The New RFP Landscape: Building Strong Contracts in 2022

Shippers have long relied on Excel spreadsheets and email to handle freight procurement processes. However, when the headwinds caused by the pandemic drove historic freight volumes into the spot market, many shippers found themselves with an unmanageable amount of seasonal rates to compensate for annual contract disruptions.

From there, the traditional Excel spreadsheet and email system began to fall apart.

“If you have 20 or 30 carriers, you don’t need a robust bidding system. You can do it in Excel spreadsheets and email if you have so many carriers and brokers.” To arise Founder and CEO Andrew Leto said. “When COVID happened, the route guides started to fail. You had to make more bets than ever and you didn’t make annual bets. You were doing seasonal bidding.’

Before COVID, shippers could supplement a couple of dozen carrier contracts with multiple brokerages to gain access to a wider network of trucks. Because this method had always worked in the past – and because there were few technological options – shippers were reluctant to adopt procurement technology. Now, however, they are beginning to see the need to run a continuous bidding cycle.

“No one in their right mind should sign a one-year contract right now,” Leto said. “Some of the largest shippers, who have historically used most of their freight at the annual rate, are now contracting those freights for three to six months because they know the rates are sky-high right now, but they’re coming down dramatically. So don’t lock yourself into a one-year contract.”

The volatile nature of the freight market has prompted some in the industry to be wary of contracts, preferring instead to rely on the spot market. While it’s true that the annual requests for proposals are largely over, Leto cautions against moving away from contracts altogether.

“The annual RFP doesn’t work, but it still makes sense to bid and fix contract bids. “It’s always going to make sense,” Leto said. “Launching shorter bid cycles is a new way to do this. Now with technology like Emerge, a better and faster bidding cycle is the new normal.”

However, Emerge’s freight procurement platform doesn’t just allow shippers to bid more often. The platform is also equipped with a benchmarking tool that helps shippers determine the ideal contract length for each lane. For example, a three-month contract makes the most sense in a lane where rates are falling quickly, while a 12-month contract extension may make the most sense in a more stagnant lane where the shipper is already paying the market rate.

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