The Ultimate RFP Checklist for Shippers: Essential Things to Include in Every Bid

Information provided by FLS Transportation

RFI… RFQ… RFP…

Depending on where and with whom you work, you may have heard these terms before, often interchangeably. Actually, each of these terms means something different and serves a specific purpose. Let’s start by defining each term.

Request for Information (RFI)

The purpose of a request for information, as the name suggests, is to gather information about the qualifications, capabilities, and services offered by freight carriers. An RFI is not a request for a proposal or quotation. It does not obligate you to any company that responds.

Use an RFI to determine which companies to invite to the RFP stage.

Include current partners and identify new candidates by tapping into your network or searching online. Be prepared to award contracts to new players if they meet your requirements through the RFP process. Rotating carriers and expanding your network to qualified vendors helps you build credibility and increases your reach in the marketplace.

An RFI is usually a precursor to an RFP, though in some cases it may be followed by an RFQ.

Pro Tip: Don’t make the RFI too onerous to answer, or carriers may not bother responding.

Request for Quotation (RFQ)

While the terms RFQ and RFP are often used synonymously in transportation, they are different. A request for a quotation can either come as part of an RFP or as a standalone template to be filled out.

Standalone RFQs are used when you are requesting a service that is standardized—for example, shipping a full truckload from Toronto to New York—or for basic commodities where you’re mainly looking to select a vendor based on price.

TAKEAWAY
An RFQ is usually used to award a standardized service such as a regular lane or spot quote.

Request for Proposal (RFP)

A request for a proposal is a formal call to transportation companies to provide detailed proposals to meet your shipping needs. Therefore, it is important that your RFP document be granular and specific about what you need.

A bad RFP is ineffective, incomplete, creates more questions than it answers, and wastes time and financial resources for all parties involved.

A well-produced RFP receives complete, innovative responses and provides the opportunity to compare and contrast information on an equal level across all submissions. A typical RFP can be broken down into three general sections:

1. Information that you provide

2. Information that you request

3. Supplemental information such as bid forms

Pro Tip: It typically takes 2-3 hours to review a single proposal, so avoid sending your RFP to too many companies or you risk getting overwhelmed. Moreover, candidates may be less inclined to apply if they feel the competition is too great.

The RFP Framework

All RFPs are different. This is true.

However, all successful RFPs have one thing in common: They provide the necessary information required to solicit high-quality and accurate responses from bidders.

A successful set of responses is predicated by delivering an RFP that allows you to collect the important information you need, and it allows vendors to communicate how they can help you. You accomplish this through structure and framework.

Here are 13 critical components to include in your transportation RFP. Use this framework and you’ll produce the winning responses you’re after.

1. The Introduction

Your company and your shipping needs are unique. Don’t overlook the introduction section.

Take a minute to introduce your company to potential bidders and provide some basic background information to help them better understand you and your distribution needs.

Is your business cyclical? Is it steady? How and why do you serve your customers? It’s important to share an overview of all products and commodities to help your transportation providers know what to expect throughout the year.

2. The Business Need

A thorough description of the scope of work and your business needs will allow transportation providers to deliver customized solutions that best match your shipping needs.

Moreover, by making bidders aware of your needs and requirements upfront, you reduce the risk of awarding contracts to a transportation provider who may not be the right fit. Give your transportation partners an idea of who your customers and vendors are and how they operate.

If you are operating on a just-in-time (JIT) model with time-sensitive freight, these details are paramount to picking the right partners on each lane. What about deliveries to ports where if anything is late you are literally missing the boat? Will a production line shut down if products don’t arrive on time? Are construction crews sitting around waiting for product to arrive for installation? Is a new location opening, and if the product doesn’t arrive on time is the grand opening canceled? Are there late fees for deliveries that don’t show up on time?

Sure, these things will be covered by your contract and accessorials, but make sure to spell out the “why.”

3. The Mandatory Requirements

If you’re conducting an RFP, you’ll likely receive 10-12 bids. This sets up a lot of work for you and your team. Your RFP needs to have a list of mandatory requirements that can be used to qualify or disqualify bidders easily.

For example: Do you require any specific license or certification? What about technology requirements (EDI/API)? Ask for a safety record and claims rate. Make sure they provide cargo and cargo theft insurance. What about liability and other insurance? Specify what you require. Keep certificates on file. Include “definitions” for every requirement to ensure that all parties share a common understanding.

4. The Pre-Qualification Questionnaire

If an RFI was not conducted to qualify bidders, use a pre-qualification questionnaire. Make sure your questions are clear. Avoid repetition. And leave enough space for bidders to provide an adequate response.

