Shipper Pricing Events Explained

When it comes to transportation, pricing plays a crucial role for shippers.  Understanding how shippers get pricing and the different types of pricing events in transportation is essential for successful logistics management. 

It is important for all roles across the supply chain to understand the various types of pricing events as well as the factors and trends that affect their timing and frequency.

These pricing events, such as RFPs, RFIs, and RFQs, play a crucial role in determining the pricing, service levels, and contractual terms between shippers and carriers. By understanding these events, shippers can effectively gather vital information about carriers' capabilities and services, negotiate pricing for specific shipments, and strategically select their OTR partners based on cost, service quality, and other key factors. This knowledge ensures smooth and efficient operations throughout the supply chain, leading to successful transportation logistics management.

After all, there's no chance of sticking to a transportation budget without pricing... 

It's not just a one-and-done event either. Continuous pricing events are key to having a steady pulse on the market and vital to creating a transportation budget you can stick to. In recent years, the timing and frequency of pricing events has changed. Let's run through the different types or pricing events and how the market affects timing and frequency.

Types of Pricing Events

1. RFP (Request for Proposal): RFPs are formidable documents sent by shippers to carriers, detailing their complex OTR shipping needs and requirements. They come into play for crucial long-term contracts or intricate logistics solutions, where carriers respond with comprehensive proposals encompassing pricing, service levels, and contractual terms.

2. RFI (Request for Information): RFIs serve as reconnaissance missions, initiated by shippers to gather vital intelligence about carriers' capabilities and services. This initial phase helps shippers compile a roster of potential OTR partners who can weather the storm together.

3. RFQ (Request for Quote): RFQs are the ammunition of pricing negotiations, as shippers deploy them to extract pricing information for specific OTR shipments or groups of shipments. Carriers respond with their rates and availability, setting the stage for shippers to strategically select their OTR allies based on cost, service quality, and other key factors.

4. Mini-bids (condensed or segmented RFQs): A smaller or more targeted bidding process used by shippers to negotiate rates and services with carriers or transportation providers for a specific subset of their shipping needs. It's a more focused approach compared to a full-scale Request for Proposal (RFP) or bidding process.

Timing & frequency

Anything that affects the supply and demand can spark pricing. Outside of the given prompts like contract terms expiring, facilities being added or removed, loss of capacity, or detrimental service failure, below are several factors that we see quite often in the industry.

Market Demand and Capacity: Fluctuations in market demand and available capacity significantly impact pricing events. When capacity is tight and demand is high, shippers may need to negotiate pricing more frequently to secure transportation services at competitive rates. Conversely, in periods of low demand and excess capacity, pricing events may occur less frequently as carriers are more willing to accommodate shippers' needs.

Economic Conditions: Broader economic conditions, such as economic downturns or recoveries, can influence the timing and frequency of pricing events. Economic downturns may lead to reduced shipping volumes and increased competition among carriers, potentially resulting in more frequent pricing events for shippers seeking cost savings.

Seasonal Variations: Many industries experience seasonal fluctuations in shipping volumes. Shippers in these industries often conduct pricing events before peak seasons or during periods of increased demand to ensure they have access to sufficient capacity and favorable rates. For example, retailers often plan pricing events ahead of the holiday shopping season.

Technology and Data Analytics: Advances in technology and the use of data analytics enable shippers to monitor transportation performance in real-time. Shippers can use data-driven insights to identify opportunities for optimization and may conduct pricing events more frequently to capitalize on those opportunities. New tech might mean better insight into service prompting shippers to send out pricing or add new partners.

Trends

Pricing events require a lot of manpower to complete and even more strategic thinking to find the best method. We asked our LinkedIn audience in a poll recently about which methods they are seeing across pricing events to increase competition.

The number one tactic is multi-round pricing as shippers seek savings.

Another trend we've seen since the pandemic is the increase of mini-bids. This is mainly due to the volatility of the market during the pandemic and strain on capacity as demand soared and supply grew scarce. Many carriers took to the spot market to take advantage of this time and shippers took to mini-bids to obtain some semblance of rate consistency with shorter contract rate periods.

All in all, not all pricing events are created equal as they reflect the specific needs of a shipper's supply chain. In conclusion, factors such as market demand and capacity, economic conditions, seasonal variations, and advancements in technology and data analytics all impact the timing and frequency of pricing events. Taking on a pricing event may seem like a lot of work for a shipper, and it is, but it is essential for successful logistics management. To learn more about how pricing events affect transportation logistics and to stay updated on the latest industry trends, stay engaged with our blog.

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