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In a previous blog post, we discussed the importance of being aware of the possible risks and alternative costs associated with delivery failures in order to arrive at the true total cost of any bid you have received during your freight tender.
But how would you do this in practice?

 
As we concluded in the last blog post, risk equals probability * consequence.
So, the first thing we need to do is to define our specific probability and consequence.
 
First of all – the foundation for your tender is created continuously. I order to evaluate risk, you need to know your current performance. Surprisingly often, shipper and carrier are equally unknowing of the delivery performance over the last year. So, be sure to implement a continuous follow-up plan for evaluating delivery performance.
This will not only allow you to take the bull by the horns and correct any imperfections when they start creeping up on you, but it will also serve as a basis for evaluation when it’s time to set up your next freight tender.
 
Secondly – you need to know what your potential consequences are – i.e. what are the costs associated with a missed delivery?
-       Will your plant shut down?
-       Will your customers be disappointed / spread a bad word about you?
Most importantly
-       What will it cost you over time?
 
Once you have your probabilities and consequences down, it’s time to create a structure to mitigate the risk. And since the consequences are most often fixed, you will have to focus on minimizing the probability of your high consequence scenarios.

For further reading on how to do this, don’t miss the third and final part of this blog series.

About the Author

Jacob Wiklund is working for TenderEasy as a Sourcing Analyst / Consultant with previous experience as a consultant in supply chain management. He holds an MsC from Chalmers University of Technology. Connect with Jacob on LinkedIn.

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It’s now one week since I started working at TenderEasy as a summer intern. To be completely honest with you, I am still very much lost.

It’s not as bad as when I first started. Previous to this job, I had zero knowledge about transport. Anything tendering related was alien to me. I didn’t even know what the word meant for goodness sake. So, getting myself a job at a company who focused on just that may have been a dive into a fish tank full of  sharks. Was it my smartest decision? Definitely not, but I’ll keep you updated on how I’m surviving. 

As of now, I’m hanging in there. Everything is confusing and complicated, except for the actual tool itself which is surprisingly intuitive . I have yet a lot to learn obviously, but what I have learned so far has been surprisingly fascinating. I didn’t think working with tendering would be any fun at all, but I’m starting to be proven wrong. What I’ve gotten to do so far is mostly just side projects to get familiar with the system so I don’t mess anything up when it comes to the actual thing. A very wise decision on their part because I sure did manage to mess up quite early on. Planning a road transport across the Atlantic ocean is completely normal and functional… right? … I know it’s not. It wasn’t intentional, okay?

Apart from that, however, I’d like to think I’m doing fairly well. My designated tasks so far include creating new scenarios, setting up spot requests and tenders, but I doubt that’s all I’m going to be doing here. As mentioned previously, I am still quite lost but I am learning and I will continue learning until I actually become useful. Have faith in me. 

/Vendela

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Over the next few weeks, we will be publishing a few blogs focusing on risk management in freight procurement. Today, we are defining what risk is and how to account for it in a total cost analysis. And we start with a simple question:

What are your criteria for evaluating a supplier bid when analyzing your freight tenders?

  • Lowest cost?
  • Shortest lead time?
  • Both?  


Let’s dig in deeper into what these two criteria really entail. Should be simple, right? Cost is cost and lead time is lead time.

But consider this: what most suppliers offer is a cost and a lead time for a flawlessly executed shipment.

Are all your shipments flawlessly executed?
If yes – congratulations!
If no – welcome to the club.
 
Nobody’s perfect and issues will always arise. The question is, who has a viable contingency plan in place to take care of disruptions in such a way that delivery disruptions and associated costs are kept to a minimum?
 
In other words – which supplier offers the best AVERAGE cost and lead time over the course of the contract validity?
 
To get an answer to this question, it’s imperative to add a new aspect to the tender process. Simply asking for price and lead time isn’t enough. A third aspect needs to be taken into account – risk.
 
So, what is risk?
Most easily, it’s defined as [probability] multiplied by [consequence].
 
