RFP, RFQs a strategy to secure direct freight?

Carriers who are looking to build a direct customer base, and brokers looking to expand their reach can and should look directly at shippers specific RFP processes. This can be a great way for a carrier or broker to grow their market share with shippers. There are challenges with RFP and ensuring you manage them properly. Believe Kevin provides a great approach and service assisting carriers and brokers navigate what can be a challenging process.

A carrier’s approach to growing their business through long term contracts

By Kevin Miles

One of the biggest challenges in full truckload transportation is the pricing cycle.  Rates fluctuate throughout the year and are affected by macro and micro economic conditions. Determining how to price freight movements involves multiple factors and can be time consuming. This can be even more a challenge when completing an RFP in October or November when the freight implementation day is February the following year.

As a small or medium sized company, it’s important to have a strategic approach to maintaining and growing your business. Do you understand your full costing, what your costing will look like in 90-120 days? These are valid concerns for transportation companies.

Current conditions and historical market rates our readers can access DAT Analytics with Ken Adamo , as well Internet Truckstop Group LLC for historical data.

According to DAT, ITS market rates are in line with 2019 or slightly above based on mode and lanes. This creates challenges for independent owner operators, small carriers and asset-based companies trying to cover their expenses, and grow their business.

In the short term, it’s convenient to look for loads on the spot market. Either through load boards or relationships with shippers and brokers. The downside is that this is a transactional situation that changes often and can create additional work for a carrier. This creates a fronthaul opportunity, but then the carrier must find a load that will return them to where they are domiciled. The biggest challenge is transportation companies when spot market is below cost it is not a sustainable model for carriers.

An alternative to spot market pricing is contract or dedicated pricing. Contract pricing creates a bit more stability and predictability. As its name implies, it creates a contract with a given price for a longer period of time. Typical contract lengths are 3, 6 or 12 months, this model is far more sustainable, asset carriers and brokers can budget around contract or dedicated freight.

Like most things in trucking, there are pros and cons to contract pricing:

Pros

1. A carrier can establish stable rates that can be perceived as favorable to the shipper.
2. Consistent volume reduces the time and expenses that would go into finding new business.
3. Relationship building could lead to additional opportunities for the company.
4. As a company gets familiar with a Shipper, familiarity improved service for the shipper both at consignee and shipper.
5. Improved business operations will reduce stress of determining the current rate, allowing a company to be more strategic in growing their business.

Cons

1. There is no guarantee that the loads won will materialize. If there was a waterfall method used, the loads available might not warrant tendering to every carrier that won.
2. Volume might not materialize due to external factors outside of the shipper’s control.
3. A company might begin building up a carrier network in preparation of new volumes and lanes. If the shipper doesn’t deliver, this could damage the relationship between carrier/broker or carrier/shipper.
4. In certain cases, a company might buy equipment in anticipation of contract volume.

Strategies to stand out

1. Know your service levels. On-time pick-up and delivery are crucial in a fluid supply chain.
2. Focus on your core regional, or lane strengths. Shipper value carriers they know can handle certain lanes well.
3. If possible, look at other equipment types than dry van. They can be a differentiator and lucrative.
4. Build relationships and trust so shippers/brokers see your company as an excellent partner.
5. Utilize technology to save your company time and money.

If more predictable revenue is your company strategy for 2024, it is worth looking into shipper RFPs. RFPs generally for 2024 are out now, are you engaging, looking for these opportunities? If you are looking to avoid Cons and pitfalls you can contact me for a consultation to develop a strategy to improve your company revenues.

Kevin has worked for shippers developing RFP strategies for shippers. With his new company he is working with carriers and brokers to help transportation providers to secure dedicated freight during the RFP season.

Balance of December we will be focused on family and peak season. Will rerun a few older for December and start fresh again in 2024.

Have a Safe and Happy Holiday all