We talked with Unyson Logistics’ Art Nourot, vice president of procurement, and Mick Noce, senior vice president of engineered solutions, about their best practices.
Unyson, a subsidiary of Hub Group that manages more than $900 million of predominantly North American multimodal freight, has been able to net its shipper customers an average 11 percent savings on their less-than-truckload spending alone. When honing an RFP, which contains pricing and service requirements for carriers, the shipper procurement team must make sure its base understands, agrees and adheres to rigorous RFP compliance guidelines. It also must successfully translate shipper data into a language carriers can understand and act upon.
The following lays out how 3PLs can manage a win-win-win procurement process:
Get your internal team in place. Start with a solid internal RFP team and resources with a firm grasp of your shipper customer’s cost, service, operational efficiency, and timing goals and “as-is” processes; create a project management plan and execution timeline; and map out the expected “to-be” process and RFP goals. It’s important to start with a clear game plan before getting a carrier involved, to assure a process that works well for you, your shipper customers and your carriers.
Do your homework. Determine your shipper customers’ bid and operational criteria for qualifying carriers and then design your RFP methodology, factoring in rates, charges, surcharges, class vs. freight all kinds, geography, accessorials, freight profile, and transit, shipping and receiving requirements. To work effectively, shipment file formats should incorporate volume, seasonality and customer base information; describe collection methods for existing carriers, data warehouse, enterprise resource planning systems, freight payment companies, or incumbent 3PLs; and define qualitative metrics and key performance indicators for carriers. Lastly, you’ll want to develop your timelines and milestones; prepare supporting documents for business and technology requirements, invoicing, payment terms and reference qualifiers; and set up location profiles.
Automate RFP distribution — where it makes sense. Automated RFP distribution/collection tools can help 3PLs match the size and scope of their customers’ requirement to generate the best RFP results. If you’re consistently distributing RFPs to a qualifying carrier base, each bid opportunity may be different, but your carrier base will still have a working knowledge of how to extract data from these tools, which — from an automation standpoint — compartmentalizes the data, requirements and business rules into an easy-to-use format for carriers. That, in turn, can feed their proposal and rate responses back into the standardized system. You’ll be able to easily evaluate and analyze pricing, carrier minimization/maximization, incumbents, geographic coverage, and preferred customer routing. Bid score cards and carrier rankings also help to narrow the field of carrier competitors and facilitate multiround bid projects.
Get your new carriers up to speed. A project plan will help you to transition newly awarded carriers, execute new rate agreements and do a contract language review. You’ll also want to electronically integrate new carriers into your network quickly, introduce them to shipping and receiving sites, and monitor their start-up and initial performance.
Keep carriers on task — and skip the “value leakage.” At bid conclusion, careful monitoring and tracking of your carrier network’s key performance indicator compliance to RFPs over the longer term can be accomplished using a transportation management system and reporting tools. This is probably one of the most critical pieces of successful RFP maintenance that shippers tend to miss, creating problems with “value leakage.” Without monitoring, for example, Carrier X — which is supposed to be handling 80 percent of a lane pair — can be down to 5 percent three months later, or it’s not handling anything. This means you’ve lost a big chunk of your value.
Count on involving the rest of your organization and your carriers. Once you’ve collected shipper data, delivered the package to carriers, and done your analysis, you’ll need a solid implementation plan to execute to your RFP requirements — a step often involving a large piece of your organization outside of your procurement team, including your operational leaders and your carriers. Plan on managing that piece of the process, as well.
Danny Slaton is executive vice president of business and product development at SMC3. Contact him at firstname.lastname@example.org. For more about RFPs, explore SMC3’s course, “Transportation RFP Essentials,” http://www.smc3.com/smc3/academy/rfp.htm.