How To Run an RFP: Best Practices for Requesting Proposals From Carriers

In the shipping and fulfillment world, an RFP can refer to either a request for proposal or a request for pricing from whichever providers you choose, such as carriers, a 3PL, or a SaaS. Some other similar terms are RFQ (request for quote) and RFI (request for information).

• Request for proposal: A request for a detailed proposal from the carrier or provider.
• Request for pricing: A straightforward request for pricing, such as price sheets.
• Request for quote: Similar to the above, potentially more customized than standard pricing.
• Request for information: Usually an interim request around capabilities.

There are some nuances with these common terms, but they are all formal requests for further details from providers. For the sake of this article, we will treat RFP as representing “request for proposal” and the advice in this article is for shippers running an RFP for carriers.

Running an RFP is a critical step in finding the best carrier partner for your situation.

RFPs are a best practice for shippers to understand and manage their small parcel supply chain, so that when changes are imposed in the marketplace, carriers have a fiduciary obligation to their customers to provide as much value as possible.

In this article, we’ll take you through key steps to preparing for an RFP and best practices for running one.

How to prepare for an RFP as a shipper

Before running an RFP, there’s some basic preparation you need to do for the best results. By equipping carriers with strategic and robust data about your business, goals, and ecosystem, you give them the information they need to present the best proposal possible that suits your unique situation.

1. Understand your shipper profile

Know what you look like as a customer from the carrier perspective. Different carriers have different ideal clients, and so you need to present your business through their lens.

For example, some carriers prefer parcels between one and nine pounds. Other carriers, such as regional carriers, require shipments to be in certain zones. Some carriers excel at ground, others want to build their express (fast shipping) services.

Different shippers will look more or less attractive to different carriers, depending on what they want (after all, carriers are businesses, too).

Some questions to ask yourself are;

• What is your total annual spend?
• What carriers do you use today?
• What’s your carrier modality breakdown (land, sea, air)?
• What shipping tools make up your tech stack?
• What are your shipping characteristics, such as weight and zone distribution?
• What is your annual shipping spend?
• Does your spend spike at any given season and by how much?

This gives carriers a clear understanding of how you will fit into their revenue and goals, how much they want your business, and what they’re willing to offer your particular shipper profile.

2. Audit your current contracts

Understand where you are within your active carrier contracts and pricing agreements. If you’re looking to switch carriers but your shipping spend is locked into one for the next year, any carrier presenting their proposals will need to take that waiting time into account (unless you can negotiate an adjustment based on things like past performance, financial needs, and other compelling factors).

You should also check for any terms and conditions that may apply. For example, some carrier contracts prohibit shippers from running an RFP until there are only so many months left in the contracted term.

This will give carriers a clear understanding of how soon you can feasibly enter into a new agreement, any barriers such as contract renegotiation that will risk your business, and they’ll be able to temper their offer accordingly. This step is important to set expectations and maintain good relationships with both your current carrier providers and any new partnerships.

3. Articulate the drivers for the RFP

Explain your driving reason for running an RFP. You need a credible basis for doing this, both to maintain your reputation in the industry and because a frivolous reason will indicate you’re not a reliable client for any carrier that can read between the lines.

Are you coming to the formal end of your agreement, having fulfilled your contracted obligations as a shipper? If so, it’s prudent and understandable to run an RFP to reassess the market and your options.

If not, look at your current carrier performance. Did they breach the service level agreements with too many late or incorrect deliveries that are costing you significant revenue? Are they too difficult to get in touch with when you or a buyer needs customer support?

This will help carriers understand what you’re like to work with, and any non-negotiables they need to deliver on. For example, if you’re finishing a carrier agreement, others can see you as a reliable shipper. If you are running an RFP because your current carrier cannot serve your emerging business in a new zone, carriers will understand service to that zone is non-negotiable.

4. Identify the objective of the RFP

Explain the overarching goal of the RFP for your business. Is it purely economics, to drive the lowest rate? Or are you trying to solve other issues?

