When most shippers and carriers hear RFP, I’d venture to say they automatically assume one of the two is going to come out on the short end of the deal. That’s a valid assumption. I will argue though, that it doesn’t have to be that way. It has always been my position that RFPs should be mutually beneficial and should have the purpose of ensuring success for both entities.
I know what you’re thinking. An RFP is designed to drive the lowest possible cost for the shipper. If that’s you’re only objective in an RFP, you really need GMT to help “right think” your LTL program. There is so much more to an RFP event than cost, which we’ll get into a little later.
If you’re a carrier and you receive an RFP, your immediate thought is probably oh boy, here we go and we’re going to lose margin/yield to keep/get this business. I know this is how Pricing departments tend to think. I spent over 20 years leading a Pricing team and constantly had to explain why this is an opportunity, not an inconvenience. This is your opportunity to display all the great things you do. It’s also an opportunity to help paint a picture of your network and where you have capacity and where you don’t. Let’s face it, there are enough carriers out there to fill the lanes where you simply don’t have the capacity to price to the expectations of the shipper. That’s a good thing and should be viewed as such. Long gone are the days of wanting every single piece of business a shipper has.
We are all so much more strategic today. There is so much more data available, that allows us to make data driven decisions than we had even just a short decade ago.
An LTL RFP should be viewed as a tremendous opportunity by both shipper and carrier to work together to build a better, longer lasting, financially beneficial partnership. That’s exactly how we view RFPs at GMT.
As a shipper, you should be constructing the RFP to determine everything you need to know about the carriers you’re sending it off to. Here is a list of things we suggest….
- Require a breakdown of each carrier’s technology capabilities (API’s, eBOL’s, capital investment in upgrading technology, etc.).
- Base Rates – be adamant in your required base and ensure carriers are willing to use and adjust/tier pricing to accommodate of their own geo strategy.
- If you have special handling needs, be clear about them and ensure the carrier can handle.
- Be clear about your liability needs and ensure they align with the carrier’s liability limits.
- Know your cost of late deliveries, understand the real on time percentage of the carrier and make sure that is covered in the RFP and/or the RFP response.
- Ask carriers to clearly articulate their needs and strengths/weaknesses.
- Equally as important as any of the above, be willing to explore dimensional based pricing and consider a move away from the antiquated class-based rating system.
As a carrier, this is your chance to boast about what you do, what you’re great at, why you’re better than the competition. Embrace this as the perfect opportunity to work hand in hand with the shipper to strategically chart the course for the next 12 to 24 months (the term of your agreement). This is your opportunity to right size your partnership with the shipper. Make sure they know what lanes you want and what lanes cause issues in your network. Don’t be afraid to put a price out there that you know will generate your target margins. It is incumbent on the shipper to decide if they’re willing to pay that rate or not. Good partners will understand this and appreciate the transparency.
Carriers shouldn’t rush through an RFP and view it as an inconvenience. It’s not…it’s a huge opportunity to get things right!
So, why GMT for LTL RFP’s and Spend Management…. First, we work with both the shipper and the carrier to get things right. We don’t negotiate rates, we don’t re-sell rates. We facilitate a data based/needs-based shipper/carrier LTL partnership. Yes, we look for savings for LTL shipper clients, but we don’t do it at the expense of a single carrier.
Once the RFP is complete, why select GMT for LTL Spend Management? Here you go…
Audit/Freight payment/spend management is a collection of processes that can be thought of in general terms as an accounts payable service for transportation invoices. Freight audit service providers such as GMT, act as the intermediary between the shipper and the carrier to receive, process, and facilitate accurate payment of invoices. Every company is different, so some processes may vary slightly, but typically invoices are sent directly to the freight payment provider by the carriers (as is with GMT). Upon receipt of the invoices the following processes will be included with GMT.
- Invoice Receipt – Carriers submit invoices to GMT in a variety of formats for processing. Typical methods include manual invoices sent via the mail or email and electronic invoices sent via EDI/API. Obviously, GMT will prefer automation through EDI/API’s.
- Invoice Validation – Upon receipt of invoices, GMT will validate and audit each invoice to make sure that the invoices have not been previously processed (duplicates), are the shipper’s responsibility to pay (billed correctly), and include proper/necessary documentation. Additional shipper specific validations are frequently included in the process such as the validation of bill of lading or purchase order numbers against a shipper’s internal data sets.
- Data Capture – Unlike the limited fields of information typically captured in an accounts payable process, freight payment services from GMT capture comprehensive data elements from the freight invoices and supporting documentation to create a reporting database. Shippers will utilize this business intelligence to analyze and manage their supply chain activity. GMT will also incorporate the shipper’s internal source data in their data capture to further enhance reporting. In this case, shippers would provide GMT with electronic data which is matched to freight invoices and can be extracted to be included in the GMT’s reporting database.
- Rate & Service Audit – During the implementation process, it is possible that GMT (upon shipper’s request), using our expertise in carrier relationship management will utilize our knowledge to provide direction and best practices in order to maximize savings in shippers carrier selection process. GMT or shipper will secure either a base rate or get multiple and specific lane pricing through an RFP (request for proposal). It is also an option that shippers provide GMT with a valid set of rates and contracts for each carrier they utilized. Valid invoices are subjected to a detailed audit of all charges presented on the freight invoice to ensure all charges are billed correctly.
- Cost Accounting – GMT will apply the proper general ledger code(s) to freight invoices based upon the rules provided by the shipper. These rules are typically driven by data elements present on the freight invoice or can be determined by “matching” an invoice to a shipper’s internal data and extracting the proper code(s).
- Exception Management – Exceptions occur quite often for various reasons. The most common exceptions include incorrect billing by the carrier and inability to derive the proper cost accounting rules due to missing or incorrect data. GMT will focus on proactive management and resolution of exceptions.
- Payment – Upon completion of the above processes, GMT will typically “close” once a week and issue an invoice or request for transportation funds to the shipper. Upon receipt, the shipper will validate the request and issue funds to the freight payment provider (GMT or otherwise) who will then disburse payment and remittance details to the carriers. Solutions that utilize 100% electronic payments are preferred as they are more secure and efficient than paper check payments.
- Business Intelligence – Shippers and carriers are provided with access to online reporting tools as part of GMT’s solution. What separates GMT is the level of detail revolving around modeling improvements, identifying cost and service improvements and our expertise in building the very best agreements tailored to your unique LTL strategies.
Learn more about GMT’s powerful RFP and contract strategy solution.
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