If you’re delivering parts to a plant that would likely have to shut down production in absence of delivery, for example, the consequence is huge in monetary terms. So, you better focus on minimizing the probability as much as possible.
 
In short, if you run high consequence trade lanes, a total cost analysis should not be as simple as the number you receive in your price matrix multiplied by the number of shipments.
In reality, you’d come closer to the actual total cost if you used something like this:
 
Freight cost + (probability of delivery failure) * (alternative cost of delivery failure).
 
But how do you do that in practice? Stick around for the next post, which will go into more detail on how you can manage a freight tender with an eye to risk mitigation.

About the author

Jacob Wiklund is working for TenderEasy as a Sourcing Analyst / Consultant with previous experience as a consultant in supply chain management. He holds an MsC from Chalmers University of Technology. Connect with Jacob on LinkedIn.

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When tendering your transports, what you want to do is move your goods from A to B at the best possible rate and to a satisfactory service level. Simple enough, right?
While in theory, you’re simply buying a transport from A to B – how that transport is charged for can differ wildly.

 
Ocean carriers are experts at eroding freight in a never-ending rat-race towards the abyss, with a misplaced hope to retake some dollars through a multitude of add-ons and surcharges, some more justified than others. In the end, it might be close to impossible to decipher what the total cost will be, not to mention checking the invoices.
 
So, to help you understand what you’re asked to pay for, here is a list of some of the most commonly used add-ons and surcharges that you might encounter. But beware – these are examples. There are many other, more obscure ones that can turn up on your freight tender bid sheet and invoice.

  • BAF – Bunker Adjustment Factor - to account for fluctuating fuel.
  • CAF - Currency Adjustment Factor – to account for fluctuating currency
  • ISPS -  International Security Port Surcharge - for security of the vessel and container while at the port.
  • THC -  Terminal Handling Charge - for goods handling at origin/destination.
  • BL Fee – for processing the bill of lading.
  • Fuel Surcharge – surcharge applicable for fuel used for land transport in connection to pre/on carriage.
  • OWS - Overweight Surcharge - for containers overweight containers
  • LSS - Low Sulphur Surcharge - for the use of low-emission fuel types
  • PSS - Peak Season Surcharge – for peak seasons with extraordinary volumes for carrier.
  • Hazardous Surcharge – for hazardous goods.
  • EIS - Equipment Imbalance Surcharge – for trades container volumes are not balanced, in terms of import and export.
  • ERS - Equipment Repositioning Surcharge – for when there is a need to position empty containers at a certain place for exports.
  • Chassis utilization surcharge –for line chassis utilization.
  • Piracy Surcharge –for costs applied to certain routes where precautions must be taken to avoid piracy.
  • SCS - Suez Canal Surcharge - for costs due to transiting the Suez Canal.

 
Of course, knowing the terms is just step one. Knowing how to apply the surcharges and how to draw conclusions regarding total cost from them is an entirely different ball game.
And to be sure you get it right, there is nothing like a dedicated, user friendly, freight tendering tool with ready-to-use price templates for all transport modes. The following are a few of the benefits you can expect:

  • Control what surcharges are added and how they are applied.
  • Check relevancy and impact of surcharges to your specific needs and setup.
  • Ensure that all surcharges are correctly applied in analysis and comparisons between suppliers.
  • Simplified follow up of invoiced shipments against produced bids.

About the author

Jacob Wiklund is working for TenderEasy as a Sourcing Analyst / Consultant with previous experience as a consultant in supply chain management. He holds an MsC from Chalmers University of Technology. Connect with Jacob on LinkedIn.

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In the Previous blog post, we discussed the importance of knowing your historical shipment profile in order to make a sound judgment on what supplier to choose in a freight tender.
Depending on the nature of your business, it could be just as important to lift your gaze and see the big picture of your business and your path ahead. Imagine if your tendering tool can help you with this.


While looking back on historic transport flows is often a very good indicator when building a prognosis, there are many reasons not to rely solely on the idea that your business will continue its current trajectory. Of course, you always hope that your business will take off, but it may be just as important to know where to expect decreases in volume.

