Manage a successful Freight RFQ - Part 1

13.05.2016

Part 1 - Freight tender RFQ Preparations

Are you about to plan a freight tender RFQ, or perhaps you have already started your work preparing for a freight tender, but soon realized it was way more complex and time consuming that you could imagine? Well, you're not alone feeling like this.

Working with large organizations and providing them our freight e-sourcing platform, we are transforming the way companies manage their freight tender RFP / RFQ's. We would like to share our experiences, so you can avoid some pitfalls and make the RFQ process easier.

In this blog, we will go through RFQ preparations. In upcoming posts we will go talk about other steps in the process; like "RFQ setup", "Bid collection and analysis" plus "Awarding and implementation".

First, let's define a freight RFQ

There are a few freight RFQ synonyms being used, such as "transport tender", "Request for Quotation" (RFQ), "Request for proposal" (RFP) etc. The purpose of a freight RFQ is to go out to the market and get the best available service at best possible price, at a certain time. A freight RFQ eventually results in new agreements with logistics service providers (LSP's) for a period of 6, 12, 24 or 36 months.
A freight RFQ project is normally an exercise that takes somewhere between 3-6 months to complete but can take longer time if it's more complex data sets involved or if the process is manual (i.e. no tendering platform is being used).

Always be prepared

A lot of the preparation work for a freight RFQ is actually covered in the daily work. You manage already in the current set-up a lot of the variables that will indicate to you when/if a full RFQ is needed. Things like:

Investigating and qualify new modalities opportunity, new suppliers, and services. To start this process during the freight tender RFQ is too late and will detract valuable time and focus from the analysis and negotiations.
Incumbent supplier performance and proposals for next period
New markets or major volume/mix changes in your transports
Benchmark the freight market/s to understand your current position

When one or many of these indicators are showing a major change you have the opportunity to sharpen the competitive advantage by tendering the business.

Collecting the data

Like with any business decision you need a solid foundation of facts to know where you’re coming from before you can make a proper decision on what to do for the future.

Collect, clean and aggregate your historical shipment data
Collect forecasted volumes, new markets & change on drop-size from your colleagues at Sales and marketing
Analyse your extra freight costs to understand if this can/should be included in your requested standard freight solution or not
Analyse your spot shipments (done outside of your existing contracts) to understand if this can/should be covered in the RFQ
Understand the structure of your shipments, the spread in weight and dimensions (see image)

Aligning on the requirements

Each RFQ is an opportunity to sharpen the quality and standards of the service provided by your suppliers. You should always align internally with all your stakeholders on these parameters. Never assume “same procedure as last year”

align with business requirements by which the suppliers are evaluated on. (Environmental, Quality, financial and other relevant corporate policies).
align with service level requirements.
agree on the “must have's” and “nice to have's” requirements.
agree on supplier measurable (KPI’s)
agree on supplier performance escalation process
agree on overall targets of the RFQ
agree on service targets and acceptable cost for improved levels/ savings for reduced levels
agree on LTA (long-term agreement) share and criteria’s for it
agree on incumbents that are ready to be changed and who to keep and what it can "cost"

Next part, setting up the freight tender RFQ.

You can also register for our webinar where we in 30 minutes go through the keys to a successful freight tender RFQ.

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