Jan. 29 2007 11:12 AM

Our goal was to write an express services Request for Proposals (RFP) that would give us a low shipment rate while meeting several diverse goals. Many of those goals were as important to us as the actual shipment cost, as they affected our daily operating costs. The way the carrier addressed the various needs would increase or decrease our total cost per express shipment. We wanted to evaluate the carrier responses in a single bottom line number. We would accept the carrier response that gave us the lowest net cost based on all aspects of our RFP.


All of the major trade shows include sessions on writing RFPs that stress treating the carriers as partners. In other words, share your needs and allow the carriers to assist you with rates and solutions designed for your needs. Our past experiences all said you can issue a request for price bids, or you can issue an elaborate RFP. In either case, you will get a lot of standard marketing boiler plate copy and a set of rates. Forget the problem-solving help! All anyone wants to talk about is the rates!


We bid four products domestic air express, international air express, ground express and international air mail. We had always bid the products separately. We decided to give the "Promised Land Method" one more chance. We would group our large volume of air express shipments with our smaller volumes in ground express and international air mail. We would include all of our special needs. Then we would ask the carriers for a comprehensive response.


The special needs that we stated in the RFP include:



  • An opportunity to bid the total product group or to bid selective parts.


  • We wanted help improving campus safety by removing carrier vehicles from our core campus. (Since the RFP, we have closed another section to through traffic.)


  • We wanted help identifying funding for delivery of shipments in the core campus.


  • We cannot use EDI billing because we cannot electronically transfer funds. We wanted the EDI billing information, but we had to pay with a paper check.


  • We needed to include three specific pieces of information in the electronic data.


  • Existing data required treating one field as a comma delimited field. (Carrier could up-link three fields, but only one field down-linked.)


  • We wanted an accurate estimated shipping charge that included all add-ons.


  • We wanted the lowest possible rates based on our total volume (over 150 per day).


  • We wanted help with other products and with our other operating areas.


  • We hoped carrier computer technology would reduce our shipment entry expense, but we did not state this as a need.


    We decided to try the "textbook approach" even though our experience said we were going to spend a lot of time for no positive results. We included the following steps:

                1. We visited with all the carriers in advance. We discussed the needs enumerated above. We refreshed our knowledge of their services. We emphasized that our decision would reflect a net cost based on the shipment rate as modified by their responses to our special needs.

                2. We reviewed the RFP of a peer university with

    similar issues.

                3. We reviewed our old Requests for Bids and Requests for Proposals.

                4. We based our RFP on our needs and carrier service inputs from the visits.

                5. We retained the right to award the services separately or as a single carrier award.

                6. We designed a multiple section RFP that included shipment volumes, shipment weights and volumes for unbid products.

                7. We requested help for an overall solution.

                8. We allowed the carriers an extra two weeks to respond.

                9. We received and relied on excellent support from our Purchasing Department. · 



    The responses were diverse. The biggest evaluation problem was reducing rate responses to a single number for comparison. The domestic air responses included three service levels Priority, Standard and Two Day Air. Each level had six zones. Each of the three carriers had 18 separate rates. Then each carrier reacted differently to our stated needs. We had to design an evaluation system tailored to the responses.


    We identified reducing vehicle traffic in our core campus as our number one priority. We identified electronic billing assistance as a close second. We checked for those responses even before we looked at the quoted rates, and we identified ways to quantify these responses in dollars.


    We used the following formula to evaluate the responses:

                1. We determined the average weight per shipment per zone per delivery product.

                2. We determined the percentage of packages in each zone of each delivery product.

                3. We determined the average shipment cost for each zone in each product using the average shipment weight and the percentage of shipments in that zone.

                4. We determined the average shipment cost in each product by multiplying each zone cost by its percentage of the product and adding the results.

                5. We repeated this process to determine the average shipment cost for each carrier.

                6. We repeated this process for ground express shipments.

                7. We adjusted each carrier's bid price per shipment by the dollar per shipment increase or decrease to our total cost of their response to our stated needs.

                8. Did their response allow us to reduce staff or require us to increase staff?

                9. We discussed the process in detail with Purchasing to ensure fairness.

       10. We awarded contracts to the lowest net responders.


    One carrier placed a regional manager in charge of its response. He visited with us at least four times before the RFP was mailed. Once the RFP was mailed, he could only contact our Purchasing Department. I reached back to my air freight forwarding days to suggest a destination advance fee as a possible solution to our primary need. All three carriers indicated that they could not use that device. He found a very creative alternative. The other two responders did not.


    We decided to try the vendor-partner RFP one more time because we had enjoyed success using this method with a mailing equipment sales representative.


    Our persistence was rewarded in many ways:


  • We removed the winning carrier's truck from our core campus in a cost-effective manner.


  • The winning carrier helped us link our web page and the carrier's web page to create a rate query that accurately estimates domestic shipment costs including out-of-area charges, fuel surcharges and our internal add-on charges.


  • The winning carrier provided software that did both up-links and down-links in three fields containing our internal billing information. We no longer have to fake a comma delimited field.


  • The winning carrier's process allowed us to reduce our shipment entry staff by 50%.


  • Our winning carrier's technology support addressed both our departmental computer needs and campus departmental Campus Ship equipment needs.


  • The winning carrier's response included a study by its professional services that helped us design a remodeled departmental work space.


  • We have one descriptor for the winning carrier's Special Customer Hot Line. WOW!


    The vendor-as-a-partner process does work. It requires you to be willing to work with the vendor. That takes a lot of your time. You must be innovative and open in your approach to the vendors. You must find a vendor who will take the time to know your business and approach your problems in an innovative way. We found that combination in this RFP. The winning carrier gained a major account. We increased student safety, reduced costs in year one, secured additional savings for years two and three and gained the potential for even greater savings on our inbound shipments. Most importantly, we gained a vendor-partner who is creatively working with us to reduce costs in several of our non-express mail processing areas. This is truly a win-win proposition!


    Elbert "Butch" C. Hiatt recently retired from Oklahoma State University in Stillwater, Oklahoma. Contact him at Ethelred@brightok.net.

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