Optimizing Logistics Through Effective Tendering

Logistics is an essential part of a company's identity.

Logistics is often viewed as a cost, though it could be considered a "margin-maximizing machine".

In its simplest form, the tendering process should be as short and concise as possible, but in logistics, there are numerous options and details to consider.

A request for quotation (RFQ) yields quality bids, which makes it easier to compare with improving the existing solution.

I asked recipients of RFQs what they found most frustrating about tendering. Here are a few responses:

• It takes an enormous amount of time to answer all the questions.
• It feels like the RFQ is tailored for a competitor to win.
• The RFQ is pre-customized, even though there might be a better implementation option.
• Communication could be better, and the process more transparent.
• Consultants usually tender for the cheapest option without understanding the difference between an apple and a pear.
• This is just a comparative analysis, and there’s no intention to switch partners.
• The only thing that matters is the price.
• I didn't know the true objective of the tender.

I would like to add a few perspectives from my discussions with buyers and sellers.

Common mistakes in tendering:

• The entire company's needs are not considered in the tender.
• Responding to tenders is extremely strictly defined.
• Logistics is not included in executive meetings or considered in the initial product design stages.
• Generalizing and assuming that all service providers deliver the same service and then quickly signing a contract with the cheapest option.
• Logistics is viewed as a cost item.

Define your needs and draft the RFQ

Let's consider what kinds of needs might be related to transportation tenders and how we can get the most value-generating responses.

Start by defining a goal for your RFQ so that you can measure the profitability of your investment.

Below are many questions for inspiration. However, always critically consider whether the question is essential.

Service Need:

• Transported Goods: What items and what are the size of the items being transported?
• Transport Volumes?
• Routes: Where are the goods being transported to? Who receives the shipments?
• Special Requirements: Are there any special requirements for the freight (e.g., temperature, fragility, side-loading)?
• Service Level and Delivery Reliability: What level of delivery reliability is the target? How is it measured?
• Delivery Time: What are the average delivery times?
• Value and Additional Services: What other services are expected from the logistics partner (e.g., warehousing, packaging, customs clearance)?
• Customer Orientation: What is your delivery value proposition? What kind of feeling do you want the customer to get from your deliveries? How do you differentiate from the competition? What do your customers expect in terms of delivery reliability?
• Budget: What is the budget for this service? Payment terms?
• Value Generation: What should the service provider offer to make the service excellent in terms of price-quality ratio?

Technical Requirements and Integrations:

• How do the logistics partner's systems integrate with your company's own systems? Consider future needs as well, as unexpected costs may arise if systems are not compatible. (Think five to seven figures).

Technology:

• What technology is expected from the logistics partner (e.g., tracking, analytics)? Technology can significantly improve customer experience and operational efficiency.

Sustainable Development:

• What are the company's sustainability goals (e.g., emission reductions, responsibility)?

I want to emphasize that alternative energies, for example, can operate even more cost-effectively than traditional fuels. So it's important to recognize the partner's current and future fleet investments.

I would also like to get you thinking about this scenario:

If you get the lowest price and agreed-upon service, but the company is not profitable, is it sustainable to buy from such a company, or is the market price distorted?

Here are some questions for a potential partner that can be modified according to your needs:

• References: Can you provide references from similar clients?
• Experience: How have you developed your customer relationships in the past?
• Problem Situations: How have you resolved potential problems or delays? What have you learned from setbacks?
• Customer Service: Do you have a dedicated customer service representative responsible for communication? Operating hours? Complaint process?
• Delivery Reliability: What is your current delivery reliability, and how do you measure it?
• Value Proposition: What is your company's value proposition to customers?
• Insurance: What kind of insurance do you have (e.g., for damages or losses)?
• Fleet: What kind of fleet do you have in use? What kind of fleet is upcoming?
• Sustainable Development: What have you done to promote sustainable development?
• Quality: Do you have quality systems or certifications in place? Do you use subcontractors? What is the share of subcontractors? What kind of audit system/Supplier Code of Conduct is in place?
• Technology: What technology do you use, and how does it benefit your customers?
• Customer Relationship Management: How do you manage customer relationships and reports? Is there a contact person, or am I reliant on customer service?
• Personnel: What is the employee turnover rate? What are your company's values regarding personnel?
• Dream Customer: Describe your ideal customer and how our company fits this profile.
• Systems: Describe your company's practices that ensure we receive the service we ordered.

In the current volatile business environment, companies need agile responses to supply chain changes. Thorough tendering is an extremely important element in minimizing company risks.

Request for Quotation

There are many different service types and options for service providers, as well as tenderers.

You need to find the best fit for your needs.

I would start with the following examples and provide as much information as possible about volume, my company, and the needs of my customers.

1. I would request presentation material that includes the best solution for my needs.
2. I would provide pricing material to be returned. I would note that the carrier should consider suitable sizes and additional services independently. I would also allow them to offer the best possible pricing model, which could be based on, for example, pallet meters, volume, weight, or stop + kg.

A company tendering for transport should already identify serious competitors in advance. The party selling the transport, on the other hand, must, of course, know its existing customers and maintain active contact with them, but in addition, it should constantly scan upcoming tenders and identify potential new customers.

For me, the best content in the seller's job has come from negotiations related to RFQs; those where both parties are open about what they want.

For example, in a million-dollar deal, the negotiation partner directly stated that they wanted condition X to minimize risks. I couldn't fully meet their demand, but I suggested we include clause X in the contract, which would still fulfill the condition. The deal was closed.

Let's end this article with a crazy idea: Could the company conduct the tender and organize group meetings with potential new service providers?
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