Static RFPs Vs. Dynamic RFPs
Transportation and Logistics are highly important business requirements in today’s complex markets. All trade and commerce activities rely on them in one form or the other. In this global era, industrial activities depend on transporters and logistics providers. They, after all, form the backbone of a dynamic, global supply chain.
The needs of a shipper are reflected through a Request for Proposal (RFP) document. It provides information on the problem at hand & the related information. It simultaneously asks the vendors to provide possible solutions along with their bids. An RFP document should be well written and must have all necessary information. If required, it should have fact-based assumptions. An RFP needs to have real-world operational awareness as well.
A good RFP provides the basis for selecting the right solution provider. This in turn improves the supply chain efficiency towards better profit margins and lower wastage. Usually, a person experienced in the Logistics and Transportation sector prepares the RFP. When a company distributes an RFP, a well-written document allows the responders to understand if they want to pursue the project. The successful service provider gets a contract for their services.
Types of RFPs:
There are a few types of RFPs used in the industry. The major ones are Static RFPs and Dynamic RFPs.
Static RFPs: Traditionally, business houses conduct RFPs every year. This includes several rounds of bidding by the prospective service providers. After awarding the contract to the right service provider, the shipper begins the long on-boarding process. Static RFPs result in committed shiploads for the service providers.
Dynamic RFPs: Short-duration RFPs are dynamic and preferred in volatile market scenarios. It is like spot market booking for shipment. Due to the varying freight costs, service providers prefer accepting smaller duration contracts. This is true for shipping within the borders and overseas.
Static RFPs vs Dynamic RFPs
Dynamic RFPs. There are several reasons for saying so. Though Static RFPs provide a long-term contract for both the shipper and the service provider, it is no longer suitable in the present market. For instance, during the COVID-19 pandemic situation, the shipping costs skyrocketed. The service providers in turn were unable to fulfill their commitments at the pre-negotiated prices. This led to major disruptions in the signed contracts.
This scenario led to short-duration contracts or mini bids for 30 days, 60 days, or 90 days. These short window or dynamic contracts result in smooth flow of goods without having to worry about the market rates or cancelled contracts. Dynamic contracts shield shippers from market volatility.
Short-duration contracts also help shippers book small shipping slots to make up for blockages in their supply chain. When a business house finds an unseen blockage in their network, extra shipping slots for small durations work as lifesavers.
In fluctuating production scenarios, Dynamic RFPs help manufacturers save costs. Nowadays, companies prefer smaller shipping slots owing to volatile demand and economic conditions. It has also resulted in quick movement of goods from the source to the destination. Shippers looking to transition towards employing Dynamic RFPs should consider ZUUM Enterprise as a TMS solution. To learn more, click here.