In the supply chain business, there are a few indicators that you need to keep in mind when setting up a freight tender to make sure that it’s in line with reality not just now, but in 6 months and a year and further down the road as well. Any of the following examples would be grounds for reevaluating your setup or even going to tender earlier than planned.

  • An anticipated growth in business
  • New market introductions
  • Generally unpredictable/uneven market
  • Change in shipped volumes or product mixes
  • Changed performance expectations in the market
  • Changing structures of your shipments


There are obviously a multitude of factors that can influence your supply chain. In fact, there are few structural changes that doesn’t affect the supply chain. So, if you don’t make sure that the most important ones are known and accounted for, then you obviously risk either getting stuck with not enough capacity or with way too much capacity, both of which are situations that will cost you and/or your customers unnecessary money and trouble.

None of this is rocket surgery, but it is still a foundational part of a successful freight tender that is often overlooked. Again, a tender evaluation must be based in reality in order to be useful at all. And by simply basing your calculations on historical volumes and adding relevant projections, you’ll be outperforming the majority of the freight buyers out there.

For more information, please contact me at johan@tendereasy.com

About the author

Johan Vagerstam
CEO and Co-founder of TenderEasy. 10+ years of experience from transport e-sourcing, he co-founded TenderEasy and now he's helping organizations to manage and transform their freight procurement processes. You can follow him on twitter  and on Linkedin .

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When setting up a freight tender, there are a few factors that are necessary in order to arrive at a reasonable and reliable conclusion. Chief of these is the ability to perform an analysis that is based on facts and rooted in the unique characteristics of your own company. This is the first of a few practical tips we will publish on the subject.
 
Let’s say you are about to release a tender to a number of potential suppliers.
You have put together a neat format in which to ask for rates. All your lanes are there, surcharges accounted for and all.

Now your offers have come in. Time to evaluate. Looking at your offers side by side, it’s obvious that Supplier A has submitted the best bid for almost every lane, so it’s an easy choice. Right?
If you’re just looking at the rates as such, it might be tempting to draw such a conclusion. But to really be sure that you’re doing the right thing, you need to also know where you’ll be shipping what quantities and to what service requirements. It sounds obvious but is often overlooked.

As an example, looking at the rate sheet below, it would be very easy to go to Supplier A and shake on it. But if you know your shipping profile, and that it might skew towards the higher weight brackets, then it’s possible that the best bid in terms of overall cost could be Supplier C.
 


This might seem obvious, but a lot of times, there is no data readily available to show you what your shipment profile looks like. Not to mention the time it would take to first produce the data and then apply it to your calculations (surprisingly often, the LSP’s themselves have a hard time reporting what they have delivered over the last year).
Hence, it is often an overlooked aspect of the freight tender evaluation – one that is of utmost importance for a relevant analysis.

And if you feel like you don’t have the time or possibility to produce reliable data – be aware that an educated estimation is much better than no insight at all!

Obviously, there are other factors to be aware of, and in further blog posts, we will develop our thoughts on the importance of reliable data and knowledge of your historic and future shipping structure when entering a freight tender.

If you find this blog interesting, you might also want to have a look at our previous series of blogs on how to manage it like a pro and how to optimize the freight tender results.

Step 1 - Freight tender RFQ preparations
Step 2 - Setting up a freight tender RFQ
Step 3 - Freight tender analysis and feedback
Step 4 - Freight tender award and implementation
 

About the Author

Jacob Wiklund is working for TenderEasy as a Sourcing Analyst / Consultant with previous experience as a consultant in supply chain management. He holds an MsC from Chalmers University of Technology. Connect with Jacob on LinkedIn.

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How hard can it be to purchase transports and making a freight tender? Pretty simple, right? You define your routes and ask for the best possible price and service for each and every one of them. Then you just pick the best offer supplied!
 
Well, what do you base that decision on? What are your essential guidelines for making that call? Perhaps:
   - Lowest price possible?
   - Minimized lead time?
   - Great reliability and information flow?
   - Capacity requirements?
 
