Tuesday, February 18, 2014

Freight Forwarders: Here's the #1 strategy for bidding on RFPs

It's no surprise that most major shippers utilize formal RFPs to negotiate shipping rates.

After all, it lets them compare proposals with the same information - making comparison between forwarders that much easier. It lets them state exactly what they need, and get pricing for that particular part of their business. And once word gets out an RFP often makes forwarders come to them, which can increase competition.

All in all, it's a win-win for shippers.

But for the freight forwarder like you, it's less ideal. You have to adapt your bid to suit their needs, rather than focusing on the strengths of your business. Usually this means simply providing a price by which your whole bid may be judged. But more importantly, it becomes difficult to stand out outside of price when you're competing with so many other bids.

So how do make sure you're maximizing the return on every bid you make?

Here's the secret strategy experienced freight forwarders have learned about RFPs that might come as a shock:

It's not about winning the bid.

Wait a minute, you're saying. If I don't win the bid, what would be the point?

Here's the thing.

You're not always going to be able to offer your services at a price lower than your competitors. 

In fact, you probably won't be able to in most cases. And the undeniable fact is that shippers using RFPs are going to give priority to the cheapest bids.

So in those scenarios where you KNOW you will be undercut on price by a substantial margin, you should bid anyway.

Even if you are certain you will lose.

The reason is that your lower-priced competitors probably cannot offer the same level of service you can. Often, they've underestimated how much the contract will cost them in operating costs, and realize they are losing money, or just not making enough for it to be worth it.

In these situations, it's not unusual for the shipper to drop the forwarder due to bad service, or for the forwarder to drop the contract.

If you make a good impression in your bid, even with your higher prices, you will be in a strong position to pick up certain lanes if anything should happen.

So your goal going into these losing scenarios should be to create a relationship with the shipper - giving you the possibility for business together down the road.

Alternatively, you can aim for only winning some of the bid, while letting others go to competitors.

Whatever your decision, you should choose whether you want to win the bid, win only part of the bid, or lose (but make a strong impression) before you actually bid.

In this way, every bid you make is a potential business investment that may bear fruit in the future. So you'll never feel like you've wasted time on an RFP.

Here are three other tips:

Always describe what your company offers that makes you different from your competitors.

Don't forget to take seasonality into account when bidding.

And, feel free to add supporting material to enhance your bid within the framework of the RFP.

Once you adapt the spirit of "losing to win," you'll find that RFPs offer an entirely new opportunity for business.


Springboard by Catapult International provides easy to use software that helps forwarders and NVOCCs quickly and accurately respond to complicated RFPs - learn more.