For example, are you seeing a less-than-desirable client experience that’s lowering your customer lifetime value? In that case, your objective might be to find a more robust transportation solution that can lower your claims rate, fix poor package tracking, and reduce where-is-my-order tickets.

This information helps carriers envision your overarching objective, and allows them leeway for creativity when it comes to solutions. One carrier might propose one way to achieve your objective, whereas another would propose a different route that plays on different strengths.

5. Detail your operational goals

Discussing your operational goals can also help paint a picture within your RFP. This is slightly different from your overarching objective, since you would be going further into the details and specifics of what you want.

For example, are you trying to increase your shipping nodes so your inventory sits in multiple locations, increasing your 2-day delivery coverage or carrier selection?

Say you ship from a single location, such as Salt Lake City. That would limit the carriers you can use. With that geographic setup, you can assume 70% of your domestic parcel distribution will head East following the U.S. population demographic to reach the end consumer. That takes many great regional carriers off the board, such as those that focus on western states.

Laying out what you’re trying to achieve operationally allows carriers to self-select or self-eliminate if they aren’t able to provide what you’re looking for.

6. Explain where you’re trying to get to

This step looks further than operational goals, and even further than just the RFP objective. Take a look at your business as a whole and share where you’re trying to get to.

Building on the example above, do you use a single carrier today and want to become a more resilient business with more contingencies? Or, are you spread too thin and need to consolidate? Or are you trying to maintain the status quo and find a sustainable way to keep everything more or less steady where they are?

This will help the carriers look beyond just the RFP and understand your goals as a business. With this knowledge, if there’s a chance they’ll be able to help you in more ways than you would have expected, those carriers are likely to bring it up.

7. Analyze market conditions

After you’ve analyzed your internal data, explained the driving factors behind the RFP, and laid out goals and objectives, it’s time to take a look at market conditions.

How is the small parcel market on a macro level? Is it a buyer’s market (great for shippers) or a seller’s market (great for carriers)?

Today’s market is more of a buyer’s market, which means many carriers are fighting for an especially limited shipping volume from brands and 3PLs. This should frame how you approach the RFP, allowing you as the shippers/buyers to further leverage positives for the carrier, such as consistent volume and a reliable revenue stream.

8. Explain your shipper ecosystem

Finally, you must understand what’s happening in your ecosystem as a shipper.

Are you a retailer that is winning or losing market share? If you’re losing market share, who are you losing to and why? Is it due to lack of retention from poor delivery experience, or high cart abandonment from not enough shipping options?

Have there been changes to your organization’s leadership you could leverage? For example, a credible reason for renegotiating a carrier contract early is being owned by private equity with a newly appointed CEO whose mandate is EBITDA improvement.

Who are the responsible parties for reviewing and approving a new carrier mix? What is the escalation plan? Know how you should implement the new carrier strategy to avoid disruptions and facilitate a smooth transition, and what resources you’ll dedicate to ensuring the plan is followed.

What do your existing carrier relationships look like, and are there shortfalls you can exploit for your benefit? For example, does your contract outline a certain on-time delivery rate that the carrier has failed to meet?

All of the above is going to help you plan out your RFP, who you’ll share it with, and how to present your RFP in a way that generates the most success.

How to run a carrier RFP

Running a carrier RFP requires deep expertise to understand what a business looks like to carriers, and how your parcel profile might be interpreted in the current economic and market position.

We recommend working with an expert to ensure you present your data well, truly analyze and understand carrier proposals, and negotiate strategically.

Here are the practical steps for running an RFP and presenting all of the above.

1. Define your scope and objectives

Before you begin, clarify why you’re running the RFP. Chat with your team (and customers if possible) to determine where you can improve and what your RFP objectives should be.

Determine your specific requirements, such as modes and geographies you want the RFP to cover. You should also clarify if you want to run an RFP for your full shipping business or only certain areas, such as zone or service level.

Draft up a timeline and align with finance, operations, customer service, and your legal team to review your scope, objectives, and your initial plan.

2. Gather your shipping data

Compile six to 12 months of clean shipping data, including origin and destination, weight, dimensions, volume, service levels, spend, claims rate, on-time delivery rate, and more.

