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As with all areas of supply chain management, the annual process of putting out a request for proposal (RFP), and building the transportation plans and budget for the year has been disrupted by the impacts of the COVID-19 pandemic. Fluctuating volumes, sharp rises and falls in demand levels and uncertainty about the performances of particular suppliers after pandemic snags have caused significant shifts in rates, and a dramatic drop in the markets in March and April. Traditionally shippers would be locking in carriers and prices to anticipate the next 12-18 months, but the 2020 RFP bidding season is shaping up to be a murky one.
While RFP’s are still required to ensure load capacities and market-based pricing, volume levels have experienced such dramatic shifts that there is a great deal more uncertainty hampering the process. Rates have dropped dramatically with the advent of the pandemic, down significantly from when RFPs were awarded at the end of 2019 for 2020. The impacts have been seen across transportation rates, with dry van rates falling to levels from nearly four years ago, along with reefer and flatbed rates. Coupling the lower rates with the uncertainty regarding capacity creates a more tense RFP period.
Reach out to the experts at Redwood Logistics to help you put together a gameplan to help you win your proposals during the 2020 RFP bidding season.
All aspects of the supply chain have been under duress during the period of disruptions, and with new compliance concerns regarding sanitation and limited contact, many procurement teams are taking a closer look at how suppliers have performed during these unprecedented times. Experts advise that buyers pay close attention to particular aspects of the process moving forward, and more carefully evaluate aspects of a contract that may have been seen as less important pre-pandemic. For example, force majeure provisions, previously less of major concern, should now be taken into careful consideration.
This provision should allow for the reevaluation of a contract in the event that a supplier can not resume business within a reasonable timeframe. With shutdowns and restrictions in flux, assuring that a contract can be reexamined in the event that business cannot reasonably be conducted can become more valuable than buyers and suppliers might have expected.
The impacts of COVID-19 have only shed more light on the importance of flexibility and adjustment in supply and service contracts. The need for the option to evaluate a contract, with of course a reasonable notice period, is of more importance than ever when evaluating and selecting a supplier during the RFP process. This can prove especially important in scenarios where the supply relationship is exclusive or includes volume requirements.
While dealing with the uncertainties of the continued impacts of the pandemic, especially with cases surging in some regions, it is more vital than ever to consider all factors during the RFP process- including the possibility that volume levels or suppliers may not be viable, and contracts may require reevaluation.
While states respond to pandemic fluctuations, with some having fewer restrictions, and some restrictions being lifted while others are put in place, negotiations may resume as normal in many areas. This is resulting in a bit of a grab for buyers as carriers seek to recover lost business. Many carriers have excess capacity, and as shippers pursue the lower rates available in the spot market, they can run the risk of damaging established relationships with carriers as they head into the holiday season.
It’s important to keep in mind that while chaotic, the effects of the pandemic aren’t likely to be permanent.
In fact, the industry has weathered previously unprecedented negative impacts, such as the 2008-2009 economic crash and 2014 Polar Vortex by recovering as a whole, despite infrastructure struggles and imbalances across regions.
Experts recommend that shippers and carriers support one another during the crisis, to maintain the overall health of the industry going forward. This includes consideration for the ongoing impacts of the pandemic, clear communication during the RFP process, and supporting the need for contactless deliveries to minimize risks to critical and essential workers moving vital goods. As the industry has continued to adapt on the fly throughout this time, as the season for RFPs approaches, more explicit plans regarding pandemic needs may be included, setting both shippers and carriers up for greater success and allowing for the safety and well-being of all.
These are challenging times, but with all of these issues taken into consideration and made clear in RFPs, companies can be assured that they can push through and thrive despite pandemic obstacles.