Why do most shippers choose to utilize RFPs on an annual or biennial timetable? Typically, they go to bid to reduce their rates; to feel out the market and to see which carriers are hungry for freight and willing to offer aggressive pricing to get it. Historically, this has worked well for most shippers, but in today’s market – is this the right short term/long term strategy for ensuring an efficient supply chain? That is the question we will examine, and if a RFP is in your future, I will also point out some key things to think about as you (the shipper) prepare to move forward with it.
In today’s environment, carriers are implementing and holding on to their GRIs, implementing increases on contractual pricing at all time high percentages and being very particular in the type of freight profile they bring into and grow in their network. Because of this, I suggest that now is not the best time to go to RFP. In today’s rapidly expanding market (in part the result of an e-commerce boom) coupled with carrier capacity that is contracting due to increased demand, I believe that most shippers are better off getting strategic with their current carriers.
There are a few different ways to think about LTL carriers and how they price. First, they like certainty. They plan their network based on a multitude of factors, but at the end of the day, they want full trailers moving in lanes that generate enough revenue to ensure appropriate margins. Second, shippers should digitize as quickly as possible to help their carriers plan their networks. Third, shippers should ensure they understand their carriers’ networks and work to grow freight in lanes where that carrier needs it and minimize volumes in lanes where carriers are struggling for capacity. And finally, Shippers should work with carriers at origin and destination to provide as much data as possible, so that their carriers are never caught off guard. When asked what success looks like in a shipper/carrier relationship, my response is always… “no surprises!”
If shippers invest more in their current carriers, not only will they reap the short-term benefits of not having to deal with “cost of change”, but they will also develop true business partners who share common goals, which is a much better long-term strategy than treating carriers as commodities. 100% of the time I will choose a strategic relationship over a transactional relationship.
However, there are still times when a RFP is necessary. At GMT, we strive to create strategic relationships, and our Contract Management service is designed to help shippers in that endeavor. GMT also provides RFP assistance that is designed to generate savings but will also drive better strategic outcomes.
So, why look to GMT for LTL RFPs? We look at the shipper/carrier relationship differently than most. We base our recommendations on strategy, efficiency, and cost effectiveness. For example, one of the biggest myths in LTL shipping is that “the more you ship, the better your discount will be”. The truth is with large mega LTL shippers, once past a certain point of diminishing returns, the volume becomes a much smaller factor in determining rates. At this point, the best deals result from taking a deeper look at data, shipping characteristics, and determining how they match up against carrier cost drivers, network capacity, and its own unique needs.
So, whether you are looking to develop long-lasting strategic relationships with your LTL carriers or have a need to expand/contract your LTL carrier network, GMT has a solution for you. If you have any questions, or would like more information, please reach out to us at GMT for a brief meeting where we can explain all our offerings.
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