During 2018 we had the pleasure of discussing with many of the world largest Freight Forwarding companies regarding the tools available to them when it comes to tender management (TM). The input couldn’t been clearer - there is no „off-the-shelve“ tender management solution in the market for freight forwarder segment. Why is that?
Freight Forwarders come in different sizes, geographical spread and organizational structures with in house processes developed (and improved) over the course of the years. Furthermore, each enterprise has various legacy systems in place which are costly, took years to properly implement and simply cannot be replaced overnight. In case of an additional investment, it must be ensured that the new software can be integrated to company’s existing infrastructure. Last but not least sourcing for software is complicated, especially complicated in large matrix organizations. Involving many stakeholders, divisions and reporting lines (solid versus dotted) across the organization and as per our experience AFR and OFR product teams are not always in the driver's seat (unfortunately) for making the final decision which solutions is the best fit from core business point of view. Such complexity has resulted in following:
- Freight Forwarders are building „in-house” solutions to improve their processes which is extremely time-consuming initiative without any guarantee of success. Even if such technology will be completed, it is costly and cumbersome to keep bug free and updated.
- Companies who try to innovate (we are big fans of technology and innovation and wish everybody good luck!) in freight procurement sector don’t in full extent understand the challenges Freight Forwarders face with their internal TM workflow; subsequently offered solutions don’t match the requirements and require re-engineering of existing processes. This is once more costly and time consuming as more and more SME’s option to tender their freight (e.g. as per Ticontract YTD November 2018 shippers have issued 26% more freight tenders compared to last year; https://www.transporeon.com/blog/gb/tendering-in-price-volatile-times) creating a 12 month a year PEAK SEASON (well, kind of).
- Excel and email are widely popular and often only tools available.
There is absolutely nothing wrong working with Excel as part of your workflow, in fact, Excel is by far the most flexible (99 per cent of all rates are handled in Excel) and our recommended media for freight procurement industry. However, there are substantial efficiencies and viable business insights to be gained applying technology that merges with Excel.
So how can global sales (product) teams transform their internal tender process being more efficient, deliver a higher win and retain ratios for the company and not cause frustration within Tender Managers?
Perhaps innovating in a partnership form with a Startup (or a small technology company) to leverage new technologies? Such approach will challenge the legacy culture (status quo) of a corporation and will include limited risk but if executed well what you get in return is improved efficiencies, fast decision making and last but not least agile software solving your actual problems. Alternatively, should you build in-house-solutions that similarly to partnership approach include a risk of delays and even failure?
Irrespectively of the form of the initiative - tendering is complex, timely and costly. On average, it is estimated 2-5 FTE's are needed to ensure the project is completed from a freight forwarder point of view (centrally; excluding the country entities). The time, the effort and the expense for answering a tender or bid, is estimated at upwards of EUR 15’000 per tender. Considering all the revenue RFQ's do generate we have identified several key areas (for sure, these are only some of the improvement areas and we would love to hear your comments and thoughts regarding other potential strategic tools) which will substantially improve efficiencies around your bidding processes – enabling you not only to substantially reduce resources and time needed combining an RFQ response, but also to make smart business decision by understanding the competitiveness of your offer and to have contingency processes in place for missing input and time critical decisions.
Integration of TMS into your TM workflow.
Your Transport Management System (TMS) provider should be considered your key strategic partner. There’s fierce competition in the service offerings so it should be in both of your interest to gain more value out of your relationship. Your TMS provider should fundamentally be capable establishing an API or similar type of integration for mapping of freight rates (FCL, LCL-MNR’s and AFR rates and surcharges) as structured data directly into your internal AFR/FCL/LCL rate-card. While it is a complex and time-consuming process requiring close collaboration between the service providers, successful integration would be highly rewarding as it would allow you to skip endless data gathering exercises (and frustrations which comes with it!) both centrally as well as in the country organizations. As per our estimation, an average integration would enable to populate around 80% of the main freight charges within 30 minutes (how long does it take you today?). In addition, data quality will be improved and errors reduced (at the end of the day the less Excel files we open the fewer errors we make). Even though there are complexities such as P&L responsibility (between the HQ and country entities) we firmly believe the integration of TMS and careful design of the accommodating tender process will help you to stand out from your peers and win more RFQ’s.
RFQ database
Now, that you are able to efficiently map your rates into your internal TM workflow you would need to understand the competitiveness of those rates. Freight forwarders handle simultaneously many RFQ’s and knowledge enabling them to compare the rate levels based on certain parameters (apples to apples) would enable you to make smart business decisions. As an example, by knowing your average (median) winning rate on a 40’HC from SHA to HAM for a an FMCG company for the certain timeline, would enable you to ultimately bid for best- paying cargo within the same sector, or to challenge customer’s unreasonably “sharp” target rates. You are also able to simply flag outliners and even renegotiate your rates with carriers if your terms allow (buying rates). You may opt to use (populate) rate levels from XYZ customer for Tom & Dick and Harry’s account. These are only a few examples but you get the idea how powerful thoroughly digitized data can be.
FOB module
Let us further skip data gathering and accompanying frustration that comes with, especially within the country organizations (agents) - FOB module will eliminate endless data entry and communication that comes with it for the standard origin and destination charges for AFR, FCL, LCL products. Each country organization (agent) is responsible keeping the database up to date and will only need to provide data for un-standard elements the customer is requesting (e.g. special inspection fees, Letter of Credit charges and similar).
Tender Management suit for Freight Forwarders
Let’s put it all together – TM software worth investing in shall integrate TMS and FOB module and digitize the data for you to understand your proposal, possible outliners and enables you to use historical rates to your advantage. But not only – what also has to be addressed is communication, the data quality and removal of unnecessary buffers and silos from the tender process. This is exactly what Sourcify.online is doing today - we ensure full transparency and control over your internal tender processes - direct communication between HQ and country entities, detailed bidding rules for accurate data entry enabling to analyze received input without massive cleansing exercise and subsequently removing buffers from your tender process due to the quality data (forget about free text and random comments in numeric cells!). The cleaner the data set the faster RFQ response goes.
Optimized tender process enables you to populate standard elements (excluding elements similar to Letter of Credit charges etc.) of your RFQ response within 30 minutes after routing confirmation, flag outliners and understand the competitiveness of your rates. We, at sourcify.online carefully designed the workflow and modules for quality outcome of each of your bid - irrespectively of experience or Excel skills of appointed Tender Manager. You will have significantly more time and resources for data analysis and value-added tasks as your baseline data gathering is efficient and quick. All of this is not only for your Global RFQ’s (handled within HQ’s), but also for smaller Multinational opportunities handled within the country entities – we empower country organizations to create and manage their RFQ’s via our platform, too.
Please contact us at sourcify@sourcify.online to find out how we could improve your tender process considering your unique needs and infrastructure! We will help you to set up processes and procedures that work, our team members have been involved with managing tenders for more than a decade so we know where major problem areas lie.
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Happy tendering!
Sander Priivits
Sourcify OÜ
Mobile +372 562 946 02