You need to think strategically to know how to slice your data so it’s most informative and actionable for your case.

For example, if you are having trouble with deliveries to certain zip codes, you may want to segment your data by zone and analyze performance that way.

Or, you may have noticed your shipping costs have gone up 30% more than expected, so you call out surcharges, accessorials, and additional costs to highlight them.

Tip: iDrive can help you organize your data to frame your strengths and weaknesses, goals, and more.

3. Build your RFP package

Then it’s time to gather all of your data and information that we went over above to present to carriers.

When you run an RFP, you want to frame an initial request to the market that clearly shows;

• Who you are, from your shipping profile to business overview
• What you look like from a small parcel perspective
• Why you’re a desirable customer for carriers
• The problems we’re trying to solve for (based on your business plan and competitive landscape)
• Specific rules you’d like carriers to adhere to, such as operational goals
• What you hope to accomplish with this RFP and for your business

Including all of the above will give carriers a good understanding of your company, what they can or can’t do for you, and what’s the best proposal they can offer for your profile.

4. Select and invite carriers to participate

Then you need to invite carriers to review your RFP and send in their proposals. There are situations where you should be strategically selective with who you invite to participate, and there are other situations where having a wider range of options will help you formulate the best mix in the end.

Your situation is unique, so we again recommend working with an expert who can advise you of the best course of action.

iDrive Logistics has deep, long-standing relationships with global, national, and regional carriers built on years of trust and mutually beneficial business. Reach out if you’d like help with your RFP strategy and carrier analysis.

5. Optionally, meet with carriers pre-bid

Something we’ve found beneficial is meeting with carriers before they bid. This gives both shippers and carriers the opportunity to get to know each other and ask any clarifying questions. You can take this time to explain how you gathered your data, clarify your desired timeline, and explain any relevant existing carrier contracts or clauses.

However, we only recommend this if you have a professional advisor on your side guiding the conversation. That expert should understand your entire business and shipping needs even beyond the RFP, so they can facilitate the discussion to be the most beneficial.

If you jump into carrier calls without the knowledge and experience of having negotiated with carriers before, you could make mistakes that put your RFP process at risk. For example, you may want to run an RFP just for a slice of your business, such as a mode, zone, or package weight. If you reveal your full shipping business to carriers, they could adjust their proposal to be the most beneficial if you also give them the shipping business you didn’t want to move.

6. Collect and validate carrier proposals

Gather all of your proposals and validate key information such as accessorials and surcharges. Confirm the proposal covers everything you asked for and adheres to your must-haves.

Engage with carriers as needed for any clarification or confirmations, and get everything ready for review.

7. Analyze their results

When you have all of your proposals in front of you, it’s time to dive in. Plan to spend a lot of time here, and again engage with an advisor as much as possible to help you analyze the results.

Model what each proposal would look like for your business, paying attention to total landed costs. Evaluate any costs versus service trade-offs, such as one carrier offering a better price but having lower service metrics.

Identify your ideal carrier mix, looking at whether a single carrier arrangement still serves you or if it’s time to go multi-carrier. Consider expected savings from staying loyal to a single carrier, switching from a single carrier to another single carrier, and switching from a single carrier to multiple carriers.

Consider any qualitative factors such as reliability, claims ratios, customer support, and whether you enjoyed working with the team (or alternatively, if they submitted their proposal late and full of errors).

Tip: Don’t forget about their tech integration. How easy will it be to slot their shipping rates into your existing tech stack? Do you have a TMS that can manage multi-carrier rates on your behalf?

8. Select finalists and negotiate terms

Some shippers see a carrier proposal and accept it as the best they can do. However, negotiating carrier contracts is one of the key steps of the RFP process that sets successful shippers apart.

Especially if you are shipping at the $1 million and above mark, carriers will be flexible with their offerings. The key is understanding what parts of the proposals are negotiable, which ones are red flags, and what tradeoffs you can make to get the best setup.

For example, are you willing to accept a lower discount rate in exchange for a surcharge waiver?

Keep the tone of these negotiations collaborative. Strategic carriers respond better to partnerships rather than price pressure.

