Over the years, Transinnovate has supported a wide variety of shippers in sourcing, organising and optimising transport. We have been active in many sectors, from metals to chemicals to pharmaceuticals to food. We have also supported companies from SMEs with €100K transport costs to multinationals with many millions in transport costs. In doing so, we noticed that large companies and small businesses could learn plenty from each other. In this blog, we present some tips and are happy to share our knowledge and experience.
Requirements
On your first date, do you put the prenuptial agreement on the table immediately after saying your name, including KPIs and an exit strategy if it turns out not to work? Chances are your (dream) partner will call it quits immediately. Yet we often see such an approach at large companies with extensive processes: very thick tender documents sent out with an RFP/RFQ. These often contain many legal clauses and sometimes the smallest details. This can already put off many (suitable) carriers and logistics service providers. Of course, a good contract is important, but this can also be done a little later in the process when there is an initial click.
Conversely, are you getting married without having properly scanned whether you are a good match and set some ground rules? With SMEs on, there is sometimes hardly any proper tender document but simply rates are requested, and you get started on the basis of trust. Asking "too little" or not laying this down formally in a compliance list can create ambiguity in the operation and on issues such as (fuel) surcharges, for instance. For instance, we often see that rising fuel prices are passed on, but falling ones are not.
Our tip: ask what you really need to find a carrier that suits you, no more and no less. The essentials can often be done within 10 pages. Small shippers can thus clarify and capture what is important. Large shippers avoid scaring off potentially interesting carriers by throwing thick documents over the fence, making them feel like 'a number'. This brings us directly to the next point - the relationship!
Relationship and frequency
What could be worse than putting the prenuptial agreement on the table at a date? Sending these in advance by post, and also giving the impression that you have written to dozens of partners! Cost reduction is almost constantly on the agenda at multinationals. This leads to frequent tenders where very many parties are invited and then also to the info@ address without notice or any form of personal contact. Parties are quickly switched for small cost advantages, giving the word "tender" a negative connotation. Then there are complaints that so few tenders are received, or that shipments are not picked up in the operation. Additional costs incurred elsewhere in the operation or leading to dissatisfied customers due to wrong logistics partners are often not traced back to the source because they fall under different departments.
SMEs, on the other hand, often attach great importance to relationship and sometimes work with the same transporter for decades. Wonderful, of course, if it works and if it continues to fit. However, it remains a business transaction. The shipper changes, the carrier changes, the market changes. If a benchmark is carried out at all, it is often without sound market knowledge of suitable logistics service providers and usually with only a few parties. This quickly creates the image 'it's all right' when this is far from always the case. A strong dependence on one in-house carrier can also lead to high dependence.
Our tips: The goal of a procurement process is not to switch and necessarily choose (transport) price. A procurement process should aim for a good and structural relationship with a limited number (but preferably more than one) of carriers. These should fit your shipment profile, service level and market situation of 'today'. Multinationals are better off putting a bit more energy into properly selecting who to tender to and preparing these parties for it through personal contact. They will then receive more and better-suited bids. Small companies would do well to periodically compare their existing relationships with relevant market players. If necessary, they can use transport procurement specialists if they do not have the market knowledge themselves.
Market knowledge and Data
Large and small shippers also have things in common. They both do well to keep their market knowledge up to date, especially in the period between tenders. As in the rest of the supply chain, organising good transport starts with continuous attention to what you need, and who can deliver it at a market-based price.
Here, we notice that both multinationals and SMEs often cannot quickly access good data. Either it hardly exists (SMEs, which often only have invoices from carriers) or it is spread across many branches and systems (multinationals). Good procurement starts, besides quality, with a good understanding of the shipment profile and current cost structure. For example, where does it make sense to invite country/region specialists, or volume specialists (parcel, groupage, part loads and FTL/FCL)?
A Transport Management System can help in getting good data, and more. Nowadays, there are low-threshold options for all types of companies that make all data available at the touch of a button. It is also important that a TMS has specific transport functions that are often lacking in standard ERP packages such as, for example, consolidating shipments, managing surcharges, invoice control, spot rate requests, dock scheduling, label printing, etc.
Discuss!
Would you like to know more about this? Do you have an opinion on it yourself and would like to spar with us? We are happy to be in touch to discuss developments in the logistics sector.