You’d be surprised by how often there is no clear answer to these questions, even at the last stages of negotiations. So what are the implications of this? Well, it will likely lead to a lack of focus on the right properties – or a futile search for the supplier that has everything. In essence, trying to catch the ever elusive ”shorse”, a fast runner on land that also has a killer instinct beneath the waves.

Shorse, a fast runner with killer instinct.

Obviously, there is no such thing as a shorse – no more so than there exists a fast and reliable transport service that is also much cheaper than the competition. And if you think you have actually captured a shorse, a service that promises everything including a cheap price, I suspect that the service will end up about as useful as the shorse in the picture. In every instance where there is a choice to be made, you’ll have to choose between service, quality and price – or some combination of them – but rarely can you choose all three.
 
That’s why it is so important to make sure that you consider your needs and your internal priorities before going to tender. A successful freight tender always starts with a thorough knowledge of your needs and requests throughout the organization. Perhaps your recipient doesn’t need to receive the shipment within a day; maybe 2 or 3 days could suffice, even if one day has been the standard thus far? Or perhaps it is of great value to be frequently updated on the status of the shipment. These are questions that a thorough research before tender start will help settle.
 
And not only will you benefit from knowing what qualities you should value - but by communicating your needs to all suppliers, you enable offers to be tailor-made to suit your specific needs right from the beginning. In the end, you might not end up with a fully functional shorse.  But with a bit of luck, perhaps you’ll find a horse that is good at holding its breath underwater…

About the Author

Jacob Wiklund is working for TenderEasy as a Sourcing Analyst / Consultant with previous experience as a consultant in supply chain management. He holds an MsC from Chalmers University of Technology. Connect with Jacob on LinkedIn .

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Hey everybody, its Monday again! Great, huh? Such a blessing - to be able to leave the shackles of the weekend behind and finally go back to the ol’ cubicle to enjoy the value of a good day’s work!
No? Can’t relate to the sentiment? Well, you’re not alone. Which is why I thought I’d share some ideas for how to start your week as motivated as your Fridays (ok, that might be a bit of a stretch...).

 

Ever since the first hunter-gatherers started walking upright and went searching for food, human kind has been joined in a dread of starting the work day (ehm..  unless you love your job and your employer, like I do…). In fact, the earliest known remnants from the time of the homo erectus are stone carvings of people refusing to leave the cave in the morning.
 
Ok, while everything I’ve stated so far might not be entirely true, I have a feeling that, given the choice, most people would like to strike Mondays from the calendar altogether. So, while that might not be a viable option, there are some tested tricks that might take the edge off that weekend hangover. Here are some methods that can be worth trying out if you feel that you’re coming down with a case of the Monday blues.

  • Get rid of your most gruesome and boring tasks before the weekend and plan your most motivating tasks for Monday morning. On Friday afternoon, you want to get out of the office, and you might leave some loose ends undone. However, if you take some time on Friday to tie up what needs to be done for the week, you won't have it hanging over your head come Monday morning. Don't leave your least favorite tasks for Monday.
  • Don't try to keep the weekend going. That is, go to bed early on Sunday night and make sure you ready yourself for the week ahead. This, on the other hand, has the drawback of shortening the Sunday evening…
  • Don’t stay glued to the cubicle all day. Take a walk to get some fresh air, avoid eating lunch at the desk, or perhaps play a game of ping pong to get the grey matter energized.

 
If you’ve tried all this and still can’t figure out why Monday’s are blue, then it may be time to start looking for a more motivating job altogether. And lucky for you, we’re hiring!
 
Visit our web hiring page.

About the author

Jacob Wiklund is working for TenderEasy as a Customer Success Manager with previous experience as a consultant in supply chain management. He holds an MSc from Chalmers University of Technology. Connect with Jacob on LinkedIn

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I’ve been working for TenderEasy for close to a year now, and it’s the first time I’ve set foot in an organization of this size. That is to say a smaller company, in the middle of a growth spurt. When I started, I had a few preconceived ideas about what it would be like to work in a smaller organization – something I’ve now had some time to experience first hand.
 