As with all of the other steps above, having an advisor during your contract negotiations can make the difference between learning by making expensive mistakes or having a game plan from the start.

Tip: Visit our free resources page for an email course on understanding carriers and contracts.

9. Implement your new carrier strategy

Now we get into the execution part of the RFP, which could be an entire guide on its own. Here are the most important aspects of implementation.

Notify the carrier(s) you chose and the ones you didn’t. Everyone who took time to review your RFP and put together a proposal deserves to know the results, so be sure to close the loop and thank every participant for their efforts.

Finalize your contracts and agreements. Go over everything three times with a fine-toothed comb. This is a critical step, and you don’t want to overlook anything that will come back to haunt you later. Learn about the common clauses carriers use to lock you in and go into the agreement with full understanding (to avoid unpleasant surprises later). Those clauses aren’t necessarily bad, but you should be sure to balance them.

Set up your tooling and technology, and focus on a slow, deliberate, and then stress-tested rollout before you fully go live.

Communicate changes internally with your team, such as marketing (just in case you list carriers you used to use anywhere in your public communications), finance, customer service, and operations. Train your team on any new processes.

10. Set regular review periods

The start of a new partnership is a great point to set expectations. Running an RFP and successfully working with carriers is not a practice you do once and then forget for the next three years.

Clarify that part of your requirement is that you expect and demand a consultative and collaborative partnership that involves regularly scheduled business reviews, so you can set the stage for micro-improvements throughout the partnership as the landscape shifts and things happen.

Monitor your actual versus modeled cost savings, service performance, and carrier compliance. Document lessons learned to go over each meeting.

Carrier collaboration is an ongoing optimization process and relationship. Treat it as such and your business will reap the rewards.

Best practices for running a carrier RFP

This article wouldn’t be complete without a bit of our secret sauce. We have years of carrier contract negotiations under our belts, and much of our team comes from carrier backgrounds. Being so deeply embedded in the ecosystem comes with a lot of learnings that would benefit any shipper.

Below are some best practices for running a carrier RFP that we share (and facilitate) with our own $1M+ shipper clients.

Identify your challenges in advance

Something shippers must stay on top of is their operational limitations and unique challenges to running and RFP and working with new (or multiple) carriers.

You must understand the technological and operational limitations to making any planned changes. For example, are you dependent on a carrier-owned technology that you cannot easily separate from your shipping operations? And does the carrier know that, so they can leverage it in negotiations?

What operational concerns and complexity will you run into when bringing in another carrier? This can be as simple as identifying you have a door in your warehouse or facility that can accommodate another truck at the same pickup time.

Or, have you used any carriers in your marketing? For example, do you say “We proudly ship with Carrier XYZ” in your welcome email, or FAQs? Is your marketing strategy in conflict with the operational changes you want to make?

Knowing what to ask and where to look for challenges will help you identify them well in advance of carriers trying to leverage them. It will also protect you from getting to day one of the new contract then finding out it won’t actually work due to an oversight.

Identify any concessions you’re prepared to make

You want to choreograph in advance what you want to happen during the RFP and beyond. This includes any trade-offs you’re willing to make, and what you want to get from them.

Have a pre-choreographed concession and series of potential situations you could orchestrate. For example, your shipping profile might be highly susceptible to the fuel surcharge and want to lock-in the current measurement tables and percentages. However, you could concede that request in exchange for the carrier solving the root problem, which is the additional, unexpected expense.

You might go to your carrier and explain that fuel surcharges have cost you an extra $1 million than planned in the last year, and ask if they can remove fuel. The carrier might then tell you that isn’t possible, to which you can then ask if they can work with you to find $1 million in savings another way instead.

Another example we’ve orchestrated is that we know a certain carrier wanted a client’s LTL business for orders exceeding 150lbs. We were able to use that as a concession and agree to send all of those parcels into their LTL network in exchange for more desirable rates.

Work backwards from what you want

Something else we do with our clients is working backwards from their goals. For example, if they want to add a regional carrier we plan out how the conversation will go with their existing national carrier, who has most of their small parcel business already.

