Manage a successful Freight RFQ - Part 3

In this blog, we will go through RFQ bid collection, and how to get the right data from LSPs (Logistic Service Providers). We will also describe how to analyze bids and how you can improve the freight RFQ result by giving LSPs useful and relevant feedback so they can give their best bid where it matters the most for you.

In previous posts, we’ve discussed: 
Part 1 - Freight tender RFQ preparations
Part 2 - Setting up a freight tender RFQ

Before you can start making a high-quality analysis, you need to get the bids submitted by your bidders (the LSPs). Often you get the bid just before the deadline, perhaps the bid is incomplete. You might get the bids attached to an email, as Excel, PDF or word-files in each supplier own format and on their own terms. If you have already made a logistics tender RFQ ”manually”, you know what a nightmare it can be to make the bids comparable to each other. This is key to a successful freight tender RFQ, to be able to analyze and compare different scenarios.
A best practice we always recommend to our customers is to invite your LSPs to a supplier webinar. In this short webinar (web-meeting) you can introduce the LSPs to your company, the freight tender RFQ, and all your requirements. It is always well invested time, both for you and for the LSP to join a webinar like this. We like to say it will kick-start your freight tender RFQ, as LSPs are keen to join and listen to what you have to say, and an LSP you don’t know might see this as an opportunity to learn more about your company, who you are, what you think is important, so they can provide their best bid matching your requirements and expectations. The webinar is also a good time for LSPs to ask you questions, and it’s perfect also for you to answer and share the answer to all participants. It really helps to share information to all involved in the transport procurement RFQ up-front.

Bid validation

Using a freight e-sourcing platform like TenderEasy makes the work of collecting and validation the bids much easier. Already when the LSPs are invited to the freight tender RFQ they download the RFQ into an Excel-format. The bidding sheets are available in one Excel file, and the bidder can save the file on his/her computer and start quoting. When the quoting is done, the LSP upload their Excel bid into the e-sourcing platform and the Excel file is validated according to the validation rules set up by you. Once all errors are resolved by the LSP the bid is accepted by the e-sourcing platform. The bid validation is a crucial step in the freight tender RFQ process, to ensure you can use your time to compare bids and making analysis and scenarios.

Sanity check

Even with the best up-front validation checks, there will always be LSP’s that are too clever in by-passing your check-points. Therefore, it is recommendable to also run sanity checks on the bids before you go into your scenarios. Out-liners should be identified and removed from the analysis. A standard feature of TenderEasy is that the optimizer automatically show the delta to the median value of each lane. If the delta is too good vs the median you may need to review that bid more closely and even ask LSP for reconfirmation.
Other checks that can be used is to run logic checks on span price tariffs where prices should logically increase for each interval (price per shipment) or decrease (price per 100kg).

Analyzing with shipping profile

When all bids are submitted and validated, we can start analyzing. Key to analysis is to use a shipping profile, i.e. a list of your shipments made for a certain time period, for example, 6 or 12 months.  
We would like to list 3 useful ways of making your analysis:

  1. Use your current shipping profile (baseline). For those of you who have repetitive transport flows. Use the historic shipments to analyze your bids, and calculate future spend and leadtimes.
  2. Use forecasted shipping profile. You might not have access to your shipping profile. Then making qualified estimates of your shipment volumes and weights.
  3. Use fictive shipping profile. If you have variable transport flows you can also make fictive transport flows, to analyze to understand the output using different LSPs.

Purpose of analysis is to calculate the total cost and service/ lead-time for your lanes. With scenarios, you can combine the analysis into quick and easily accessible data, available to you in a matter of seconds, summarized into aggregated reports such as:

  • Incumbent LSP result, no change of existing business
  • Incumbent LSP result, reshuffle business
  • best LSP per destination country
  • best LSP per different groupings (e.g. origin country, business unit/ plant)
  • best LSP based on ”cost cherry pick”
  • consideration best LSP based on service and other “soft values” that can be quantified by cost for internal

Feedback to LSPs

When bids have been submitted and validated, you can provide feedback to suppliers how they are performing with the competition. With Excel as your ”tool”, it can be a very difficult task to accomplish.
Aside from the normal feedback (e.g. ranking, target price, delta to benchmark) which is useful, but not very informative to the LSP. With TenderEasy you can also share a more detailed and “visual” feedback using our color-coded functionality. This has proven very successful to help focus the LSPs on improving the right tariffs.

At TenderEasy we have put a lot of efforts into making analysis and feed-back possible for all of these situations. In fact, the option of using fictive scenarios can always be used in combination of the others, as it is a built in feature inside the analysis
Next part, Freight tender RFQ awarding and Nomination.

If this blog raised questions or you're ready to kick off optimized freight procurement, please get in touch.  

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