy is going to have to become a larger part of the conversation since it's going to be going on more frequently than just once a year.

Rush Feldhacker 07:29
So you're awarded lanes are going to be constantly under attack now. It's not just a once a year thing. When brokers have these awarded lanes, a lot of times they have these set to carriers as dedicated lanes. So those are very low cost to serve loads for a broker, they want to hold on to those. But their network density is also dependent on having those loads and networks. So if they can count on having three trucks go from Chicago to Milwaukee every day for a customer, they probably have loads back for those carriers from Milwaukee to Chicago that they're also going to have at risk.

Rush Feldhacker 08:02
It's important to have that relationship with their customer where they can go and negotiate with the customer to leave certain lanes off of the upcoming bid, or can at least have the option to maybe match a rate to keep those lanes within their network.

Rush Feldhacker 08:16
And then capacity sourcing and procurement becomes even bigger because if you have a brokerage, there's a St. Paul to Reno that you haven't run, ever and you get awarded that you have to spin up capacity for it really quick, you need to do that in a way that doesn't cost you a lot of money or resources because three to six months down the road, you might not have those loads in your network anymore.

Rush Feldhacker 08:37
So from a brokerage perspective, the game is changing. The buttoned up brokers with high data integrity and strong sourcing and pricing departments are going to be at a distinct advantage, especially if they have strong sales teams that view this as a positive that they're going to be able to go out and attack other's lanes and rake in more contract business right now. Which is what brokers ultimately want right now is more contract business and less spot. So it can definitely be a positive. It's just making sure that you're positioning yourself to take advantage of it.

Marney Edwards 09:09
Got it? Thank you Rush. So Dennis, kind of the same question. You work with large shippers, ocean, drayage, and all sorts of stuff, very complex processes. Are they seeing a bit of benefit from an assorted bid cycle as well?

Dennis Heppner 09:25
They are and I'll answer that one in two ways Marney, and let's just focus on for the just for the sake of our discussion here on truckload. From a from a macro perspective, and what we talk to our clients a lot about when we engage with them to assist with this process and using a technology such as RFP guide is:

Dennis Heppner 09:51
They're going to get some repeatable processes that they're going to have in place so they can very quickly spin up another bid, and start looking instead of the entire network, looking at subsets of the network. It might be a certain geography or whatever it might be.

Dennis Heppner 10:07
Also the flexibility that I have if I'm doing a good job of looking at my historical data, and I recognize some trends or patterns, that I can spin up a bid pretty quickly to try to address that. Obviously, speed to contracts is huge exposure to new carriers and in capacity,

Dennis Heppner 10:33
Ultimately being technology geeks that we are, we want to see that integration of the bid event tool into their TMS. So not only do we get these rates, we can actually use these rates.

Dennis Heppner 10:48
And then from a relatively micro perspective, with some of our shipper clients, obviously they're seeing big results, right. They're getting big rate improvements. They're getting some capacity they maybe weren't aware of, or they didn't have this visibility previously. And they're getting some new carriers into the mix. And that's not a bad thing. Competition is a good thing.

Dennis Heppner 11:15
Many of our shipper clients, it's been a cost avoidance, frankly. It is kind of holding steady instead of just being at the mercy of the market.

Dennis Heppner 11:27
And the final one that I'll mention is getting a larger mix of asset-based carriers, brokers, different regional carriers, local carriers, national carriers, whatever it might be. Just to get a diversity in my carrier base. And again, that to have that visibility to that is a huge value to them.

Rush Feldhacker 11:55
Fantastic. Rush, Dennis, thank you so much. Really appreciate the time. Appreciate you joining us on the Loadsmart partner chat to talk about the annual RFP process

Marney Edwards 12:06
To kind of sum it up. I think we're really three kind of themes that came out of it.

Marney Edwards 12:11
1. you really need to find a tool that's easy to use that not only IT can use it but the front of the line business folks can improve procurement can also leverage it.

Marney Edwards 12:21
2. you really need to find something that's great specific, something that really focuses on this industry.

Marney Edwards 12:27
3. And then third, I think Dennis and Rush both alluded to this is it's it's important that this thing be compatible or somehow integrate in with your current IT system.

Marney Edwards 12:39
Again, thank you for joining us have a great day.

 

About JBF Consulting

Since 2003, we’ve been helping shippers of all sizes and across many industries select, implement and squeeze as much value as possible out of their logistics systems. We speak your language — not consultant-speak – and we get to know you. Our leadership team has over 70 years of logistics and TMS implementation experience. Because we operate in a niche — we’re not all things to all people — our team members have a very specialized skill set: logistics operations experience + transportation technology + communication and problem-solving skills + a bunch of other cool stuff.

About Loadsmart
Loadsmart is a logistics solutions provider automating how freight is priced, booked and shipped. Whether through digital brokerage, freight procurement tools, dock scheduling software, truck management software, managed transportation services, freight and network optimization or custom solutions, our shippers and carriers move more with less.

About Metafora

Metafora, previously "CarrierDirect", is a business consulting and software development firm that exclusively serves the transportation, logistics, and supply chain space. Metafora partners with carriers, shippers, and freight tech vendors to help them optimize their business and build software to fuel their growth. Metafora+ is their partnership network for the thinkers, the leaders, the innovators in the logistics space.