Logistics tender management & supplier selection

Once an outsourcing decision has been taken, companies are faced with the challenge of ensuring that their supply chain priorities are accurately and fully codified in a clear invitation to tender (ITT) or request for quotation (RFQ) document. Third party logistics providers (3PLs) invited to a logistics tender will have exhaustive information needs to ensure they fully understand the shipper’s supply chain context and can prepare a relevant response to tender (RTT).

The typical logistics tender process is divided into three main stages:

  • a request for information (RFI) document is used to gather basic credentials from a ‘long list’ of suppliers. On average, approximately 10-12 suppliers are invited to respond to an RFI.
  • Based on RFI responses, shippers invite a smaller number of 3PLs (usually three to five) to the full ITT.
  • Depending on the quality of responses and the number of 3PLs to whom the shipper’s business will be awarded, shippers will then enter into detailed contract negotiations with between one and three bidders before awarding the business to their selected partner or partners.

In parallel to the preparation of logistics tender documentation and collection of related data, shippers should ensure they can answer the following questions:

  • Do we expect bidders to propose solutions to our requirements or just bid on the operational execution of a solution we have developed internally? 3PLs are keenly aware of the commoditisation of logistics services and any opportunity to display added value (for example, through solutions design) should be welcome. 3PLs’ solutions will often be skewed towards their existing infrastructure, and this will mean that shippers are not presented with the ‘objectively optimal’ solution. At the same time, the opportunity to leverage 3PLs’ existing business to create efficiencies of scale can create significant opportunities to reduce costs, and should be explored wherever possible.
  • What will be our criteria and weighting for supplier selection? Will we be able to convince bidding 3PLs that our decision will not be simply cost-based? As outlined in the previous point, 3PLs will tend to avoid shippers looking simply for the lowest cost. Even the most elaborate wording about quality and partnership in the ITT will not persuade 3PLs’ experienced bid teams that the shipper will not simply flip to the numbers in the RTT. Shippers who do not ‘walk the talk’ when presenting their priorities to 3PLs face the prospect of many refusals to bid, thus narrowing the choice and potentially leading to a suboptimal solution.
  • What are our key contractual expectations from the future relationship? As detailed in our page on contract negotiations, it is crucial that shippers’ contractual expectations are communicated as early in the process as possible, as part of a strategy to ensure maximum leverage in negotiations.
  • How will the future governance model function? Will our relationship with the 3PL be involved or arms-length? Ensuring cultural fit with the 3PL is a crucial part of the selection process. Shippers’ levels of trust in their partners, the resultant level of involvement in day-to-day management and analysis of performance will vary from organisation to organisation. Similarly, not all 3PLs will react equally positively to an overly questioning or very distant Client. Care should be taken to verify bidding 3PLs’ existing governance models and their effectiveness, by interviewing operational and senior management in companies the 3PL currently works with.
  • Who will be involved in negotiations with potential suppliers? Does our team possess the appropriate skills and experience to give us a negotiating advantage over the 3PL? Shippers should be aware that 3PLs’ bid teams will usually have more experience in negotiating with shippers – they are continually involved in logistics tenders, whereas the shipper will usually run a major tender once every two to four years. In this context, shippers must ensure they have an experienced team available to represent their interests during negotiations.
  • Have all our stakeholders been adequately briefed on the project and are they ready to contribute with decision-making in the timeframe required?

Having participated in hundreds of logistics tenders worth billions of euros, our team has extensive experience of the factors critical to the success of a tendering process. We support Clients in all stages of a tender process:

  • agreement of selection criteria against Supply Chain Design
  • creation of RFI and RFQ documentation
  • identification of the supplier ‘long list’
  • management of suppliers’ Q&A
  • supplier meetings
  • verification and comparison of submissions
  • selection of the short list
  • contract negotiations
  • final supplier selection