Freight Tenders or freight RFQ’s are an integral part of shipping and logistics for the carriers, shippers and freight forwarders. With complexity on the uprise, what is really making a difference in a logistics tenders…negotiation skills or technology?
Negotiation versus technology
The inspiration for this article The Art of Tendering: Negotiations versus technology, came from a recent blog and research by American Shipper on Logistics Procurement. First, let’s take a closer look at the blog.
1. The art of handling a freight tender – By Hariesh Manaadiar ( Shipping and Freight Resource)
This informing blog, written earlier this year by Hariesh Manaadiar, is a spot-on description of what is going on, in general, in freight tendering today. The workload and data related to freight procurement are now beyond a human scale problem. The complexity of transport tenders nowadays surely motivated Hariesh to write the article:
‘Because the majority of the tenders are quite complicated and capable of pushing people over the edge due to its complexity with its tight deadlines and the nearly impossible task of compacting the costs.’
People in our industry who have handled some complicated global freight tender will surely understand what Hariesh describes. To underline the level of complexity, Hariesh comes up with a great example of a Multinational shipper, but this could easily be projected to the internal situation of many freight forwarders in the industry with a little imagination.
‘Imagine a MNC (Multi-National Company) who have multiple brands to be exported from their 20 odd group companies to around 200 countries globally where they are present. Imagine the logistics division of the above multinational. In each of these countries trying to secure the best rate for shipping their products from A to B which may translate into thousands of containers over a short period of time. Or imagine you are one of the lucky service providers invited to bid or tender for this business. Visualize the dynamics involved in coordinating the movement of these containers across the 20 operating companies into 200 countries for these thousands of containers.’
It’s complex, it’s immense and mind-blowing altogether. No matter what side of the tender you are at. Secondly, but shortly after, I found a very interesting report investigating the adoption of technology in logistics procurement. Knowing the numbers and facts of last year, I was keen to have a closer look at this.
2. Research: Technolgy in Freight Procurement
According to this year’s American Shipper Transportation Procurement Benchmark Study, half of the companies still rely on manual processes to address this critical function. Nevertheless, freight procurement has seen a period of rapid change recently, with the onus on shippers and logistics services providers to invest in technology and become adept at collecting, managing and using data to improve their procurement function.
There seems to be a clear relation between technology, negotiation skills and the success rate of a freight tender. So why are half of the companies still making use of manual approaches? Why does more than 70% of shippers interviewed feel their procurement tech is average at best?
Very surprising figures if you ask me. Especially, if you take a good look at the key dynamics impacting freight procurement. All of which can be addressed with the right, modern technology.
1. Increasing contract and spot rate transparency
2. The transportation procurement team is not well coordinated with sourcing and merchandising teams
3. Tight supply on my specific lanes
4. Lack of technology
5. Changing trade regulations causing a company to source in new locations
Anno 2017, it is undeniable that technology is becoming increasingly important in logistics. This is backed by the number of tech start-ups in the industry, but also by the strong data-driven demand that industry leaders have put into operation over the last 3 years. Yet, only 50% of the companies worldwide are relying (partially) on Transportation Procurement Technology. While managing the data related to freight procurement is now beyond a human scale problem. But what about the manual aspect of tenders, the negotiating?
Conclusion
Perhaps the biggest barrier currently in logistics procurement is the knowledge people have on the available solutions. Or the perception of the capabilities of E-procurement tools. Off course, negotiation skills remain a vital part of the business. Moreover, procurement is nowadays all about building strategic relationships rather than squeezing an extra buck out of your supplier. And that is specifically where modern technology can play its part. Procurement must ensure that:
- Suppliers do not feel commoditized (picked from a large, general database)
- Suppliers are closely involved with the project
- Suppliers must be able to work with your E-procurement tools (easy, fast, support available)
1st generation freight procurement tools brought it online, 2nd generation tools provided all functionalities as we know them today, but the 3rd generation really made procurement intuitive and easy, both for the tender party as the suppliers.
In my opinion, the effective Freight Tender manager is not some smart Excel jockey or an ultimate scenario builder. He or she is a logistics-driven professional that keeps numbers in balance with reality and has great empathy towards carriers which results in effective communication and negotiation with carriers. Bottom line, in order to be successful, you will both need negotiation skills and solid technology at your fingertips!
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