While your questions will depend on the business needs you outlined during the planning phase, some examples are:

• Ask for business history
• Ask for coverage area
• Ask about fleet and network size
• Ask to see the motor carrier number, certifications, DOT and safety ratings, and claims records
• Ask about insurance coverage and their approach to risk management
• Ask about their continuous improvement methodology (e.g., Six Sigma, total quality management) and commitment to innovation

5. The Terms & Conditions for Submission (and Doing Business)

There should be no confusion surrounding your terms and conditions. State them explicitly. Mention which are negotiable.

Your RFP should include:

• General terms and conditions (GTCs)
• Payment and billing terms
• Standard operating procedures (SOPs)
• Contract terms and service-level agreement and contract duration if the contract is awarded

For example, be sure to include things like acceptance rates, on-time pickup rules, on-time delivery requirements, and technology requirements. This should include the business rules and a copy of your service agreements (contracts).

Pro Tip: Include a copy of the contract in your RFP. This will keep you from having to negotiate terms after you’ve awarded business.

6. The Scope of Work, AKA Detailed Freight Characteristics (What, When & How Much)

This is the core section of your RFP—the meat and potatoes. It’s generally what shippers and transportation providers think about when you say “RFP.” For the scope, it is incredibly important to provide as many details as you can on your freight.

TAKEAWAY
Transportation providers need to know the following eight freight characteristics to provide an accurate quote:

1. Commodity types

2. Average weight per load

3. Cargo value

4. Primary and secondary equipment types

5. Clear instructions on the lanes up for bid

6. All ZIP and postal code (origin and destination) information for all lanes

7. Freight volume for each lane and frequency of shipments

8. Seasonality or variability

7. The Pricing or Bid Template

A pricing or bid template lets you compare bids easily. Your bid sheet should include detailed lane information as well as freight volume and frequency, including historical data and total estimated volume.

Put yourself in the driver’s seat by providing a standard template to harmonize rate structures so you can make an apples-to-apples comparison. To make it easy on yourself and your bidders, you may want to put this in Excel format.

8. The Fuel Surcharge

Be upfront about what you’re comfortable paying for fuel surcharges. The more specific you are upfront, the easier it will be to find a compatible partner during the selection process.

Fuel surcharges as determined by the Department of Energy can fluctuate significantly during a calendar year. Make sure to specify if you will be basing this surcharge on the national average updated every Tuesday at 8 a.m. CST, or if you will provide your own fuel schedule. Also, be strategic on how you are fielding rates from your providers. Are you requesting rate per mile excluding or including fuel?

9. The Extras (Accessorials)

Do you have any special requirements? After- or before- hour deliveries? Blind shipments? Detention? The easiest way to avoid nasty surprises when you receive your final freight bill is to state any extra needs you may have upfront that apply to both shippers and receivers.

Be clear in both the definition and fees for your accessorials. This will help with rules of engagement and avoid invoicing issues down the road.

10. The Deadlines & Point of Contact

Set a timeline for your RFP to be completed.

TAKEAWAY
Be sure to cover these nine key dates for every RFP:

• Bid opening date
• Questions due date or information conference call
• Deadline for first rate submission (due date): Make sure you’re giving bidders enough time to put together a good bid proposal response. The timeframe depends on how many lanes/type of freight/number of stops on lane.
• Feedback date: Are you providing feedback after the first submission? This not only helps you get the best rates, but also gives your transportation providers more intel on the lanes for which they can provide the best service.
• Deadline for second rate submission
• Final negotiations date
• Notice of award date
• Go-live date
• Contract length of commitment and renewal options

Pro Tip: Provide a single point of contact to address questions and concerns.

11. The Submission Process

Describe the overall RFP bidding process. Include clear instructions on response submission requirements, response format, submission mechanisms, and how to submit questions and feedback.

• Email
• Web-based TMS submission
• Submission to 4PL/consultant

12. The Evaluation Criteria

Highlighting your evaluation criteria will allow transportation companies to lay out the information you’re looking for, making it easier for you to compare and pick the best 3PL partner.

Be honest and open; if incumbents will be given special consideration or be part of the first round of negotiations or if it is a one-bid round with key lane negotiations among incumbents, state it clearly.

Bidders will appreciate the transparency. If you avoid mentioning these details, you risk losing out on bids from companies who question the authenticity of the process and whether they stand a chance.

Pro Tip: Always select back-ups. Anywhere between two and four should do.

13. The Performance Indicators (KPIs)

Make your performance expectations explicitly clear. Ask for current metrics to ensure potential transportation partners have performance tracking and reporting capabilities. On-time performance? Acceptance rate? Claims rate? Specify your KPIs as they can be rolled into your service-level agreement as part of your service contract.

Step-By-Step Guide to Executing Your RFP

The quality of responses you receive is directly proportional to the amount of time you spend planning and writing your RFP.

Think of your RFP as more than a document to award shipping contracts; it is the product of a lengthy, but important, process that can be overwhelming if you’re not familiar with the steps involved.

But, don’t worry, we’ve got you covered. Let’s walk through the RFP process from start to finish, step by step.

