Efficiently managing transport tenders
by Phil Lavin, Sales Manager, AEB (International)
The era when shippers maintained their own fleet of vehicles is long gone. Outsourcing in transport management has become a fixture in the portfolio of logistics managers. But shippers have become much more selective, and the goal has moved beyond just driving down costs. Above all, the quality of the services and internal processes is seen as increasingly important.
The process of calling for tenders and ultimately awarding a contract is generally a lengthy one. First, a shipper has to analyse what they need to ship to which regions and under which terms and tariff structures. The data needed to call for tenders – volumes, routes, products – is in the shipper’s freight management system. Once consolidated, this data provides the basis for soliciting quotes.
Another key point: Who should be invited to pitch? Which carrier offers which spectrum of services, and who is strong on which routes? Carrier directories or industry association rankings are helpful in selecting service providers for consideration.
Today, nearly everyone relies on IT support for tender management. Most shippers use simple tools such as email and file attachments. Transport service providers typically use spreadsheet templates to prepare a quote, and all quotes are then collected and compared in spreadsheets as well. This process makes perfect sense for smaller businesses with fairly basic transport needs. But the complexity of tender management can quickly escalate, making this method difficult to manage. For companies calling for tenders several times a year it makes sense to use specialised IT solutions.
Tender management software can help standardise outsourcing methodologies and simplify processes through focus on absolute transparency, tamperproof archiving, and automation. These IT solutions enable businesses to define standardised texts, using their existing documentation – shipment data, general terms and conditions, and international commercial terms (Incoterms). Such documentation can then be attached to emails along with the call for tenders. The ease with which documents are duplicated means that shippers can reach out to new service providers, gaining a clearer picture of their market. The call for tenders that carriers receive in such a form includes a matrix for entering quotes, making it easy for the shipper’s logistics manager to compare and work with the data. Such software can also simulate various scenarios and evolving supply structures, and plug in current data to calculate quotes. This helps to find out which transport partners offer the best terms for various scenarios, such as the loss of a major client or the relocation of a distribution centre.
Carriers can also benefit from targeted IT support and sometimes use web portals to issue calls for tenders. Some of these portals are free to use and don’t require a contract with the portal operator. It’s also important for outsourcers to be able to display all their information and specifications, and for logistics providers to be able to submit quotes that include more than just shipping rates and prices – lead times, the price for door-to-door delivery, and all additional fees, for example.
Of course, in addition to a good price, good quality of service is of great importance, too. So when the collaboration with a carrier is working well in terms of cost and performance efficiency, it’s probably not worth changing, as every change is associated with a certain transition phase and risks. It generally takes some time before all the supply chain partners work together smoothly. That’s why it’s crucial to look at the whole picture and not just at the price.