Responding to bids is one of the many things we do to fill trucks. Call them what you like-tenders, RFQ's, RFPs-really they amount to nothing more than an auction of a company's loads. We get tons of them.
Responding to bids is one of the many things we do to fill trucks. Call them what you like-tenders, RFQ’s, RFPs-really they amount to nothing more than an auction of a company’s loads. We get tons of them.
Until now, our response to an RFQ has always been the same. We spend gobs of dough and resources to create a detailed proposal with every compelling reason why that company’s freight should be on our truck.
It hit me as hard as an open-ice Scott Stevens’ body check when I realized that we’ve been doing it wrong for the last 25 years. I finally got it.
I received an RFQ from a company that apparently has never heard of blind cc’ing its email. To my utter shock, the RFQ was distributed to 173 other industry players. It wanted numbers on more than 300 lanes and gave me a week to complete the task.
The magnitude of this request made me sit back and take stock of the RFQ process and whether it’s time to end this age-old practice.
When you’re one of 173 bidders, what are the chances that a thoughtful, well-constructed response will “win” or even be noticed? In fact, I can’t remember the last time we picked up a good piece of new business from an RFQ. The only time we had any luck was as the incumbent, which automatically grants you the last kick at the can.
I wrote Joe Prospect a response that I almost guarantee was different from anything he would have received from the other 172 transportation “providers” invited to participate. There would be no numbers this time around. Instead, I told him he should consider a few points as he leafs through all those proposals looking at prices:
Cost Drivers: Customers control their prices almost as much as we do. Payment terms, days of the week you ship, consolidation of shipments, and use of technology are good examples of factors that impact costs. By working together, shippers and carriers can identify and eliminate inefficiencies that drive costs and rates up. Alone, truckers can only get rates to a certain level. We need lots of help to find the gravy that isn’t on page four of the annual bid package.
“Glass House Syndrome”: Your wife insists that the outside of your house needs painting. Taking the cheap and easy approach, you measure the square footage and fire off a tender to 15 of your favourite painters. It’s fun picking the cheapest price. The family CEO certainly is going to be happy with the bundle of green Daddy’s saving. When your painter arrives he is ecstatic to realize the job requires nine fewer gallons of paint. You forgot to tell him the love shack is all windows.
Nothing is more important for driving costs out of the transportation equation than quality information. Without it, you have little choice but to quote high to cover your butt. Unfortunately, there’s no faster way for your proposal to find the “reject” pile.
Sustainable Relationships: Long-term freight solutions aren’t as cheap or easy to find as they once were. Try moving loads from the US to Canada these days.
It’s going to get worse. Most truckers aren’t sprinting to the bank to borrow the cash to add capacity. We’ve learned that having 20 extra loads a week is more profitable than having 20 extra trucks a week. In the current market, it’s not possible to provide a sustainable solution when the shipper is looking for the lowest-price option.
All the Rules: Every bid has verbiage that explains the rules of engagement-the commitments you have to make if you any chance of getting invited to the prom. Shippers may think these binding obligations help control costs when in many cases they do just the opposite. These days, many truckers are sourcing loads on one of the many on-line boards that pay better coin with no rules. It seems to be working for them.
Not long after I sent my “Dear Johnny” letter, I received a reply and was pleasantly surprised. The Ivory Tower arranged a fact-finding meeting with the lady at the Toronto plant who is “paid to implement their decisions.” Ironically, she pays no attention to the routing guide, gives the freight to whomever she wants, and does it all in a language in which I am fluent.
Kudos to those who find RFQs to be an effective way of getting business. I prefer the fact-finding meetings where it’s me and my prospect talking about what we can do for one another. My chances are far better sitting there than in Johnny Prospect’s inbox.
I finally got it. And it looks like I finally got one.
Mike McCarron is the managing partner at MSM Transportation (www.shipmsm.com) in Bolton, Ont., which specializes in moving products from Canada to and from the rest of the world. He can be reached at firstname.lastname@example.org. In coming issues, he’ll examine cost drivers, Glass House Syndrome, and other keys to sales management for truck fleets.