Preparation: The Key to Successful Business…and Procurement Projects
Shippers everywhere are enjoying the "summer of '16." Carrier capacity is abundant, and rates, particularly in the truckload spot market, have fallen by double-digit percentages relative to last year. Contrast this with the "winter of '14" when the Polar Vortex drove spot rates to all-time highs. Since that time, decreasing fuel costs, coupled with favorable regulatory rulings and expanded carrier capacity has clearly pushed the pendulum toward a shipper's market. How long will this last? It's hard to know.
But my boss reads the latest news, and wants savings NOW.
Even though transportation professionals know the perils of short-term thinking, they are still finding themselves under pressure to take advantage of the current market. So how do shippers do this without sacrificing long-term relationships, so that when "winter" returns, they are not left out in the cold?
Like anything in life and in business, a successful procurement project or event is all about the right preparation.
First, turn your focus internally.
Often, procurement events fall short because individuals who put the RFP together in headquarters don't fully understand the specific requirements of the end users within their own organization. You need to understand your actual spend, or in the case of transportation services—your volumes. Make sure you fully understand your needs and volumes (lanes, units of material, etc.) so you can communicate it clearly to participants.
When drafting the RFP, you need to seek out detailed service and quality requirements from the people who will actually be using the services or materials. In transportation, you might learn that the plant needs drop trailers, or perhaps 48-foot trailers because they can't fit 53-footers in the facility.
You also need to know your baseline costs. Because at the end of the day, you need to be able to say whether you did worse, better, or stayed the same.
Then, plan for clear external communications.
When seeking out new suppliers and vendors, it's also crucial to clearly communicate how you expect to do business. By clarifying payment terms and conditions upfront, along with how you want to work from a legal perspective, you can avoid going all the way down a path to an award, only to have it fall apart in final negotiations.
Understand the providers in the marketplace.
The next step is to qualify your providers. There is no substitute for due diligence. If you're casting a net for something you don't already buy, then it often makes sense to conduct an RFI (request for information) first, then choose who you'll send the RFP to from the initial respondents.
When structuring the RFP, most procurement strategists advise you to unbundle service elements as much as possible. For example, break apart line haul and fuel surcharge line items to get an apples-to-apples comparison. It also helps to standardize accessorial charges in your RFP.
Be realistic with your timeline.
Most people underestimate how long it will take them to analyze the data and work through their own side of the contract negotiations, especially if they don't conduct procurement events very often.
Complex bid packages virtually guarantee errors in submissions, so sanity check responses, and don't pin your hopes on something that's unrealistic.
And remember: you're being evaluated, too.
Throughout the process, make sure your communication is as consistent, clear and responsive as possible. It's OK to be repetitive and don't lag in responding to questions. If a shipper seems unorganized, carriers will hesitate to offer their most competitive pricing due to fear of the unknown.