Step #1: Plan your work so you can work the plan.

YOUR RFP PLANNING
The planning stage is the most important part of the RFP process and should not be rushed. It is essential that the planning phase involve a cross-functional team of stakeholders. Together you must come to a complete understanding of your business requirements and then clearly state them in your RFP and eventual contract.

Pro Tip: If the goal of your RFP is to exert pressure on your current partners to obtain a better rate, you may be doing yourself a disservice. If carriers/brokers/3PLs determine that your RFP is not genuine, you risk damaging your reputation as a shipper, and your future RFPs may not be taken seriously.

TAKEAWAY
The 16 planning questions you need to answer:

1. What do you hope to accomplish through this RFP?

2. What are your estimated cost-saving goals?

3. How will you measure success?

4. What operational efficiency are you looking for?

5. What sort of technology requirements do you have? EDI? Real-time updates?

6. Are you looking to add or reduce carriers?

7. How many bid rounds will you have?

8. Will it be an open bid or invite only? How will you choose who to invite (RFI)?

9. Are you going with asset only or will you include non-asset-based brokers?

10. Are all lanes up for bid or are certain lanes reserved (asset only, incumbent, etc.)?

11. Are you going to package or bundle lanes? How will you evaluate this?

12. Will incumbents be given special consideration?

13. What’s your RFP timeline? Key due dates?

14. How will you communicate the release of your RFP?

15. Who will manage the responses when they come in?

16. How will you evaluate and award lanes?

Step #2: Ready. Set. Data.

RFP PREPARATION
Once you’ve taken the time to answer the questions in Step 1, you need to gather the necessary data to prepare your RFP. The better the data you provide to carriers/3PLs in your RFP, the better the responses you will receive.

TAKEAWAY
The seven pieces of data you need to know:

1. Detailed lane data

2. Expected freight volume and shipping frequency by lane

3. Any special equipment requirements

4. GTCs—if your company doesn’t have its own GTCs, take time to draft them

5. Delivery appointment requirements, shipping and/or receiving hours, and facility profiles

6. Current cost structures and pricing templates—so you can benchmark the proposals you receive

7. Selection criteria and KPIs

Clearly define and spell out all operational, functional, service-level, technical, and financial requirements in your RFP.

Pro Tip: Include as exhibits all essential elements that require a response from carriers/3PLs. This makes it easier to spot and respond.

Step #3: Teamwork makes the dream work.

RFP Review, Revision, and Approval
Your RFP needs to be clear and concise. After compiling, review for grammar, format, objectives, and instructions. The quality of your RFP is a direct reflection of your organization and should be written to the highest standards.

After you review, edit, and re-edit your RFP draft, it is ready to be approved by all decision-making stakeholders.

Step #4: Fire Away.

RFP Issue and Support
Once approved, the RFP is ready to be issued. You can send out your RFP in a number of ways: by email, through a web-based portal, or through a consultant (if you’re working with one). If you use email, instruct the carriers/brokers/3PLs to reply to your email as acknowledgment of receipt.

If you conducted an RFI as a precursor to your RFP, limit your RFP to qualified respondents only. If you didn’t conduct an RFI, include a qualification questionnaire with your RFP, which will allow you to quickly screen for transportation providers that don’t meet your requirements.

Make sure you’ve assigned a point of contact who can respond to any questions or concerns.

Pro Tip:
Timing is everything when sending out your RFP. If you send out your RFP in the winter months, you may get better rates as everyone is looking for freight. It’s also best to onboard a new provider on lanes outside of busy summer months.

Step #5: Collect & Analyze.

RFP Response Evaluation & Clarification
Once you receive all responses, it is time to evaluate the proposals. You can assign this step either to a team or an individual.

Read each proposal first, flagging those that violate directions and/or those that don’t meet minimum requirements. Checking for compliance is an easy way to short-list responses to only those that would make good partners.

On the second read, score the responses on the selection criteria you included in your RFP. If you provided an RFQ template or price template, you should be able to easily compare responses apples to apples.

Scoring can vary from company to company and can range from simple to highly complicated. One approach is to weight all sections so that they add up to 100%. Within each section, assign points from 0-10 (where 0 is unacceptable and 10 is outstanding) to each criteria component according to the degree to which the proposed solution meets your stated requirements. Compile the results.

If you need clarification on any information received, reach out with your questions in writing. Allow the carrier/3PL at least three business days to adequately respond. Re-score if necessary.

Step #6: Award the Bid.

RFP Selection and Contract Negotiation
At this stage, you need to set meetings to close the deal and sign contracts with the vendors of choice. If you included contract terms and GTCs with your RFP, this process should be simple. If you didn’t, you will enter into final negotiations. It is considered good practice to notify both successful and unsuccessful participants once the RFP process is complete.

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Reprinted with permission from FLS Transportation. To download a full copy of this whitepaper, visit bit.ly/RFP-checklist