Supply chain woes are nothing new. While consumers wandering the aisles in a big-box store notice a few more things missing these days, those of us in the transportation industry know that supply chains have almost always been frayed.
Shippers know collecting orders throughout the week and shipping them only on designated days would clear up many of their biggest issues. Imagine a big box retailer shipping out only two days each week. In this case, the retailer could probably make do with an RFP-only business. But that would be hard enough for them to accomplish. Now, think about blowing that up into an entire shipping network.
It’s all about supply and demand. Customers’ preferences continue to be king. Their desire for more, next, and now, for better or worse, drives many inconsistencies in the supply chain – especially, over the last three years
Addressing these inconsistencies is where spot business comes in. And the increasing inconsistencies over the past few years is one of the reasons many industry insiders have decreed the death of the RFP.
But if correction is what we’re looking for, does a spot-only market really help us balance the imbalance? Instead, we suggest using each method for what it does best and strive for a healthy balance between the two.
RFP Gives You Consistency
RFPs lead to relationships. They may offer better rates, but probably the biggest benefit is consistency. Would you want to operate on blind faith each time you put a new load into the ecosystem? Or would you prefer knowing you’re in good hands because you’ve worked with that carrier before and they have a record of delivering loads on time?
When you focus on building carrier relationships – shared insights, optimized loads – the inevitable outcome is the realization of strategic business partnerships, where shippers and carriers share common goals. This is a solid long-term strategy and helps build supply chain resiliency.
The arduous – and many times inaccurate – nature of the current RFP process shouldn’t be confused with the desire to drop it altogether.
Spot Fills in the Gaps
Spot helps you respond to unforeseen circumstances. A shipper who needs to get something from point A to point B as quickly as possible will look to spot as a viable solution. It’s essentially throwing a transaction into the world, and flexibility is its main draw.
But, in the end, shippers – and the consumer – may be disappointed. On a spot spectrum between price and service, you can get lucky, but it’s a crapshoot. You probably could buy a truck for 99 cents, but do you want to? Your load might never get picked up.
This volatility makes it a less than ideal way of running a shipping business full-time.
Together, RFP and Spot Help you Balance the Imbalance
Any good transportation solutions provider offers accurate pricing and reliability. They work with carriers and shippers in a choreographed dance to foresee RFP-worthy contracts. For example, if they notice a shipper bid on a lane 100 times, they should suggest contracting it to turn it into a more cost-effective buy and consistent service. This introduces mini-RFPs throughout the year.
That partner should also force spot shipping when applicable, making it accurate and executable. Shippers may have to buy capacity, but at least it’s a rate they can get capacity for. To do this, brokers should start with the carrier.
It can seem counterintuitive. But when you use technology to unite a fragmented system of reliable carriers – with preferred lanes, streamlined operations, more predictable loaded miles, and bigger paychecks – you open the door to a whole new way of shipping that removes a lot of the guesswork. Instead of a slippery transaction, shippers leverage a vetted network. Spot and RFP shipments both get products delivered, and fewer carriers are left with an empty truck that leads to empty miles.
Need something done quickly? Spot is always there. Need something consistent? Turn those spot deals into RFPs. Together, those pricing systems help balance the imbalance of an ever-changing network. But none of it is possible without a partner that operates with the best outcomes for shippers and carriers at heart.