Centralized RFQ process?

Another tender invite? Another opportunity to gain business! But how can you efficiently manage such an influx of RFQ’s? Have you considered centralizing your bidding process? In this short article I will outline some of the key points worth thinking about while considering central RFQ management.

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Pros of centralized RFQ process:

· Holistic view of the opportunity

· Allows for fewer overheads

· Enhanced visibility

· Clear processes and procedures with defined roles and responsibilities

· Duplication of staff efforts and resulting costs are negated and all activities are standardized.

· Centralized records can be kept of all RFQ’s

· Improved RFQ quality (incl. main trade lanes common-rated etc.)

· More knowledge in the central team

· Central communication channel is optimal to reach decision makers

· Suppliers know where and whom to contact which makes supplier contact and negotiation much easier

· RFQ management teams can build relationships with customers (decision makers) to better understand the business requirements and deliver extra value

Cons of centralized RFQ process:

· Timely process – requests with short deadlines (including ad-hoc RFQ’s) have to be sent from other areas to the RFQ management team for processing, causing delays

· Complicated and time-consuming decision process

· Freight forwarders are geographically dispersed and may not be able to take advantage of local contacts, negotiations nor discounts.

· Centralized RFQ management team may become too large and complex to manage

· Conversely, for a small freight forwarder it may not be cost efficient to have staff that only deals with RFQ management

· Country specific decision making might influence the outcome of the bid in a none-favourable way (lack of central steering)

· Lack of tools and automation resulting in companies depending on (excel) skills of individuals

· Manual process (email & excel) with extra layer (central RFQ management team) is even more prone to human errors

What else to consider?

These important factors will play a key role in the decision process:

· Organizational size (geographical presence) and structure

· P/L responsibility

· Customer portfolio and your key industries (e.g. automotive industry is strongly centralized)

· Amount of RFQ’s handled and revenue generated by RFQ management

· Tools (automation) available to the teams

Conclusion.

Consolidation through mergers and acquisitions is a major trend in many industries (automotive industry is a classic example). A central goal of most operations has been to improve investment returns through cost cutting, productivity gains, and economies of scale, exactly the same is the case for RFQ management. Central volume bundling will lead to greater discounts and more favourable terms. Incentive agreements are substantial stream of income for freight forwarders. In parallel major shippers are pushing their vendors into expanding their menu of services (rather than turning to an unfamiliar supplier).

Subsequently freight forwarding industry (especially OFR community) is strongly centralized and holistic view of opportunities is needed to deliver competitive packages/solutions to your customers. So, advantages of a centralized RFQ process strongly outweigh the disadvantages and if you are handling around 150 RFQ’s p.a. you should seriously consider (at least for main trade-lanes) centralizing your RFQ process. RFQ management tools can be used to automate much of the work and reduce the response times which is one of the key downsides of centralized approach. Irrespectively if you are using centralized procurement process or not, it is wise to have contingency/alternative processes in place to cover bids which do not qualify as central RFQ’s, in order to not miss out on strategical country level opportunities.

Whether you agree or disagree we would love to hear your thoughts on this topic.

Sourcify’s solution is built for central management of RFQ’s, but we also did not forget about all the tactical country specific RFQ’s (which don’t qualify for global tender teams) – in our solution country teams can run RFQ’s just as central teams can. A win-win solution.