Before starting at TenderEasy, I had read Malcolm Gladwell’s David vs Goliath. In it, he uses a number of real life examples to outline the potentials of the underdog vs. the giant. It was jammed full of steadfast tips on how to make the most of “being David”, both in terms of creating value and as a means of attracting talent. And as I stated, I was eager to try it out in practice. The following were some of my notions coming in, that turned out hold true in practice.
 
As an employee, you will have a broad range of responsibilities
Obviously, the fewer people there are in the organization, the less specialized the roles can be. As such, you may be given a wide range of responsibilities - ones that isn't always limited to your area of expertise. So for those of us prone to growing bored of the same old task over time, getting to do whatever needs to be done at a certain time is quite enticing. Of course, sometimes that means that there are no one to delegate the most boring tasks to either…
 
Greater involvement
When you’re constantly within earshot of all conversations, it’s going to take a lot to feel left out of the decision process. Have an idea? Blurt it out and see if it sticks. No need to put a letter in the suggestion box and hope for a reply.
 
Fast paced changes/decision making
A larger company must involve many people and processes in decisions and development, slowing the process and delaying results. As a member of a smaller organization, the road to walk from idea to implementation can be very short – sometimes within a day. And if it doesn’t work out as planned – just revert or try something else just as easily.
 
Being close to the customer
Being close to the customer is important for success in business, and a small business is frequently much closer to the customer than a large one. If one of our dear customers gives us a call or sends us an email, they can be sure that it ends up at the core of TenderEasy and will be attended to accordingly. And if you as a customer have a unique idea or request that could improve your freight tendering process – it will be taken to heart and might very well end up in the next system update because of it.
 
 
Obviously these are just my experiences, and I might rightly be accused of being biased, but there is no getting around the fact that there are a number of indisputable benefits to working for – and hiring – a smaller company like TenderEasy. Not least of which is that whenever there is a disagreement, you can settle your differences via a game of ping-pong…

About the Author

Jacob Wiklund is working for TenderEasy as a Customer Success Manager with previous experience as a consultant in supply chain management. He holds an MsC from Chalmers University of Technology. Connect with Jacob on LinkedIn

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Over the last few years, I’ve been involved in a number of transport tenders. Most of which had one thing in common – an initial ambition to evaluate a number of different factors. And a final decision to sign with the cheapest possible provider. As soon as analysis is started and a total cost appears, concern for the environment tends to take a back seat, so to say.
 

There is, obviously factors that cannot be ignored. For example, if a shipment needs to reach a factory by a certain time in order for production to proceed, then the right delivery time is obviously a must have service. But many of the non must-have´s are lost along the way.
 
“So what – isn’t cost reduction the end goal of freight tendering?”
Well yes, largely so. But what about the cost of arriving a day later than possible? What about the cost of insufficient information flow?
A neat and often useful way of looking at it is to assign a monetary value to a discrepancy in service level for the services you deem most important.
 
Let’s use lead time as an example, since it’s probably the most commonly used service aspect. What would it cost to arrive later than necessarily possible?
Perhaps it means that a perishable good would lose a day on the store shelf, thus increasing waste. Or maybe it means that more overtime is needed for goods reception. Another way of looking at it is that an earlier planned arrival might mitigate the impact of a delayed delivery. Etc, etc. When weighing all of these factors, you might arrive at the conclusion that an improved lead time is worth EUR 15 per shipment, for example.
 
After that conclusion, it’s easy to produce a total cost analysis where an extra EUR 15 per shipment are added to offers with a longer lead time. Of course, it works both ways. Perhaps you can accept a day’s longer lead time than first considered if that means a cost reduction that outweighs the cost of the delay. By doing this, you will arrive at a total cost analysis for your freight tender, that doesn’t just give you the lowest possible direct freight cost, but one that gives you a simple numerical value as to which provider can offer the best (and cheapest) solution from a combined cost/service perspective. Easy piecy!

About the author

Jacob Wiklund is working for TenderEasy as a Sourcing Analyst / Consultant with previous experience as a consultant in supply chain management. He holds an MsC from Chalmers University of Technology. Connect with Jacob on LinkedIn

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