Boom or Bust: Why Dynamic RFPs Are Better for Shippers and Carriers
Over the past few years, the freight market has experienced increasingly rapid shifts between boom and bust cycles. This volatility has compelled shippers to adopt more agile procurement strategies, ones that align closely with current market conditions to secure competitive rates and reliable capacity.
During the extreme swings of 2020 and 2021, many shippers found themselves forced to abandon traditional annual request for proposal (RFP) processes. In their place, a growing number have turned to dynamic RFPs, a more responsive approach that fosters stronger relationships with a select group of preferred carriers and delivers consistent, cost-effective results.
Cloud-based transportation platforms now enable real-time, data-driven collaboration between shippers and carriers. These tools facilitate dynamic RFPs, helping shippers lower costs and improve service even in constrained freight markets. They also provide the flexibility to pivot quickly when conditions shift in the shipper’s favor.
When markets are tight
Traditional RFPs are typically conducted once per year, during which shippers negotiate rates and award contracts for specific lanes. But the value of these agreements often begins to erode almost immediately. Carriers are rarely required to accept every load offered under a traditional contract, meaning capacity commitments remain uncertain, especially in volatile markets.
As the freight market tightens, carriers often reject lower-paying contract freight in favor of spot market opportunities, where rates can be 23% to 35% higher, according to industry studies. This leaves shippers scrambling for capacity as their routing guides fall apart, forcing them to move down the list of contracted carriers and ultimately into the spot market, often with unfamiliar carriers at elevated rates.
A dynamic RFP helps mitigate this risk. Instead of relying on outdated rate sheets, dynamic RFPs allow shippers to offer contract loads in a reverse auction format, enabling real-time bidding from pre-approved carriers. This process provides transparency and incentivizes carriers to submit competitive bids, often below current market rates, especially when vying for consistent, repeat business.
When Markets Soften
In a soft freight market, dynamic RFPs offer equally compelling benefits. Spot rates may fall below contracted rates, yet under a traditional model, shippers are locked into paying more if the first-in-line contract carrier accepts the load. Dynamic RFPs allow shippers to capitalize on downward trends quickly, reopening competition and adjusting prices accordingly.
For carriers, the streamlined nature of dynamic RFPs reduces the administrative burden associated with annual procurement events. Rather than predicting future market conditions months in advance, carriers can base bids on real-time data, resulting in better alignment of rates and service expectations for both sides.
Conclusion
Dynamic RFPs represent a smarter, more flexible way to buy and sell freight services in today’s unpredictable market environment. They provide shippers with better access to capacity, more accurate pricing, and greater control over their routing guides, while giving carriers an easier path to profitable, long-term relationships.
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