In this case, we would separate out the part of business we want to give the regional carrier, say 30% of total parcel spend, and only allow regional carriers to bid on that.

Then, we would go to another national carrier with the remaining 70% of the shipping spend and ask for their best, most competitive rates.

Because we did the work and analyzed the data, by the time we come back to the original carrier, we can present a very different business case than if we didn’t plan everything out in advance.

Without planning and research, we would need to go to the original carrier and say “we want to add a regional carrier, so we need to remove 30% of our business from your network.” Your original carrier may even find a way to increase your rates and claw back that 30% of revenue in additional fees.

Having gone through the planning, we can go to the original carrier and say something like “looking at our data from the last few years, our shipping spend in this zone has gone up by almost 40% due to residential surcharges, and it’s more than the business can sustain. Instead, we’re moving that zone to a regional carrier to the tone of approximately 30% of our total shipping business. We like working with you and want to continue, but if that isn’t possible we will need to make a switch to stay in business.”

In the second scenario, one of two things will happen. Your original carrier will not accept, and you go with the alternative carrier you have already prepared. Or, your original carrier will recognise that losing 30% of your business is better than losing 100% of it, and they will concede so you end up with the situation you wanted in the first place.

Important to note, sometimes carriers that lose a portion of your business find other ways to make up that revenue, so you should work with an expert to ensure you’re protected from this situation. For example, if the original carrier says “that’s alright but we’ll need to move you back to published rates,” of course we would advise against it since you’d be spending more than ever.

This approach requires a lot of expertise in data analytics to accurately portray your business situation and protect your margins, so again, work with an expert where you can.

Don’t force carriers into a box

Something we always recommend that you may not hear elsewhere is do not provide a rate template that you require carriers to populate to participate in your RFP.

This signals to carriers they’re nothing more than a rate to you, whereas the most successful contracts are between partners. Carriers will use all of this information, including how you perceive a shipper-carrier relationship, to gauge their potential success in your RFP and subsequent contract.

Instead, create your business case and then allow carriers the creativity and flexibility to meet your needs and goals.

Tailor your questions to the carrier

Just like each shipper profile is unique, each carrier is different as well. Some common questions to ask in RFPs are “what was your financial performance last year?”

This may make sense when analyzing small regional carriers to ensure they’re financially stable and not at risk of dissolving. However, if you’re talking to FedEx, UPS, and USPS who have been around for years, don’t go asking how many carriers they have in their fleet.

Superfluous questions show that you don’t mind wasting the carrier’s time. Rather than following a template of “all the questions to ask a carrier in an RFP,” customize it per carrier and use a pragmatic lens on everything you do and ask for.

When you respect carriers’ time, they’ll see you’re serious about working with them especially.

Don’t burn bridges

The supply chain world is a small one, so don’t leave any scorched earth in your wake. Stay respectful and professional. Even if you’re ending a partnership or rejecting a proposal now, there’s a high chance things will change in the future.

For example, if you are ending a partnership or reducing spend with an existing legacy partner, you may need to share some transparency around why it’s happening. New carriers may need to know the major flaws of their competition to understand why you’re making the switch. Your existing carrier may need to know how much better another carrier’s offer is. However, as you share this information, do it while respecting the privacy of all parties.

When ending a carrier partnership, keep the door open. Mention the reasons it wasn’t a good fit now, but that you look forward to finding other ways to partner with them at some point in the future.

Wrapping up: Run carrier RFPs strategically to find your ideal shipping scenario

Running a carrier RFP is a complex process that requires a deep understanding of carrier networks, how they think, and how they will perceive your business. It also requires accurately gathered and analyzed internal data to best portray your shipping profile and clarify exactly what you need from carriers.

Although RFPs are complicated, they are also incredibly useful when executed well and at the right time. Instead of being something tedious, they can turn into a competitive advantage and make your $1M+ shipping spend go even further (with a better customer experience).

Work with iDrive Logistics to access expert carrier knowledge, long-standing carrier relationships, and the experience needed to avoid pitfalls and achieve your goals.